Monday, April 18, 2011

Why we should care about inequality (PART II)

This is the second of two posts dealing with economic inequality in the United States. In the first post, I detailed why it is important to reduce inequality in the US, and I reviewed evidence suggesting that Americans seem to want to reduce inequality. In this post, I discuss why inequality continues to increase, despite people's desire to reduce it.

"the duty of the man of wealth is to consider all surplus revenues which come to him simply as trust funds... becoming the mere trustee and agent of his poorer brethren." --Andrew Carnegie

In my previous post I discussed how people with less in America (less wealth, income) tend to have poorer health outcomes than their wealthier counterparts. More specifically, the have-nots don't live as long as the haves, and have a greater risk for mortality due to injury/illness. I also discussed how countries with reduced economic inequality have better health outcomes for their poorer citizens, and how Americans--somewhat surprisingly-- actually prefer a society that is more equal in its distribution of wealth.

Why then, does inequality continue to increase in America? Research implicates two reasons:

People don't realize inequality exists
Americans don't realize the sheer amount of inequality in the United States, and as a result, they don't have any reason to be alarmed by it. In the last post I mentioned how research by Norton and Ariely (2011) suggests that Americans would ideally like a society with less income inequality. What those researchers also found was that Americans were totally unaware of just how unequally US wealth is distributed. The evidence, shown below, suggests that Americans underestimate the amount of wealth that the richest 20% of Americans have by more than 25%!

The problem is further compounded when we consider how people define their own socioeconomic wealth. We can acknowledge that there are clearer social signals (e.g., cultural practices, physical features) that help people identify themselves with a particular gender or ethnicity. For socioeconomic position, cues that signal status are much more poorly defined. As a result, most people don't even agree on the extent they and their families come from low-income working class backgrounds, or medium to high income middle class backgrounds. As an example, as many as 35% of manual laborers consider themselves to be middle class in the United States. Similarly, almost 45% of skilled service workers (nurses, teachers) consider themselves working class (these are people who earn 4-year college degrees, or even masters degrees). In essence, the haves believe they are the have nots and vice versa.

It's also not too hard to find books that talk about how American society has transcended social class categories. Moreover, news organizations are sometimes worried about discussing social class, for fear of inciting class warfare. All together, these factors make it difficult for us to recognize who specifically has an unequal share of economic resources in society, and who is in need of economic assistance.

We rely too heavily on the nobility of the rich
American history is full of wealthy philanthropists like Andrew Carnegie, Bill Gates, Warren Buffett, etc... and rightly so-- Americans give more to charity than any other nation. However, recent research suggests that these examples are the exception rather than the rule.

Psychologists have long believed that the values that make people successful in making money, performing well in school, and obtaining wealth are based in self-interest and not in compassion, altruism, or prosociality. More specifically, individuals who make a lot of money tend to do so because they have an uncanny ability to focus on their own dreams, goals, and personal aspirations. Sometimes these pursuits come at the expense of relationships with other individuals and the broader community.

Corroborating this theory, individuals who have more, tend to be less generous, prosocial, and helpful to others. For instance, in a large scale survey of charitable donations, lower income individuals tended to give a higher proportion of their annual salaries to charity, relative to their higher income counterparts.

The least wealthy give the highest percentage of their income to charity (source)
Dacher Keltner, Stephane Cote, Paul Piff, and I have also conducted research wherein we examined generosity in the laboratory. In one study, higher income individuals helped a distressed experiment partner less than lower income individuals. In a second study, higher socioeconomic status individuals gave less of a  10-point economic windfall (that would later be converted to money) to a partner during an experiment than did lower socioeconomic status individuals.

In essence, these data suggest that there are likely deep-seated, psychological reasons why relying on the charity of the richest 20% of people--those who control the majority of wealth in America--is not a good strategy for reducing inequality in society. In fact, relying on charity has done nothing to stop trending increases in inequality between the rich and the poor.

So what would you do to reduce inequality in society? Is it possible in America? Let me know in your comments.


P.S. I'm speaking about this topic at Stanford on April 22nd. Go here for details (it's free to the public).


  1. I would perhaps add two other factors to this story (though there are naturally many more).

    1) The American dream: the idea of going from the poor house to the rich house, from being an immigrant with nothing to one's name to being amongst the rich is well ingrained in American culture. The problem is that its not all that true. Historically, the era when people could truly believe that social mobility like this was a common occurrence ended somewhere in the decades preceding the First World War. With the rise of major corporations, the American dream has long since faded. Social mobility analyses paint a similar story.

    2) The structure of government: the US government does not exactly serve its constituencies. Lobbying is a major facet of US politics and at the end of the day, K street has a lot more to say about the policies that are enacted than main street. Many of the lobbies are financed by major corporations. And as long as campaigns remain incredibly expensive, the pull corporations have on the US government is unlikely to change.

  2. These are great observations! With regard to the first, in some of the data I've collected on adults in the US, they report having very similar educational attainment and income as their parents (the correlation being around r = .40, with r = 1 being a perfect association). What is interesting is that these same people ALSO report that they believe that their children will do better than they will socioeconomically. So there is evidence for your point: beliefs in social mobility, alongside constraints on it.

    With regard to #2, also true, and I think maybe it warrants its own post altogether. Indeed inequality is a product, at least in part, of state regulated inequality of policy between average Americans and corporations. Thanks for reading!