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Cost of living getting you down? Depends on how you look at it

"How much more money would you need to feel comfortable?"

In late August, news.com.au launched a national survey to examine Australians’ attitudes toward the cost of living.

They framed their ‘survey’ with a preamble that included paragraphs such as “The thing about cost of living is that it’s a universal problem. Whether you’re a low income earner with a household kitty of $40,000 a year or you’re better off with an income well into the six-figures, everyone is feeling the pinch, at least a little” and “The cost of groceries, bills, childcare, petrol and you name it keep rising while only the cost of big ticket items you buy once in a blue moon (like big screen TVs) seem to be falling. But with wage growth at an all-time low and unemployment at a 17-year high, it seems like there’s less and less money left over every week.”

I guess it was nice of them to start the questionnaire with a few prompts about how you should approach your answers to the questions.

And headlines like “Feeling the pinch?” would tend to attract a particular attitude, as well.

Amongst results to be released today, they found that for the question, “How much more money would you need to feel comfortable?” in every income bracket, the majority of people chose the highest option – $250+ – and that those people in the highest income category – $250k – chose that option more than in any other.

Greedy, you might say?


But, the response doesn’t surprise me.

Money is both abstract and concrete.

While numbers, dollars, and cents are concrete, how we allocate and prioritise how we spend those dollars and cents is a little more victim to our psychological biases. Indeed, currency itself is sometimes referred to as a shared illusion.

Putting all that philosophical stuff aside, even at a scientific level, research has shown that the relationship between having a lot of money and life happiness and satisfaction is surprisingly weak. So, having a high income, doesn’t mean that you think that having more money wouldn’t make you happier.

The psychological explanation is that people look to tangible variables, such as money, to help explain why they may not be completely happy in their lives. In reality, studies of objective life satisfaction suggest that having more money doesn’t make you happy once you reach a certain level of income.

There are also a few problems with the way that the questionnaire was put together. The questionnaire on the website would simply not pass a basic validation process. In research, any form of enquiry needs to pass a range of validity tests, such as content, discriminant and face validity. And without going into too much detail, most of the questions would not pass these tests.

The inclusion of specific amounts that people would need to make their life more comfortable, such as would serve as an anchor for people completing the questionnaire. I think everyone would want earn that much money, but if it is unprompted, most people tend to be a bit less “greedy”. People on lower incomes would be less likely to (unprompted) want $250K+, but those on higher incomes would still think they need more.

The sample frame is also questionable. Self-selection bias, and only open to those readers of News papers and on the website would also be problematic.

But, more broadly, I think this desire for increased income, regardless of what you earn, is about human hardwiring, the environment in which we live, and, critically, influenced by a broader belief and values system that tells us toward that the path to happiness is through consumption.

Research that I have recently done on vulnerable consumers actually examined how lower income consumers are influenced by the materialism they view in the media (even believing that the fictional lives on comedy and drama programs are close to reality), which leads them to be more willing to go into debt to achieve that “dream” of a better life. I guess you could argue that people on higher incomes also dream of the better life.

If you constantly see imagery of people living an amazing life, because of the things that they buy, then it becomes hard to resist, despite our better judgment. Marketing specialists, who know their stuff, recognise that in reality, consumers will respond to messages that tell them that the only way you can be happy is to treat yourself, when the evidence suggests that this just leaves us with a short-term buzz, which puts us on the hedonic treadmill looking for more short-term buzzes.

Feeling the pinch? Maybe take the results with a grain of salt.

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