Wealth Distribution in the U.S.

I had seen the results of Michael Norton and Dan Ariely’s study about wealth distribution earlier this week, but David Cay Johnston’s post at  Tax.com (“United In Our Delusion”) and Claude Fischer’s post on the topic at The Berkeley Blog offer better analyses than I could have done.

The two main things to note: most people (of all stripes and incomes) badly estimate the current state of wealth disparity — thinking there is a lot more equality than there is — and most people’s ideal wealth distribution is pretty much the same, and quite a bit more equal than what we have now, whether they identified as Republicans or Democrats, whether they were men or women, whether they are wealthy or not.

The richest 20% of Americans have 85% of the wealth, which means the other 80% of us has 15%.  Most people estimated that the top 20% had 59% of the nation’s wealth; in other words, the estimate was off by 31%, though wealth distribution has remained unchanged for a generation. And, the respondents’  ideal was for that quintile to have just 30-40% (and only 10% of respondents chose the distribution the U.S. actually has).

The bottom 40% of Americans actually owns 0.3% of all the wealth in this country; respondents thought they owned 8-10% and said the ideal would be 20-25%.

As Johnston puts it:

Americans think very much alike on wealth distribution. Amazingly alike. High-income or low, Republican or Democrat, young or old, male or female, Bush voters or Kerry voters, Americans are united in what they believe is the ideal distribution of wealth. And they are just as united about what they imagine to be the distribution of wealth in America.

“The problem is that neither the ideals we broadly share, nor our estimated distributions of wealth today, bear much relationship to reality.”

Essentially, based on this study (admittedly, of only 5,500 people), “Americans believe the ideal distribution of wealth is that of Sweden. Moreover, 90 percent of Republicans share that belief.”

In their paper, Ariely and Norton suggest that Americans are unaware of the actual amount of wealth inequality; that they may “hold overly optimistic beliefs about opportunities for social mobility in the United States;” and that though conservatives and liberals agree on ideals, “public disagreements about the causes of that inequality may drown out this consensus.”

Fischer notes that “one implication of the Norton-Ariely paper cited above is that, were most Americans to appreciate how unequal their society is and how much greater that inequality is than their ideal, their political views would shift. Perhaps, but perhaps not. The other evidence suggests that increasingly many Americans have been aware of growing inequality, but that has not changed their resistance to explicit economic ‘leveling.’  Research on Americans’ hostility to the estate (the ‘death’) tax, for example,  shows that it is impervious to information, for example, that vanishingly few Americans ever pay that tax.”

The reasons Fischer says scholars give as to why Americans resist tax changes towards more wealth equality include:

  • Anti-statism: historical suspicion and hostility toward government
  • Opportunity, not outcome: Americans believe we have opportunities for economic advancement.
  • Race trumps: Issues of economic inequality are tangled up with issues of race (blacks poorest), and so whites resist government action even if it would help themselves.
  • Ideology of self-reliance and fear of ‘ dependency.’
  • Constricted horizons: “Americans may see and resent great inequality but cannot really imagine that things could be (and are elsewhere) different. “

Ariely’s research suggests that the vast majority of Americans just don’t know how things really stand in the U.S.


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