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Is US income gap wider than you think?

A study by behavioral economists suggests that most Americans would prefer a more equitable distribution.

By Karen Datko Aug 13, 2012 6:23PM

Image: CEO (© Roy McMahon/Corbis)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.

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29Comments
Aug 13, 2012 9:30PM
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A poor man wants to be rich, a rich man wants to be king, and a king ain't satisfied 'til he rules everything.

I think that's from a Bruce Springsteen song.

At least in the survey people showed some common sense and heart.  The income gap in this country is shameful and ultimately harmful.
Aug 14, 2012 5:54PM
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Sure, everyone has the theoretical ability to become rich, even here. Where I draw the line is when those riches come at the expense of someone else's opportunity. When riches are the byproduct not of one's own efforts but from work Daddy or Granddaddy did, enjoy it to the hilt but don't call yourself "self-made", and don't expect a greater tax break for them or for dividends (i.e. money-for-nothing) than that given for wages earned through actual work whether blue or white collar. Don't expect to sell products made with foreign slave labor at American prices and be honored for it, especially when most of those products are junk by, very often, your own design. And for God's sake cut it out with that "job creator" crap unless there's a long-term living wage behind it - for people HERE.
Oct 4, 2013 3:49PM
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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.

Aug 14, 2012 10:28AM
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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.

 

Oct 4, 2013 5:45PM
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Why would you not care about the gap? It is stupid to have 99% of people that struggle to pay for an apartment or home (people who work very hard for a small amount of money) while others have multiple homes, vehicles that cost the same as the low priced homes, and has everything handed to them on a silver platter. Then, the rich have the nerve to turn around and say that they are the job creators. No, you are the slave drivers. Your just required to give people something for their work. And what is "required" is pathetic. If the wealth was better distributed, people would have better opportunities to do something they enjoy and STILL PROVIDE FOR THEIR FAMILY. They wouldn't have to work multiple jobs just to attempt to get ahead. And the quality of life for everyone would go up because there would be less stress, which would improve the quality of life all the way down to individual interactions. I just hate how our society is a sick game of Monopoly, where some people get extra advantages to the game that others don't have access to. Especially, when you realize that we are the only species that has to pay to live.
Oct 4, 2013 4:51PM
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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.

Oct 4, 2013 4:34PM
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I'm would bet the Roman Empire and other failed societies had a similar situation.

History repeats itself.

Oct 5, 2013 8:29AM
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Problem is we all keep supporting this consolidation. I can remember when we used to purchase groceries , clothing , furniture, gas and even jewelry from a local merchant. This kept alot of your money local instead of these Walmart and other large corporations. We used to be able to afford buying tickets for a sporting event or movie also. Here we have created new millionaires by putting these sports players and actor / actresses on a pedastal earning millions. If all of us average Americans would start supporting local small businesses and refuse to pay the ridiculous prices that the sporting event tickets now cost we could as a country start to address the problem.Think of everytime you buy Tyson chicken instead of a local that can't produce and sell at the same cost as "the big boys", but would keep the profit lower. This is NOT about either political party. We have watched this change take place under both parties. The Trillions of money that has been printed is done by the Treasury who by law must disperse the money thru federal banks and has for the most part been funneled into wallstreet. Banks after the collapse are responsible to lend to who they feel are a safe and profitable person to loan the money too and that means the " fat cats " that have the money to repay the loans...not Joe blow that wants to start a small local business because we all are guilty of NOT supporting locally. We are all guilty of this including me. In the coming years we the average American will see the price we are going to pay as the meager amounts of "money" we have when the value of the dollar drops tremendously .. and it will with all we have printed and nothing to back it up. Look at it this way. Say your an average retired person who thru their life working for a pension and a savings have accumulated $200,000. This is where my retired parents are right now. If or when the inflation hits and the value of the dollar drops in half, then what you purchase with that savings gets cut in half. This means that the rich person that had a billion is only worth 500 million. They still own the stocks or businesses are still living comfortably and the business they own will start taking in twice as much more with the dollar value dropped in half. A never ending cycle. Young kids today will only be able to "pay off" this huge financial debt when inflation hits and the value of the dollar drops hurting the average American that saved enough to live. Think of it this way, If you make $25.00 per hour and are paying for a $150,000 home and all of a sudden their is a huge devaluation of the dollar and thru time your adjusted wages are $100.00 per hour but bread is now $ 10.00 a loaf. This happened in the late 60's and the 70's. It's coming again and only these huge rich companies and the people that run and control them will be the ones that get richer. Never ending cycle until we decide to start taking care of each other. 
Nov 20, 2013 2:39PM
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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.

Nov 20, 2013 12:05AM
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You polo player, I guess that playing polo pays well, so you don't have to worry about misfortunate. Yu should know that they are also members of society. This crap about equal opportunity to be rich makes my blood boil. There are carpenters, cashiers, I mean people with inability to compete with smart ones as Google founders for example. Not everyone is born with the same set of abilities and opportunities as some rich are. There is this billionaire who received 50 million from his father and he obtained the future wealth mostly trough speculations, so I wouldn't call it "worked hard for his money". He has also build Casino in Atlantic City and when it came to pay the  bills, he filled for bankruptcy, so even  not exactly rich contractors didn't get paid and there are countless machinations the rich pull on working people to get richer. People who have negative view in response to above article are either rich, or voting against their own interest. .
Nov 21, 2013 8:47AM
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In Japan and now the Swis are trying to put a cap on the wage gap to about 20:1  How much is enough? It becomes greed. The CEO's have sent 57000 manufacturing plants to China so they can Utilize slave labor. and not have to conform to any pollution control. We need to put a tariff on goods that come from places like this. Even the playing field and we may see some manufacturing come back to the US. The only jobs that are here are service oriented jobs where the employers are reducing wages. The other thing is large businesses are claming their businesses are overseas and a shell in the US is losing money while making millions elsewhere. If you live here pay your fair share. I believe a flat tax is in order. Make is simple, no giant code no one can figure out. Last year I paid 28% the same time our pres is paying 16% and Romney 17% explain how this is fair?
Aug 14, 2012 3:19AM
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Income inequality will always exist in a free enterprise capitalistic society. Alowing the government to pass legislation that inhibits the growth of capitalism and the free enterprise system insures that only those in power (the government) and those now in possession of wealth will ever have it.
Oct 4, 2013 4:31PM
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I'm having trouble seeing where you differentiate between income distribution and wealth accumulation. 
Oct 4, 2013 3:55PM
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Wealth gaps mean nothing to me... what is important to me is to insure that every American can get an education regardless of him means and every citizen can get regular mental and physical healthcare regardless of his or her means and for special needs citizens who cannot be productive due to mental or physical restrictions, ie, brain-damaged quadrapelics as one example (though there are many others), a base income adequate to insure a clean living space and food...who cares if the top 20% control 99% of the wealth as long as the other 80% has the opportunity to succeed and for those who cannnot work, that their basic needs are met?
Oct 4, 2013 4:53PM
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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.

 

Oct 4, 2013 4:58PM
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There has been an avalanche of this kind of rhetoric forced down the throats of our society for decades ! People wonder why things keep getting worse and motivation is quickly becoming a thing of the past . Get a six figure + salaried Behavioral economist to create his own little bucket of focused misinformation , get it published and Walla everyone becomes just a little bit more discouraged . What is the message here you ask ??? Communism makes everyone happy . With all of the recent obvious failures it should be clear that Communism is a complete and utter disaster !!! The masses , the sheep of this world are always eager to be led to their next sheering . All you have to say is "it's not fair" with just a little redistribution every one will be happy !!! I'll tell you what is fair "fair is a place where hogs go to compete for ribbons" !!!
Oct 4, 2013 3:43PM
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America SHOULD have income disparity. There is a diverse population from diverse backgrounds, education levels, and abilities. It was that way for the 70 years that I lived in the U.S. now there are more folks on welfare which covers more people than ever before. This includes a lot 3rd generation welfare clients. The idea that everyone is equal and deserving of pay whether or not they earn it is not working very well.  No, not everyone can be a winner. Nor should they be.
Oct 4, 2013 4:11PM
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Who respects the "Gini co-efficient"?  The Marmaduke Mass Marshaling Poll finds no income inequality in the whole world and it is preferred by most Cairns.  Save me the trouble and indicate just what fields these two scholars claim as their own.  The number one tenant of Marxism is create Class Consciousness.  Do a word or subject count and you will find articles about class in the popular media to be almost non-existent 10-15 years ago and today we are deluged with them.  Obama doesn't even know what the middle-class is but he throws the term around at every whip stitch.  He wants everybody to think he is talking about them when, in reality, the middle-class he professes to be saving is the very group he expects to pay for all his entitlements.  Don't look to the rich - they aren't rich enough.  According to Forbes, the top 1% in our country - Obama's favorite demons - have a combined wealth of just under 2 trillion dollars.  Forget about higher taxes - confiscate all of it and you don't have enough to pay the bill.  Of course, the middle class will have to ante up - he just wants them to think they will be getting something other than the bill.  Oh, by the way - income levels are indeed more equal in West Africa, most of Asia, North Africa, etc. - they are all (the people) impoverished except for the crooked politicians who run those countries.  Is that our goal - to be equally poor and destitute.  Go back and look at the tax rates in 1948 - 70-90% across the board for rich and poor alike.  We can go there again and have a permanent class of government bureaucrats living better than everyone else.  Stalin always claimed the Soviet Union was failing because of the apparatchaks (civil service bureaucrats)
Aug 14, 2012 7:23AM
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and , in reality, the bottom 40% pay no federal taxes and many in the bottom 40% receive some form of government handout paid for by the top 20%.  I'm not into class envy or worse, class warfare.  We've always been a society that has had it's share of rich and poor.  What has made this country great, probably unique, is the opportunity everyone has to become rich.  If you don't take advantage of all the opportunities this country has to offer, shame on you but don't blame the rich for doing just that.
Aug 13, 2012 7:54PM
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One more bad, bad rich people article.  Only 17,000 more to go before election day.  Got to protect those union (ahem)  "reporter" and Harvard reseacher jobs. 
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