Researchers advocate for optimum level of 'unequality' for the US economy

The growing disparity in economic inequality has become so stark that even Janet Yellen, Federal Reserve chairwoman, recently expressed concern. Interestingly, new research has discovered that American citizens desire an unequal, but more equal distribution of wealth and income. Lower levels of this "unequality" are associated with decreased unethical behavior and increased motivation and labor productivity. This study is published today in the inaugural issue of Policy Insights from the Behavioral and Brain Sciences (PIBBS).

"People from all walks of life – rich and poor, liberal and conservative – agree far more than they disagree on what America should look like. People exhibit a desire for unequality – not too equal, but not too unequal," wrote study author Michael I. Norton, of the Harvard Business School.

In his recent research, Norton found that people dramatically underestimate how unequally wealth is distributed in the U.S. and desire some , but much less inequality than the current levels. For example:

  • Americans estimated that the richest 20% had about 60% of the nation's wealth, when in reality, they had 85%; they wanted the richest 20% to possess 30% of the nation's wealth.
  • Americans estimated that the poorest 20% had about 4% of the nation's wealth, when in reality, they had .1%; they wanted the poorest 20% to possess 10% of the nation's wealth.
  • Americans estimated that CEOs made an average of 30x what unskilled workers made, while in reality, they earned 354x what unskilled workers made; Americans thought that an ideal pay ratio for CEOs to unskilled workers would be 7:1.

Drawing on recent behavioral research, Norton writes that high levels of pay inequality demotivates lower paid workers and is not offset by increases in motivation for higher paid workers. Inequality may even lead to worse performance in both groups, less generosity, and more (e.g. cheating) across the income distribution.

Commenting on his behavioral approach to the topic of an unequal economy, Norton noted:

"Economists have used historical data to attempt to determine when and why inequality has positive and negative consequences. Behavioral scientists – psychologists and behavioral economists – have taken a different and complementary approach: How inequality affects the thoughts, emotions, and behavior of a single person in worlds that are more or less unequal, and how that person's rank in each world – from richest to poorest – further shapes behaviors ranking from cheating to effort to generosity."


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Nov 04, 2014
In an item marked as a related story on this page (http://phys.org/n...l#nRlv), the finding is that Americans overestimate inequality. The questions are a bit different, but they don't seem very different. Some of them ask about absolute income, rather than proportion of the nation's wealth, but the other study also contains question about income ratios. Instead of the CEO pay/unskilled worker pay ratio, which here is underestimated, they asked about the top 20% income/bottom 20% income, which is overestimated.

Nov 04, 2014
Americans thought that an ideal pay ratio for CEOs to unskilled workers would be 7:1

Just a note: There is no prerequisite for being a CEO. It's unskilled labor.

cjn
Nov 04, 2014
Citing Janet Yellen for her concerns on income inequality is like citing the CEO of Exxon for his views on the effect of fossil fuels on the global climate. Yellen, is the president of the Federal Reserve -the organization which has done everything in its power (intentionally or unintentionally) to debase US currency and funnel money to the banks and the very rich. In the last 6 years, the Fed has put $3,400,000,000 ($3.4T) into circulation, with no accountability, reducing the value of each dollar already in the economy.

These bonds issued by the Fed weren't just put into the USG budget or given to the population, they were given to the banks, which took a 5-10% cut to receive the money, and then received interest payments on the loans they subsequently made. This behavior explicitly exacerbates the issue of inequality/unequality, and yet we ignore it because we have a "Progressive" administration.

cjn
Nov 04, 2014
"Left" or "Right" is simply a red herring, while the monied elite buy influence and scheme new ways to pilfer money from the working classes. Now, they're not satisfied taking the production of our current lifetime, they're focusing on stealing money from our futures through bonds that we'll have to repay and/or service for decades.

So long as we have governments which operate without checks (each party giving their respective leaders a pass for this behavior), we will continue to see the balance of assets shift from the 99% to the 1%. This is the real problem; not our perceptions on who makes how much and "how that makes us feel."

Nov 04, 2014
To begin with, the claim that people want inequality in earnings is a lie. The "research" began by saying, "Look, society's going to be unequal, we just want you to tell us how unequal you think it should be!" Now, to be fair, Americans do approve of a system which can lead to inequality, namely, the "work hard and you'll advance" idea, but it's the chance to improve your condition they want, not the situation of people being at different levels. But, matters are far from the "work hard" ethic today. It's still possible to advance, but, today, it's gained almost exclusively by clout, cronyism, back room deals, sexual favors, and designing your product to betray the "rank and file" buyer, in everything from programmed obsolescence to facilitating rich and crooked connivers trying to scam the people behind their backs.

Nov 04, 2014
here is no prerequisite for being a CEO. It's unskilled labor.

Try it.
No mention of how the top 10% pay 68% of income taxes.
Top 1%: > $360k
2%-5%: $161k to $360k;
6%-10%: $117k to $161k;
10% to 25%: $69k to $117k;
"The bottom 50 percent paid 3 percent of income taxes but earned 12 percent of income."


Nov 04, 2014
hey rygg,

Guess a felon was caught voting, guess who he voted for?

http://www.thebla...ve-done/

One might assume democrats think laws like taxes are for everyone else.

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