McCall_ Americans Aren't Naive

Rising Wealth Inequality: Should We Care?

Why do Americans seem unperturbed about the growing gap between the rich and the poor?

Americans Aren't Naive

Updated March 22, 2011, 09:52 AM

Leslie McCall is a sociology professor and fellow at the Institute for Policy Research at Northwestern University. She is finishing a book on American attitudes about income inequality, economic opportunity and redistribution.

Understanding what Americans think about rising income inequality has been hampered by three problems.
First, polls rarely ask specifically about income inequality. They ask instead about government redistributive polices, such as taxes and welfare, which are not always popular. From this information, we erroneously assume that Americans don’t care about inequality.

What we are missing is an understanding of why Americans desire less inequality.

Second, surveys on inequality that do exist are not well known. For instance, since at least the late 1980s, a majority of Americans have agreed with the statement that income differences in the U.S. are too large. Similarly, 70 percent or more have said for decades that executives are overpaid, and a smaller share have said that lower-level occupations are underpaid. Americans say this despite underestimating how much executives earn (though we should not really expect people to know these figures).
Third, although I found that newsweeklies began covering the issue of rising inequality in the 1980s, and coverage increased at key junctures (e.g., in 1992 and 1996), politicians and the media do not consistently engage Americans on the issue.
Even though Americans underestimate how much inequality exists, they still want less of it, as studies have shown since the 1980s. Therefore hammering home how extreme inequality really is probably will not heighten public concern, though it might cause policymakers to be more focused on the issue. This is why Norton and Ariely's paper is so significant. The other point to remember is that political scientists have done research on the role of "facts" in moving public opinion and they often don't have much effect.
What we are missing is an understanding of why Americans desire less inequality. Far from believing naively in the American dream, Americans are well aware of barriers to opportunity, such as the dearth of good paying jobs and accessible, quality education for those with middle and lower incomes.
My research suggests that, in times like these, Americans hold the rich partially responsible because of their reckless stewardship of the economy, spurred to some degree by rising inequality. Taxing the rich does not seem to be the most direct solution to these problems, whereas putting the economy back on track through equitable growth does. Thus Americans support regulation (including curbing executive pay), job growth and fair pay (as we’ve seen lately in Wisconsin), and education.
It is often said that Americans care about opportunity and not inequality, but this is very misleading. Inequality can itself distort incentives and restrict opportunities. This is the lesson that episodes like the financial crisis and Great Recession convey to most Americans.
http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care/americans-arent-naive-about-income-inequality

Norton _ Living Beyond Your Means

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

Osberg_ A Volatile Mix of Attitudes

Rising Wealth Inequality: Should We Care?

Why do Americans seem unperturbed about the growing gap between the rich and the poor?

A Volatile Mix of Attitudes

Updated March 22, 2011, 01:37 PM

Lars Osberg is the McCulloch Professor of Economics at Dalhousie University.

The United States is a country that has more marked income and wealth inequality than any other affluent nation, but also does less – in tax and transfer policy – about reducing inequality than anywhere else. However, this cannot be explained by different preferences for economic equality.

American views toward inequality are polarized to a degree that is unusual internationally.

In most respects, Americans are not very different from anybody else. When asked, for example, “In (your country), are income differences too large?” overwhelming majorities, in all countries, either “agree” or “strongly agree.” There is also not much difference across countries in average mild agreement with statements such as “Inequality continues to exist because it benefits the rich and the powerful."
Where Americans are quite different from Europeans is in their willingness to see government as a legitimate agent of change. When asked what individuals in specific occupations “do earn,” the average American respondent also underestimates the incomes of C.E.O.s much more than people do elsewhere. And there appears to be more tolerance for inequality between the poor and the middle class than is common elsewhere.
However, American attitudes are a volatile mix. Underestimation of the inequality between C.E.O. incomes and the wages of the average production worker wage does not, for example, imply approval. When asked what that ratio should be, the average American – like respondents everywhere – says C.E.O. salaries should be a small fraction of what they now are, and those desires for more equality appear to be hardening, even as the actual differential is widening.
Furthermore, American attitudes toward inequality are polarized to a degree that is unusual internationally. Although Americans do not on average have different preferences for aggregate (in)equality compared with other affluent market societies, the attitude hides a deeper divide between those who accept that “what is, should be” and those who would prefer a very substantial leveling of incomes. Whether this bipolarity of American attitudes will produce a tendency to future swings of public policy remains to be seen.
http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care/a-volatile-mix-of-attitudes

Rosenbluth_The Gender Complication

Rising Wealth Inequality: Should We Care?

Why do Americans seem unperturbed about the growing gap between the rich and the poor?

The Gender Complication

March 21, 2011

Frances McCall Rosenbluth is a political science professor at Yale University.

One of America’s most troubling trends over the past several decades is that the rich have gotten richer, earning a larger percentage of total income than any time since the roaring ‘20s.

Divided by a wide income gap, American women agree on few economic initiatives.

But the picture for gender equality is more complicated. The median female income has risen faster than the male median, growing from about two-fifths in 1960 to three-fifths in 2008. Still, women remain over-represented among low income earners and under-represented among the super rich. Wage dispersion, or the difference between bottom and top income earners, has grown among women almost as much as it has among men.
In many European countries, by contrast, class equality is protected at the cost of gender inequality. Long-term labor contracts in Europe, promoted by potent labor unions and the parties that represent them, protect workers’ jobs and wages.
But these labor protections have the unintended side effect of giving employers a disincentive to hire or promote women whose greater likelihood of interrupting their careers for childrearing and other family work make females a poorer long-term human-capital investment for a company. However illegal, firms in Europe have ways of engaging in “statistical discrimination” to avoid investing in workers who, actuarially speaking, are less likely to stick around in the job long enough to reach top productivity.
How ironic that, as a result of labor protections, female labor force participation rates are systematically lower in Europe. An exception to this low participation rate of women can be found in Scandinavian countries, which have large public sectors. While women are underrepresented in the Scandinavian private sector as they are elsewhere in Europe, their greater representation in the public sector allows the government to pass along the cost of lower female productivity to the tax payer.
The glass ceiling in the U.S. is somewhat higher than in Europe because it is relatively easy to fire unproductive workers in America, making female workers a less risky bet in the event that they slow down or are less effective networkers on account of motherhood. But here as elsewhere, unless and until the costs of childrearing are equally shared across the sexes, real gender equality in the workplace will remain out of reach.
Why are women not more outraged by the persistent inequalities in gender roles that limit their economic opportunities? For one thing, women have conflicting interests: they may feel attachments to their husbands, to their children, to their class, or to other aspects of their identities that limit their solidarity with other women. A woman who chooses not to work outside the home is more likely to vote for policies that protect her husband’s disposable income than to mandate paternity leave or to raise taxes to subsidize someone else’s childcare. An economically successful woman who can afford a nanny for her own children may also oppose public subsidies for childcare.
Divided by a wide gap in income, women agree on little, let alone on public policies powerful enough to change existing social norms.
http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care/the-gender-complication-in-wealth-distribution

Winship_We Feel Rich Enough

Rising Wealth Inequality: Should We Care? NYTimes 3/22/10

Why do Americans seem unperturbed about the growing gap between the rich and the poor?

We Feel Rich Enough

Scott Winship is the research manager of the Pew Economic Mobility Project, where he designs the project's research agenda and evaluates commissioned work. Outside Pew, he writes about economic issues at his blog.

Just one percent of Americans mention inequality when asked what is the most important problem facing the country. Why? Partly because the concentration of wealth is strikingly low by historical standards and the gap between rich and poor has not increased as much as many pundits believe. Another factor may be the relative affluence that the typical American enjoys today.

The nation is looking for the same thing it has for decades – not a leveling of income differences, but a fair chance for everyone to achieve the American Dream.

A prominent public opinion analyst has observed that voters' economic concerns "have shifted from those of getting to those of keeping." Those words were written by Samuel Lubell in 1952. Between that year and 1979, the income of the median family doubled, and while progress has slowed, it has still grown respectably since then.
Despite the sluggish recovery, a Pew Research Center survey conducted last year found that three in four Americans who had reached midlife either said they were rich enough to lead the kind of life they wanted or believed they would be in the future. Pew's Economic Mobility Project, using a national survey that tracks multiple generations, has shown that four in five Americans have exceeded the income their parents had at the same age.
The median American is richer than about 95 percent of people worldwide, a fact that may explain why the gap separating them from the richest Americans is so low on the list of most peoples' concerns. Instead, Americans want to expand opportunities for upward mobility for the nation's poorest.
The Economic Mobility Project recently asked people what was more important, reducing inequality or ensuring that everyone has a fair chance at improving their economic standing. More than 60 percent "strongly" felt opportunity was more important, while just 16 percent felt strongly about reducing inequality.
In the same survey, 17 percent said it was a "major problem" that people born to rich parents tend to remain at the top as adults (we gave them the actual figure). In contrast, more than half said it was a major problem that 42 percent of those starting at the bottom will remain there. The nation is looking for the same thing it has for decades – not a leveling of income differences, but a fair chance for everyone to achieve the American Dream.
http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care/most-americans-by-midlife-feel-rich-enough

Racism and the Multiracial Label

Rainier Spencer, the director of the Afro-American studies program at University of Nevada-Las Vegas, is the author, most recently, of "Reproducing Race: The Paradox of Generation Mix."

The Education Department’s provision on “mixed race” violates both the letter and spirit of federal policy set in 1997 and 2000 regarding, respectively, the non-acceptability of a multiracial category and the establishment of strict rules regarding how multiple-race responses are to be counted.

The change endangers the accurate monitoring of civil rights compliance in education. Despite the important gains of the civil rights movement, much discrimination still exists, albeit in less overt forms. Civil rights compliance monitoring -- the use of racial statistics to uncover suspicious patterns in education, housing, employment, etc. -- is our very best means of detecting covert and institutional discrimination. It is the reason for all those “check boxes" for racial identity that no one loves.

By placing students who check more than one box in a “two or more races” category, the Education Department’s provision surreptitiously and illegally creates a multiracial category in education. It does this not because of the questions asked of respondents, but in a backdoor way, through the tabulation results of students who check more than one box.

The government rejected a multiracial category because such a category would provide nothing useful, as no relevant medical, social, educational or housing data are obtained when ethnic and racial differences are collapsed and, in effect, rendered meaningless. The "two or more races" label would put people who are black and white, and who are Asian and Native American, for example, in the same category. This system would make it impossible to compare new statistics to the huge stores of historical data.

People, including students, are not discriminated against on the basis of being mixed-race, but rather on the basis of being one part of that mixture The federal race categories, crude as they might be, allow us to track how people are treated based on how they are perceived by others. The dangerous result of the Education Department’s provision will be two-fold.

On one hand, the “two or more races” category will provide no useful data for compliance monitoring; while on the other, real racial discrimination against some students will go untracked by the compliance monitoring apparatus because students who check more than one box will not be placed in the categories that are in fact motivating their unjust treatment.

Even though race is a fiction, racism remains real, and can be tracked most effectively by the federal race categories that are expressed, you might say, in the language of the racist. To hinder this ability to track racial discrimination for the sake of instituting what is essentially a multiracial category is unconscionable.

Why Race Still Matters

Anthony P. Carnevale is a research professor and the director of the Georgetown University Center on Education and the Workforce.

The U. S. Department of Education’s practice of counting Hispanics of all races as singularly Hispanic blurs our understanding of socially significant differences. This policy is most harmful to black Hispanics because of the unique persistence of discrimination and disadvantage among African Americans.

This conflation of race and ethnicity inevitably distorts the diagnosis of the unique educational problems of black Hispanics—or, worse yet, averages them into obsolescence. This is particularly harmful because false or partial diagnosis of any problem inevitably produces less effective policy responses.

As much as we would all like to believe that we have put race behind us, the evidence clearly shows that race still matters. I come to this conclusion reluctantly. While I was vice president of the Educational Testing Service, we spent a substantial amount of time and money trying to find a class-based substitute for race-based affirmative action. However, as much we tortured the data, it would not confess that the educational opportunity problem was about economic class or language barriers rather than race.

Our research since then at the Georgetown University Center on Education and the Workforce continues to show that being Black still has independent and powerful negative effects on educational opportunity, quite separate from language and class barriers.

This policy has another unintended consequence. By counting both white and black Hispanics to be simply Hispanic, the Department is implicitly making Hispanic ethnicity into a race.

The resolution of this bureaucratic hiccup is relatively simple. Local educational institutions collect data on both the race and ethnicity of students, and the data reported should be as nuanced as the data collected.

Race, Poverty, and Educational Equity

Gerald Torres is a professor of law at the University of Texas at Austin. He is former president of the Association of American Law Schools.

The debate over new Department of Education rules for how schools and colleges count students by race and ethnicity reveals a tension between students of mixed racial background who want their entire background to count and those Hispanic/Latino students who must ignore their racial complexity in order to count their ethnicity.

In issuing the new regulations concerning racial and ethnic data collection, the department confronts two aspects of changing life in the United States. First is the continuing reality of racially identifiable educational inequality. Second, the younger generation of Americans is less likely to feel confined by rigid racial categories and thus may be harder to identify.

Categorizing and counting students by race still has relevance since blacks and Latinos continue to experience educational inequality as shown by achievement data and the resources available in the public schools they attend. Where poverty and race are linked these problems are compounded.

To get a handle on possible solutions we need to know who is going to school where, how those schools are performing and whether performance is linked to the demographic make-up of the student body. To address these problems the Education Department has to be able to track the characteristics of the students as well as the schools.

American society has, however, become more racially and ethnically complex and this is where the new survey questions come in. Latinos are the prototypical multiracial grouping. There are Latinos who identify as “white,” some who identify as “black” and many who identify themselves as “mixed” or mestizaje. However, there are issues that are common to Latinos regardless of racial identity. Just to be clear, I am not saying that the racial categories that have dominated the American social imagination have no impact on the lives of Latinos. Rather I am saying that Latinos often stand at the intersection of many of these categories.

The department has opted for an ethnic definition that is commonly treated as if it were a racial definition (see for example the definition of “white” under the guidelines). Does giving priority to Latino ethnicity over race for “non-white”/"non-black" social groupings make sense? For Latino ethnicity the answer seems to be yes, because of the complex and inclusive racial mix that is at the heart of the ethnic definition. Moreover, it makes sense for Latinos in the historical context of American racial politics and perhaps for the educational evaluations the department needs to make as well.

The rise of multiracial identification stems from a resistance to obdurate historical racial categories and the reality that there are more children now with parents of different races. Do you erase part of who you are if you are forced to choose one race over another when you really feel like you are part of both? Do you diminish the political power of a historically oppressed group if you do not choose to make that group your primary identifier? And who gets to say who you are anyway?

This resistance to racial ascription is part of the reality that is exposed by the questionnaire. But perhaps it points the way to who we are becoming.