Friday, 17 August 2012

Wealth inequality: the invisible quintile A couple of articles have been published lately (BBC, Atlantic) based on some fascinating 2011 research by Michael Norton and Dan Ariely which looked at Americans’ perceptions of wealth and inequality (pre-pub copy available here). They invited respondents on a ‘nationally representative online panel’ to say how much wealth they think is concentrated in each percentile from the poorest to the most wealthy. They found that respondents ‘dramatically underestimated the current level of wealth inequality.’ The average estimate was nine per cent for the bottom two quintiles combined, and 59 per cent for the top 20 per cent. This contrasts starkly with the reality which is that the bottom 40 per cent of the population holds 0.3 per cent of the wealth, while the top quintile holds 84 per cent of the wealth. This echoes UK findings. According to this Equality Trust paper, three quarters of us misperceive our economic position within British society. Norton and Ariely asked respondents how they would like to see wealth distributed ideally: ‘Respondents constructed ideal wealth distributions that were far more equitable than even their erroneously low estimates of the actual distribution.’ The black bars in this chart from the Atlantic show that people’s ‘ideal’ proportion of wealth for the highest quintile was only slightly more than half the estimated proportion, and much less than half the actual. (The 'actual' in the left hand columns is invisible because it is so small). The researchers then invented somewhere called 'Equalden' (modelled on Sweden) with a more equitable distribution of wealth, and asked people whether they preferred it to the US actual distribution. Yes indeed, 92 per cent of respondents did, and there was no significant difference in gender or income level among participants. Nor, strikingly, was there a significant difference between those who professed Republican sympathies and Democrats. Notoriously, both the US and the UK have been getting more unequal for a long time. If nothing else, the debate around this research has to give a boost to the equality movement, because it implies that even those whose behaviour suggests they think they benefit from inequality, would prefer a more equal society. But. As one commentator put it: 'Americans' ignorance about wealth (and, probably, income) distribution is encouraging in the sense that it offers hope that most voters might opt for government policies more conducive to equality if only they knew how unequal things were. But it's dismaying in the sense that people who occupy a position of relative privilege seem to go out of their way to avoid acknowledging it.' Maybe all it needs is for the right calibre of politicians to convert this knowledge into lasting change: is that too much to ask?

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