Americans Still Have NO CLUE About How Much Inequality We Have

Politicians, Media and Wall Street May Be Trying to Hide the Size of the Gap

Even years after the Occupy protests (love ’em or hate ’em, they focused everyone’s attention on inequality),  Americans are still clueless about how much inequality we really have in our country.

As we noted in 2011:

Dan Ariely of Duke University and Michael I. Norton of Harvard Business School demonstrateAmericans consistently underestimate the amount of inequality in our nation.

As William Alden wrote last September:

Americans vastly underestimate the degree of wealth inequality in America, and we believe that the distribution should be far more equitable than it actually is, according to a new study.

Or, as the study’s authors put it: “All demographic groups — even those not usually associated with wealth redistribution such as Republicans and the wealthy — desired a more equal distribution of wealth than the status quo.”

The report … “Building a Better America — One Wealth Quintile At A Time” by Dan Ariely of Duke University and Michael I. Norton of Harvard Business School … shows that across ideological, economic and gender groups, Americans thought the richest 20 percent of our society controlled about 59 percent of the wealth, while the real number is closer to 84 percent.

(Indeed, even those who assume they’re educated about inequality may not realize that we’re at lord and serf levels.)

Ariely subsequently explained that both Republicans and Democrats are passionately opposed to the degree of inequality we have in the U.S. … but that politicians may be trying to make us think we’re more equal than we really are (The media and Wall Street are also trying to hide the size of the gap).

Les Leopold reports today on a new study which confirms how clueless Americans are about inequality:

A[n] important study (“How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay”) by Sorapop Kiatpongsan and Michael I. Norton provides insight on why Americans aren’t more upset about rising inequality: It shows we are clueless about how bad it really is. Their analysis of a 2009 international survey of 55,187 people from 40 countries, found that when it comes to understanding the severity of inequality, we’re the most clueless of all.

Americans are virtually blind to the growing gap between CEO pay and the pay of the average worker. As the chart below shows that gap has increased dramatically. In 1965, for every dollar earned by the average worker, CEOs earned 20 dollars. By 2012, that gap mushroomed to 354 to one.

2014-11-15-aflwagegap.JPG

But, when asked in the survey, Americans grossly underestimated this gap. Instead of 354 to 1, the Americans in representative survey think it is only 30 to 1. When asked what the ideal pay gap should be, Americans say that a fair gap would be about 7 to 1.

More amazing still, the survey results, combined for all countries, show that the misconception of inequality doesn’t significantly vary by age, gender, income, political leanings or education.

To see if these finding also hold for the U.S., I waded into the database: Does political affiliation and education impact how the 1,581 Americans in the survey estimated the wage gap? (The data comes from the International Social Survey Programme: Social Inequality IV – ISSP 2009 on the website Gesis. )

2014-11-15-paygapbypartyandeducation.JPG

As the chart above shows, “Strong Democrats” estimated that the actual ratio between a CEO of a large corporation and an unskilled factory worker was about 36 to 1. “Strong Republicans” said it was 40 to 1. A difference without a distinction.

When it comes to offering opinions about what the wage gap should be, the Strong Democrats thought 5 to 1 was about right, while the Strong Republicans thought it should be about 12 to 1. The two political extremes obviously are much closer to each other than to the current reality of 354 to 1.

***

When it comes to our ignorance of the pay gap, there are no blue states, no red states — only misinformed states of mind. We’re the Know-Nothings of inequality.

Why are we so blind to inequality?
Most of us have no idea that our golden land of opportunity is the runaway leader among developed nations when it comes to inequality, (see chart below.) This dubious distinction runs counter to American Dream that we’ve been indoctrinated with since birth. As a result, we reflexively think that America is epitome of democracy — the fairest most just and most upwardly mobile country in history. That makes it hard for us to account for why we are more unequal than all these other countries. So, I suspect many of us just tune out the data. It’s too jarring to the deep-seated doctrines that comprise our national identity.

***

We may still be living with this cultural hangover and operating from a societal self-image from yesteryear. We are likely to cling to it for quite awhile, in part, because it’s comforting as new economic insecurities take hold. As workers from other nations pass us by, we look in the mirror and still hope we are the fairest of them all.

And see this.

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  • clarioncaller

    The American citizen still thinks he/she has constitutional freedoms because they can vote for either ‘shit’ or ‘feces’ on the ballot, and continue to think there is a difference.

    • WTFUAMERIKA

      That’s why the Tea party movement happened.

      • clarioncaller

        TP may have begun as an organic grass roots group, but it has been co-opted by the same puppet masters. Follow the money.

        • WTFUAMERIKA

          Nope not yet. They’re still trying to kill us.

  • jadan

    It’s not the inequality most Americans object to, it’s the reality that there is no upward mobility. Americans have always admired the rich as living examples of the American Dream come true. Isn’t that what Reagan preached, the “right to get rich” as a core American value? Income inequality was extreme in the 19th Century. The difference between then and now is opportunity for the mass of people to realize their money and security dreams….people have no faith in the future in this time…

    • Melanippe

      You are right, upward mobility is missing even for highly educated people. The younger generation listened to their parents’ advice and all the political propaganda, to stay in school, get an education, work hard, etc. and when they were ready to enter the working world the jobs had been sent overseas and most of the remaining jobs just do not pay enough to live and pay off the debt accumulated during above-mentioned preparation for life.
      I have found a website that gives good advice concerning debt and other financial matters. It is Thomas McFreeman’s “The Art of Debt Guerrilla Warfare” – How to beat debt collectors when your back is against the wall.

    • cybervigilante

      Sure, go to college, get a degree, be in debt to the Banksters for life, and get a job at McDonalds.

  • mla

    I’m not sure why I should care.

    I mean, look it from an individual basis. Do I care that Steve Jobs (RIP) was a multi-billionaire? No. A bunch of people decided to give him money for stuff. Good for him. I really don’t see it affecting me one way or the other. I certainly don’t think I was somehow entitled to Jobs’ wealth for the mere fact that I exist.

    Now, if we’re talking about corporatism and political dealings that allow people to steal with impunity, *then* I can get upset about it. And certainly I think it was a mistake not to let the banking industry fail, regardless of the economic consequences — this concern over inequality I think is a consequence of that injustice.

    But it’s the *injustice* that matters — not how much you or I make.

    • Carl_Herman

      and it’s the looting that is connected to massive wealth. How much looting, you ask? Until we have arrests, we’ll continue to be looted with only clues.

      “Injustice” is another word for “crime.” Massive crimes must be lawfully stopped, or else one has a society of increasing crimes into increasing areas. This is exactly what Earth has.

      • cybervigilante

        Holder publicly, and shamefully, told the Banksters they would never, ever be prosecuted for any crime. So of course they’ll still keep doing crime, as he goes back to a big pay job for the Banksters he helped.

  • Chumps

    I’m poor, so as a result, I live in a crime-ridden, impoverished hellhole. Hence… Inequality thrives because pithy comments like mine, in forums like this, look EXACTLY the same as the pithy comments of others who live security and splendor.
    .
    If our on-line avatars indicated our net-worth or if we were federal employees or contractors, we’d see that the narrative is dominated by narrative supporters of pro-federal, pro-Wall Street genocidal criminals…. Just like the media which ignores the income disparity.
    .
    In the 90’s the Clinton cult presented the left with this deal… Unless you handed over control of everything to a few dozen Wall Street crooks – You would never be able to have oral sex again.
    .
    So now you can starve under the freeway and give/get a BJ to/from an illegal alien.

    • cybervigilante

      Good old Bill. “Unleashed” the Banksters and bragged about it, destroyed welfare and created millions of homeless, started those job-destroying trade deals, then pretended to be “for the people.” And oh, fooling with Monica ensured that idiot warmonger Bush would be elected. Four strikeouts and you only get three.

  • JC Shark

    “Neither shall you desire… anything that belongs to your neighbour.” – I dont give a damn about what other people have. Me and mine are doing just fine.

  • sorry to burst your bubble

    Equality doesn’t exist.

  • Mark Williford

    I was really poor. i worked three jobs, took almost a decade to get out of college. Then I started all over again being unable to find a job (because all the jobs are in china and mexico) and then started my own business and starting hiring poor people. The more time and effort I poured into the poor people the more they made and the more I made. But I got tired of trying to manage these people, the IRS, the accountant’s, labor boards. I then sold the business and went out and got a Government Job and then closed the business.

  • regeya

    I’ve been seeing more about American poverty lately, and it distresses me that several of the more left-leaning organizations want to shame people into realizing that the poorest of the poor in America are still in the global 1%, and people on the right want to do things like kick the support out from other people.

    I just did some figuring a few minutes ago. I took what I was making in 2011–$11/hour, never any more than 40 hours–and tried to calculate if I could live in the closest town. And, unless I was illegally squatting, I couldn’t, and that was figuring for an average price of an apartment for a single man, a frugal grocery bill for a single man, and I also had to figure in utilities because it’s not legal to live in an apartment without running water and electricity. I also figured in a car, working under the assumption that it wouldn’t be possible to get a job paying at least $11/hour that would be close enough to walk.

    And I could do it. Just barely. As long as nothing went wrong. And when I mean “nothing”, I mean I needed to have a magical car that never broke down, never needed routine maintenance, and that I would always be healthy, and that I would never have to pay for repairs to anything in the apartment out of my own pocket. And entertainment would have to be talking, or reading, or maybe going to a park or something.

    Yes, if I lived out in the country, I could probably get away with shutting off the water, but in this county at least, there are building codes, so I’m not going to be able–not legally, at least–to build a palette hut with a dirt floor. If I tried to use an outhouse, the health department would be all over me. One plus is that, as far as I know, I could raise chickens on my property. But I would still have to have to pay property taxes to keep my propterty–yes, you can lose your property for not paying taxes–and in a rural spot, having a job almost certainly means having a car, unless you have a coworker that lives close enough to drive you to work.

    But there’s the thing: I’m not single. I have two children. My wife? She has a great job. She’s a teacher, where they still pay competitive rates to get talent.

    And one of those newspaper companies that I used to work for, while my salary was totally flat for years, every CEO got paid double the amount of the previous CEO. They tell people at my level that we have to be “globally competitive” but that at the CEO level, they have to pay more for talent. Huh.

  • James R. Olson

    Why would any one in their right mind Hate the people of occupy wall street?