Is US income gap wider than you think?
A study by behavioral economists suggests that most Americans would prefer a more equitable distribution.
Do Americans understand how vast the nation's wealth gap is? And if they had their way, what income distribution sounds just about right to most people? That's what two behavioral economists have attempted to find out.
On both counts, the results they got may surprise you.
First, we Americans recognize that there's an income gap but greatly underestimate how much wealth is concentrated in the top fifth of the population.
"If you guessed around 9% for the bottom (40% of the population) and 59% for the top (20%), you're pretty much in line with the average response we got when we asked this question of thousands of Americans," Duke professor Dan Ariely wrote in The Atlantic this month.
In reality, the bottom 40% of the population has only 0.3% of the wealth, and the top 20% has 84%, he writes. (Post continues below.)
How does that compare with the wealth distribution people would like to see? Ariely and fellow researcher Michael Norton of Harvard tested that two ways.
They asked 5,522 Americans to describe a distribution of wealth in which they'd be comfortable being randomly assigned anywhere between the bottom and top.
What a bunch of fair-minded people we are. Ariely wrote:
We found that the ideal distribution described by this representative sample of Americans was dramatically more equal than exists anywhere in the world, with 32% of wealth belonging to the wealthiest quintile down to 11% by the poorest.
What was particularly surprising about the results was that when we examined the ideal distributions for Republicans and Democrats, we found them to be quite similar.
They also asked subjects to pick between two unidentified countries -- one modeled on the U.S. reality and the other somewhat similar to Sweden. The second one was chosen by 92%, with, once again, a small difference between those who identified with either major party -- 93% for Democrats and 90.5% for Republicans.
The difference between rich and poor respondents to the question was also small, Ariely told NPR.
What can we learn from this? Ariely wrote:
The first is that we vastly underestimate the level of inequality that we have in America. Our society is far more uneven in terms of wealth than we believe it is. Second, we want much more equality than both what we have and what we think we have. Apparently, when asked in a way that avoids hot-button terms, misconceptions, and the level of wealth people currently possess, Americans are actually in agreement about wanting a more equal distribution of wealth.
Want a graphic illustration of where the U.S. sits? Another Atlantic article includes two maps identifying countries by how they fit on the Gini coefficient, a respected method for measuring income inequality. The article says:
Income inequality is more severe in the U.S. than it is in nearly all of West Africa, North Africa, Europe, and Asia. We're on par with some of the world's most troubled countries, and not far from the perpetual conflict zones of Latin American and Sub-Saharan Africa.
More on MSN Money:
The Criminals in Congress work for the billionaires and big corporations that have destoyed the Middle Class.
--The last 13 years... exporting 30-40 million jobs overseas./
-Floooding the employment market with another 30+ million illegals and flooding in immigrants.
-The Middle Class now make 5% less than they did in the year 2000.
-The top 1% have more assets than 150,000,000 Amewricans.
Stop the Criminals.. billionaires, Congress and the other faces of Evil. These people are not Americans they are preditors. These people are the Face of Evil.
But the top 1 % are job creators aren't they? Think of all the butlers, groundskeepers, and yacht captains who would be unemployed without them.
And William Stuart (poloplayer), if you read the article you'd see that the bottom 40% control 0.3 % of the countries wealth, how much of that should they pay in federal taxes?
Keep in mind they may not pay income tax but that's because they make next to nothing. They don't get out of paying the federal gas tax, unless they don't drive.
Congress is a big example of what is said here. I'd write a petition that said that in the case of a government shut down, all congress and white house officials would receive an immediate pay-cut. They are an example of rich people who don't care at all about how their actions affect those less fortunate. Maybe they should use their money to buy better brains, because they certainly are not using them now.
I'm would bet the Roman Empire and other failed societies had a similar situation.
History repeats itself.
The income disparity always happens in any society. But, we are talking about the "income gap". When this "income gap" becomes wider, the economy in the society will be affected tremendously and the standard of living will decline. There is absolutely no reason that the top executives of any company should receive their compensations at 300+ or 400+ times more of what the average workers in their companies receive. The top executives should know (I think they know but ignore) that the success of a company depends on the loyal and hard working workers, NOT the shareholders, who are productive to make the success happen. The average workers should have every right to be compensated well. Without the efforts from the average workers, not a single decision made by the executives can get materialized. The middle class has shrunk since 1980's due to the stagnated salaries for decades and even further more since recent recession that have made the purchase power decline among average consumers. Why have the average workers' salaries been stagnated? The reason of this is that there is not much leftover from the company's profits after certain amount of revenues required to be pumped in to operate the company and the top executives get their shares of compensation. Even though when company distributes the annual profits at end of the year, the top executives would get their lion shares.and the entry level workers would receive their shares of profits at probably a single digit percentage of their base salaries. In fact, the population of the riches is much smaller than the vast population in the country and there is only so much of typical consumer products the riches would purchase annually that is no comparison to the average consumers. It is the vast population in the country who are average consumers and constantly need typical consumer products and this vast population should be in the middle class who have jobs and get compensated at fairly decent salaries and are able to purchase whatever they need. A strong purchase power from the middle income population will stimulate various markets that will then subsequently generate businesses for various industries. Then eventually, the nation's economy improves that will create a stable living standard and a safer society for us to live. Unfortunately, we have been living in a "Greed" society without ethics. There is only "$" sign in their minds and "greed" in their hearts from politicians in D.C. to the top executives and board directors in companies.
Wealth (property) is effectively a repository of stored personal freedom. (In order to do what I want I have to consume resources and time. I can choose to do what pleases me each an every moment - which means I am free every moment. Or I can do some things which do not necessarily please me, but pleases someone else and they are willing to provide me with additional resources for doing those things.) I gain wealth by doing more of the latter and less of the former. The goal being that this "stored" freedom can be used at a later time of my choosing.
Income is nothing more than a representation of the value of those resources which are exchanged - what is the thing you are doing worth?
The value is determined by the worker ( Is it worth the loss of freedom I experience in order to do something for this buyer?),,and the value is determined by the buyer (Is what I am getting worth the loss of freedom I experience in order to have this done for me?)
What the "income gap" demonstrates is that there are lots of people in the US who choose every day to do only what pleases them that day. Buyers place little or no value in paying others to do what is enjoyable (sleeping late, watching TV, having sex with multiple baby mamas, smoking dope, drinking, etc.) and also assign little value to things that require little personal cost in the way of risk, education, or expertise (flipping burgers, parking cars, waiting tables, clerking at 7/11, etc.). They place a high value on things that do require some expertise (brain surgery, performing arts/sports, etc.), has high risk (electricians, demolitions experts), or perceived as unpleasant (plumbing).
So, since there are few people willing to make the effort or give up the freedom needed to develop the knowledge base or expertise, those that are will receive higher incomes and store more wealth. Those that choose to just flip burgers or party will earn very little - but that is the choice they have made.
The end result is a wide income gap and wealth accumulation. It is not the fault of the wealthy - they are paid because of the sacrifices in freedom they have made to get to where they are....it is the choice of low wager earners to not make the effort to compete for these higher paying roles - primarily because the low wage earner finds it more enjoyable to pay someone else to make that sort of effort. This is exactly what you should have in a just society. People getting exactly what they deserve. And in such a economic system wide gaps in income and wealth are expected. All this report shows it that America is, mostly, functioning better than these other countries.
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