Economic Inequality: What We Think vs. What's Real

October 05, 2010

head scratchingIn Slate last month, Timothy Noah discussed gaps. Not the "enthusiasm gap" among voters that the mainstream media has so enthusiastically wasted air time on, but something much more disconcerting.

But, while we're on the enthusiasm gap, let's sidebar. The American political system hasn't given us much to be enthusiastic about in recent years. While voting and other forms of democratic participation are critical to the future of our economy, we should also be considering what it's going to take to build a more engaged electorate. One answer is organizing. But, to build a base that's in it for the long haul, we'll need more education.

Noah wrote about the gap between what Americans think versus the reality of wealth inequality in the US. He recounts a time when the top 1% of American earners were taking home 18% of the nation's total income. That was in the early 20th century, and an insurrection of the working class seemed near. That figure has risen by 33% in the past eight decades, with the top 1% accounting for nearly a quarter of all US income, and we've not yet witnessed an uprising. On the contrary, many of us seem to be sleepwalking.

Noah cites a survey in which participants were asked to share their best guesses about wealth distribution across quintiles (fifths of the population) in the US. When surveyed about the holdings of the wealthiest quintile, participants on average undershot their estimates by 31 percent. (The top quintile accounts for 84% of all wealth in the US.)

U.S. Wealth Distribution: Actual vs. Estimated vs. Ideal

US Wealth Distribution - Real vs. Estimated vs. Ideal
Source: Michael Norton and Dan Ariely, "Building A Better America–One Wealth Quintile At A Time" (pdf)

The outcomes of this study may offer a glimpse into why we've not yet seen that uprising: we're not fully aware of the severity of inequality in the US.

There is a silver lining here though – one that gives us hope for what could be. When asked to select an ideal wealth distribution among three options, 90% of respondents chose more equitable distributions (see below) than we have in the US today.

Wealth Distribution Preferences: US vs. Sweden vs. Equal

Wealth Distribution - US vs. Sweden vs. Equal
Source: Michael Norton and Dan Ariely, "Building A Better America–One Wealth Quintile At A Time" (pdf)

One part of UFE's mission is to raise awareness of the dangers of concentrated wealth and power. These findings suggest that we've got our work cut out for us, because, evidently, too many Americans are still in the dark about how truly unequal our country has become. But, as more light is cast on the truths behind inequality, our movement for justice will grow stronger.

Read more: David Cay Johnston digs deeper into Norton and Ariely's study.

If you'd like to help counter this pandemic of unawareness, check out UFE's workshop, "The Growing Divide: The Roots of Economic Insecurity," or our book, Teaching Economics As If People Mattered, and consider hosting an educational event for folks in your neighborhood.

If you work with a community-based organization and would be interested in attending or co-hosting a future UFE Training of Trainers Institute (ToT), send a note to info@faireconomy.org mentioning "ToT inquiry" in the subject line.

Also, join our mailing list, tell your friends, family and colleagues to do the same, and we'll keep you up-to-date with the latest news on economic justice.

Photo above by PhotoJohnny on Flickr.

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