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Mind The Gap: Overestimating Income Inequality

The views expressed are those of the author and are not necessarily those of Scientific American.


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I’m thrilled to be breaking my dissertation-imposed “mini-hiatus” this week with a series of guest posts over at the BPS Research Digest, where I’ve been asked to take over guest hosting duties for the week and write a few pieces on some recent awesome Social Psych research.

First up — recent research has given us a lot of talking points about income inequality in the United States, specifically the idea that Americans vastly underestimate the true level of wealth inequality that exists in our country. However, could some of this finding be biased by the fact that people are just plain bad at forming concrete estimates for really tricky, abstract concepts? In a new paper, John Chambers and colleagues address this possible methodological issue by tweaking the way they asked people about wealth (or, rather, income) inequality, and the results might surprise you.

How much money do you think you would have to make each year to land yourself in the infamous One Percent of salary earners?

According to a new study, your answer is very likely to be wrong. Research conducted by John Chambers of St. Louis University and colleagues at the University of Florida reveals that – at least where Americans are concerned – people are actually significantly likely to overestimate how much money is earned by the richest people.

Chambers and colleagues asked Americans to estimate the percentage of US citizens whose annual incomes fell into three categories: Under $35,000, $35,000-$74,999, and $75,000 or higher. These numbers roughly represent the cutoff points for the bottom, middle, and top third of American earners. Yet, on average, the respondents in this survey greatly overestimated the percentage of Americans who fall into the lowest category (estimating 48 percent) and underestimated the percentage of Americans who fall into the highest category (estimating 23 percent).

 

For the rest of this post, head over to the BPS Research Digest!

 

Melanie Tannenbaum About the Author: Melanie Tannenbaum is a doctoral candidate in social psychology at the University of Illinois at Urbana-Champaign, where she received an M.A. in social psychology in 2011. Her research focuses on the science of persuasion & motivation regarding political, health-related, and environmental behavior. You can add her on Twitter or visit her personal webpage. Follow on Twitter @melanietbaum.

The views expressed are those of the author and are not necessarily those of Scientific American.





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  1. 1. tuned 10:46 am 04/28/2014

    A much better analysis is found here:
    https://en.wikipedia.org/wiki/Economic_inequality

    Check out the 3D graph of mortality vs. income especially.

    Link to this
  2. 2. abj 4:00 pm 04/28/2014

    Can we please stop conflating income inequality and wealth inequality ?

    I think we are confusing everyone.

    Link to this
  3. 3. ZZeitgeist 5:13 am 04/29/2014

    The gap in income “we the people” talk about is entirely different than whats being discussed in the article . ” we the people are worried about the gap in income between the super rich , the so called 1%, who controls / owns 90% of wealth in America and , “we the 99 %” who are left with only the balance of 10% of the wealth of the nation.

    It seems that here the real issue is masked by a non- issue , viz, the gap in income existing within the 99% who have only a paltry 10% of national wealth to share among them .All of the 99% are working class drawing salaries or employed by the 1% in their corporations , banks etc, Nothing is found mentioned about the ever widening income gap between the super rich 1% and the others , the 99% .

    The income gap that “we the 99% ” are worried about is the wide salary gaps like , that is existing between the salaries of CEOs and his/ her average worker, which , it had been published recently, as having a ratio of 332 : 1 ie, the Average CEO earns 332 times more as remuneration in a year than an average worker earns in a year within the same concern.

    This would mean that for earning the same remuneration as his CEO, his / her employee has to work for 332 years ie, for 20 to 30 generations !

    “We the people , we the 99% ” , are not talking of , the three stratas of workers as neatly categorized by the author . The author tries to deflect the thrust of the issue in his concluding irrelevant paragraph which I quote , ” Chambers and colleagues asked Americans to estimate the percentage of US citizens whose annual incomes fell into three categories: Under $35,000, $35,000-$74,999, and $75,000 or higher. These numbers roughly represent the cutoff points for the bottom, middle, and top third of American “earners”. Yet, on average, the respondents in this survey greatly overestimated the percentage of Americans who fall into the lowest category (estimating 48 percent) and underestimated the percentage of Americans who fall into the highest category (estimating 23 percent).” Unquote.

    The last paragraph misleads and deflects the thrust of the issue. The issue is known very well to the author , but the author wants to say something else as if that’s the issue which it is not.

    The income gap is abysmal , monumentally fathomless and no one knows how to bridge the income gap, opportunities gap etc existing between the 1% and
    ” we the 99% ” , a la’ Occupy Wall street movement .

    Drastic situation might call for drastic measures . But who will bell the cat ! ” we the 99% ” have been rendered helpless , powerless and spine-less by the effective throttling of the 1% . And, worse , the 1% knows it too.

    Link to this
  4. 4. Jerzy v. 3.0. 6:52 am 04/30/2014

    Social mobility, or the proportion of poor that become rich and vice versa, is even better measure of economic situation than income inequality. USA ranges even worse in social mobility than income inequality. That means that not only the top 1% controls 90% of American wealth, but they also raised barriers and blocked the chance for others to go to the top.

    Societies can fluorish with big income inequality, if poor have fair chance to make it to the top through talent and hard work, and the rich must contribute to the society as not to fall from the top. This “streetsweeper to millionare” scenario is not true for USA anymore in the last decade.

    Link to this
  5. 5. rkipling 12:24 am 05/2/2014

    I’m pleased to find new posts on your blog.

    That is an interesting study. I took the study to be about the psychological perceptions of income or wealth inequality. People who wish to discuss their political views on inequality may be missing that point?

    Link to this

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