Rising Wealth Inequality: Should We Care?
Why do Americans seem unperturbed about the growing gap between the rich and the poor?Living Beyond Your Means
March 21, 2011
Michael I. Norton is an associate professor at the Harvard Business School. He is currently co-writing a book on money and happiness.
In a recent survey of Americans, my colleague Dan Ariely and I found that Americans drastically underestimated the level of wealth inequality in the United States. While recent data indicates that the richest 20 percent of Americans own 84 percent of all wealth, people estimated that this group owned just 59 percent – believing that total wealth in this country is far more evenly divided among poorer Americans. Easy consumer credit and a belief in social mobility have reduced the clamor for wealth redistribution.
What’s more, when we asked them how they thought wealth should be distributed, they told us they wanted an even more equitable distribution, with the richest 20 percent owning just 32 percent of the wealth. This was true of Democrats and Republicans, rich and poor – all groups we surveyed approved of some inequality, but their ideal was far more equal than the current level.Why then, given the consensus on this more equal America, are Americans not clamoring for redistribution?
The actual United States wealth distribution plotted against the estimated and ideal distributions across all respondents. See more details.
First, the expansion of consumer credit in the United States has allowed middle class and poor Americans to live beyond their means, masking their lack of wealth by increasing their debt. We might think that people who have "zero net worth” have nothing. But in fact, having zero net worth increasingly means owning a lot (cars, televisions, even houses) – but also owing a lot. As a result people with zero net worth, and even negative net worth, can still feel that they are living the American dream, doing “better” than their parents did while keeping up with the Joneses.Second, poorer Americans’ belief in social mobility – despite strong evidence of its rarity – causes negative reactions to policies that would seem to benefit them, like raising taxes on those who earn and own a lot more. Why would the poor oppose taxes on the wealthy? Because many believe that they, or at least their children, will eventually be wealthy, voting for taxes on the rich may feel like voting for taxes on themselves. As a result, even the word “redistribution” has negative connotations.
My colleagues and I are now exploring whether educating Americans about the current level of wealth inequality (by showing them charts and pictures) might increase their support for policies that reduce this inequality. In addition, we are assessing whether different forms of redistribution – for example, raising the minimum wage, or longer term interventions like reducing disparities in education – are less likely to evoke heated opposition, and perhaps increase advocacy for greater wealth equality.
http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care/living-beyond-your-means-when-youre-not-rich
This article talks about redistributing wealth but I am uncertain how the United States would go about doing that. Would they tax the middle and upper class and use that money to fund programs for the poor? I can understand wanting to help the poor and I believe we should have programs in place to make sure all children receive a good education so they have the opportunity to better their lives. What I don’t agree with is punishing people that have worked hard and achieved success. I can only relate this to school and I feel like I do well in school because I study hard. I give up a lot of free time to make sure I am prepared for class by studying and doing my homework. If another student did not receive as good a grade as I did on a test because they didn’t study as hard I would not want to share my test points with them to make sure we both got B’s. I would want the grade I worked hard for. Now if someone had a learning disability, I would think they should receive special help. Just like I believe the poor need special help. I think we need to focus our efforts on making sure children receive good educations so they can fairly compete in the business world and have the same opportunities as others. Redistributing wealth is not going to help children get a better job, we need to put programs into place that will have long term affects and really help future generations succeed.
ReplyDeleteWhy did people who were surveyed believe that the richest 20 percent of Americans, who own 84% of all wealth, only owned 59%? The triangle theory is one answer. Most Americans are positioned in the middle 80%. Their view of the top 10% is clouded by their quest to get there. They believe that they are closer than they are. If the top 10% owns 84% of the wealth, they will have a hard time getting wealth because the remaining 16% will be distributed among the 80% in the middle. However, if they believe the top 10% in the triangle owns only 59%, the remaining percentage is larger and they can earn a bigger percentage. This survey might not be as surprising as it sounds. To really get a better picture of this survey, it would be necessary to see the raw data. Who was surveyed? What status did they have? Where did they fall in the triangle? All of these factors would play a part in the results.
ReplyDeleteThis article mentions the ideal belief that many Americans have about just how much of the wealth the top twenty percent control. The people polled estimated that the top twenty percent own 59% of all wealth, when in fact, the top twenty percent own 84%. Many people are greatly unaware of just how great the divide is between the classes. I think part of why people guessed that the top twenty pecent only own 59% is because if they only own that, then it means that everyone else has a fighting chance. People are more willing to accept fighting over the remaining 41% than having to face the idea of 80% of the population trying to split up 16%. The very idea is disheartening and ludicrous to many. I think it is important to explore the idea of educating people about the current level of wealth inequality. Also, I think it is a great idea to focus on bills to further education opportunities and raise minimum wage because these bills focus on helping the lower class, and shy away from the idea of making the rich pay.
ReplyDeleteI agree with Sam. Hard workers dederve to keep their money. It is completely unfair for someone to have to give out their money to those who do not try to make a living on their own. Just like Sam said, if I studied super hard for a test and received an A, I would not appreciate sharing my points with those who did not study as hard. People make sacrifices to earn their lifestyle. Why should someone work hard just to give free handouts?
ReplyDeleteIt is not surprising about the confusion of most Americans about how much the upper class does control. Many people do not want to admit that the upper class is the most powerful, and are having wishful thinking when it comes to the control. This confusion shows that people do want there to be equality between classes, even if it might be impossible.
ReplyDeletePeyton Bromley said...
ReplyDeleteI agree with Lexie that our idea of the top 20 percent and what they control is clouded by our quest to get there ourselves. We as Americans thrive on the hope that there is 41% of wealth out there to fight for opposed to only 16%. People would also have to alter their lifestyles because they no longer could live above their means becuase of the illusion they will eventually have the money someday.If we acknowledge that there is only 16% of wealth left and 80% of the population fighting over it more people would give up and be disheartened. In acknowledging this the upper class will gain more power over the other other classes. We want equality even if it is unlikely to happen.
I agree with Sam and her concerns on how wealth can be redistributed. Conceptually,evening out money seems easy, just take some from the people who have a lot and give it to the people who don't. In real life however, that would be unfair to people who worked and sacrificed to get where they are. Some wealthy people gained their wealth easily but others genuinely struggled to get to the top. Who can decide if someone actually earned what they have or not, and how would they decide that? There is no question that a change to equal the division of wealth is what Americans say that they want, but is there a fair way to get it?
ReplyDeleteIt is kind of sad to think that people in the lower class do not want to vote for laws that would place a higher tax on those who are wealthy. The American Dream is beginning to become out of reach for many citizens today. The gap is becoming too large and the amount of opportunites to climb the social ladder is decreasing. Also the people who are pretending that they have the money to pay for new cars, televisions, and houses are just digging themselves into a hole of debt they are not going to be able to get out of. People should be educated on the problem of inequality and distribution of the wealth in America. If they are educated on the subject then some ideas of how to fix the problem could begin to formulate.
ReplyDeleteThough the majority of Americans want a more equal distribution of wealth no one is exactly willing to make the redistribution a reality. The artcle mentions one reason that I particularly agree with, people nowadays think that since they have possessions such as houses and nice cars they don't see a problem with increasing their debt. They think that their increase in possessions is an okay trade for increased debt. They believe that since they have more than their parents did it means they're better off. But in reality this isn't the case at all. People are in massive debt which is only going increase over time if the wealth isn't redistributed to better pay lower-paid workers.
ReplyDeleteMasking a lack of income through credit card debt can explain why Americans are seemingly unaware of their decreasing income over the years. They are too busy focusing on their material possessions that they don't notice the fact that they are falling deeper into debt until it is too late and they are forced to bankruptcy. Even then they still believe that the American system is effective and blame their failure on their lack of work effectiveness. It also amazes me how so many of the poor believe in class mobility. despite the fact that it is obviously rare, people still cling to the hope that their situation will improve. This causes great harm since they wont restrict what they believe to be their future status. The rich continue to be successful with the limited restrictions while the poor are ignorant to their lack of progress.
ReplyDeleteI am a firm believer that every one should work hard to earn what they want out of life, if they do not attempt to make the living they want for themselves then they should try harder. Therefore, if i am going work super hard for my living and worked my way up to the top i would not want to help someone who does not at least attempt to make something for themselves. Granted it is more difficult for people to get to their dream life, but all I am asking for is someone to try and work towards their goal. There is nothing wrong with a little help from someone who is already established but getting freebies and hand outs are not okay because I would not want to work very hard and watch someone not even make a feeble attempt and get hand outs. That would upset me because it takes away from the principle of hard working lifestyles. Life isn't easy.
ReplyDeleteA redistribution of wealth in the United States is a good idea. Some people have too much wealth and others are living on the streets, which tells me money needs be moved around into new hands. However I do understand why redistribution makes people nervous. Nobody wants to lose what they have and even though this type of policy could benefit lots of people, people are afraid they would draw the short end of the stick.
ReplyDeleteAs stated earlier, "the expansion of consumer credit in the United States has allowed middle class and poor Americans to live beyond their means." This of course, is bad news. Nowadays, people definitely owning a lot of "stuff" but they are facing a lot of debt that comes with it. A redistribution of wealth is a fabulous idea, but the trend that the economy is on right now really is discouraging that. Just like that monopoly game, the rich are getting richer and the poor are getting poorer. It would be great if minimum wage went up and good education was more prevalent in the country, but this requires the Government to get involved, and as Americans, that is never accepted easily.
ReplyDeleteMadison Jones: Like Shannan said, its not surprising that Americans are blind to the percentage of money the wealthy actually control. Americans contain the attitude of wanting to move up an economic class, even though it is very difficult and unlikely. I think more people should be educated that alot of material belongings does not equal wealth. With a large amount of belongings comes alot of debt and I think many people are blind to this fact.
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