Debate over executive compensation highlights a growing disparity in wealth and its implications for wellbeing. Recently, reports revealed that departing Virgin Australia CEO, Jayne Hrdlicka, will receive nearly $50 million in shares and other benefits. This news comes amid discussions about the potential for Elon Musk to become the world’s first trillionaire, with a proposed A$1.5 trillion compensation plan tied to ambitious targets from Tesla’s board.
In contrast to Australia’s corporate compensation figures, the public perception of executive pay remains strikingly different. Research from the United States indicates that many believe the average CEO earns ten times more than the average worker, with a preference for a ratio closer to five times. In reality, CEOs in the United States earn approximately 265 to 300 times more than the average worker. Australians estimate that CEOs earn seven times more than average workers, yet the actual disparity is significantly larger. A study found that CEOs of the top 100 Australian companies earned 55 times more than their average employees last financial year.
The philosophical roots of this discussion can be traced back to ancient Greece, where Aristotle introduced the concept of eudaimonia, or “living well.” He suggested that true happiness stems from cultivating character and intellect, rather than the mere acquisition of wealth. This balance between internal fulfillment and external goods remains relevant today, as many seek to understand the relationship between wealth and wellbeing.
Recent research has attempted to quantify the financial threshold necessary for optimal wellbeing. A 2010 study in the United States suggested that wellbeing peaks at around US$75,000, a figure that, adjusted for inflation, would be closer to US$111,000 today. However, this varies based on living costs and individual circumstances. Studies indicate that the benefits of increased wealth diminish after reaching a certain point, with those transitioning from poverty to middle class experiencing the most significant improvements in wellbeing.
A 2022 experiment involving participants from Brazil, Indonesia, Kenya, Australia, Canada, the United States, and the United Kingdom revealed that individuals in lower-income countries reported happiness gains three times larger than those in wealthier nations. Participants were given US$10,000 (approximately A$15,000) and notably contributed over two-thirds of that amount to family, friends, strangers, and charitable causes.
Longitudinal research emphasizes that materialistic aspirations, driven by the desire for status, can be detrimental to wellbeing. Such pursuits often stem from low self-esteem and a tendency to compare oneself unfavorably with others. This “hedonic treadmill” effect leads individuals to require ever-increasing levels of wealth to achieve satisfaction, potentially sacrificing meaningful relationships in the process.
Research from Harvard University, examining two generations of men and their children since 1938, highlights the importance of deep interpersonal connections for mental and physical health. The psychologist Abraham Maslow, in his 1943 hierarchy of needs, posited that self-actualization—reaching one’s full potential—begins with financial stability that covers basic necessities like food and shelter.
Recent trends in Australia have shown a concerning rise in economic inequality, particularly affecting younger generations grappling with housing affordability. The latest data from the Australian Bureau of Statistics indicates that the wealthiest 20 percent of Australians control approximately 62 percent of the country’s wealth. As inequality worsens, research from the UK suggests that social outcomes deteriorate, leading to increased crime, substance abuse, and diminished social trust.
As the discussion on wealth and happiness continues, it raises critical questions about the societal implications of extreme wealth concentration. The irony remains that those who pursue excessive wealth may not necessarily achieve greater happiness or fulfillment. Addressing these issues is essential for fostering a more equitable society that values overall wellbeing.
Brad Elphinstone is a lecturer in psychology at Swinburne University of Technology. This article originally appeared on The Conversation.
