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SEPT. 26 2014 12:49 PM

Americans Have No Idea How Bad Inequality

Really Is
And if they did, they wouldnt want European-style solutions.
ByJordanWeissmann

ProtestersaliatedwithOccupyWallStreetdemonstrateatZuccottiParkonthesecond
anniversaryofthemovementonSept.17,2013,inNewYorkCity.
PhotobySpencerPlatt/GettyImages

I
fMichaelNortonsresearchistobebelieved,Americansdonthavethefaintest
cluehowsevereeconomicinequalityhasbecomeandiftheyonlyknew,theyd
beappalled.
 JORDAN WEISSMANN

JordanWeissmannisSlate'sseniorbusine ssandec onomic sc orre spondent .

ConsidertheHarvardBusinessSchoolprofessorsnewstudyexaminingpublic
opinionaboutexecutivecompensation,co-authoredwiththeChulalongkorn
UniversityinBangkoksSorapopKiatpongsan.Inthe1960s,thetypicalcorporate
chieftainintheU.S.earned20timesasmuchastheaverageemployee.Today,
dependingonwhoseestimateyouchoose,hemakesanywherefrom272to354times
asmuch.AccordingtotheAFL-CIO,theaverageCEOtakeshomemorethan$12
million,whiletheaverageworkermakesabout$34,000.

Intheirstudy,NortonandKiatpongsanaskedabout55,000peoplearoundtheglobe,
including1,581participantsintheU.S.,howmuchmoneytheythoughtcorporate
CEOsmadecomparedwithunskilledfactoryworkers.Thentheyaskedhowmuch
morepaytheythoughtCEOsshouldmake.ThemedianAmericanguessedthat
executivesout-earnedfactoryworkersroughly30-to-1exponentiallylowerthanthe
highestactualestimateof354-to-1.Theybelievedtheidealratiowouldbeabout7-to-
1.

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Insum,respondentsunderestimateactualpaygaps,andtheiridealpaygapsareeven
furtherfromrealitythanthoseunderestimates,theauthorswrite.

Americansdidntanswerthesurveymuchdierentlyfromparticipantsinother
countries.Australiansbelievedthatroughly8-to-1wouldbeagoodratio;theFrench
settledonabout7-to-1;andtheGermanssettledonaround6-to-1.Ineverycountry,
theCEOpay-gapratiowasfargreaterthanpeopleassumed.Andthoughtheydidnt
concuronpreciselywhatwouldbefair,bothconservativesandliberalsaroundthe
worldalsoconcurredthatthepaygapshouldbesmaller.Peopleagreedacrossincome
andeducationlevels,aswellasacrossagegroups.
How much should CEOs earn compared with the average
low-skill worker?
Researchers Sorapop Kiatpongsan and Michael I. Norton asked 55,000 people around the world how much
they thought CEOs in made compared with the average low-skill factory worker, and how much they should
make. Here are the estimated, ideal, and actual ratios. All ratios are to 1, so 93:1, 40:1, etc.

Actual ratio of CEO to What subjects thought What subjects said would
Country
worker pay was the ratio be the ideal ratio

Australia 93 40 8.3

Austria 36 12 5

Czech
110 9.4 4.2
Republic

Denmark 48 3.7 2

France 104 24.2 6.7

Germany 147 16.7 6.3

Israel 76 7 3.6

Japan 67 10 6

Norway 58 4.3 2.3

Poland 28 13.3 5

Portugal 53 14 5

Spain 127 6.7 3

Sweden 89 4.4 2.2

Switzerland 148 12.3 5

United
84 13.5 5.3
Kingdom

United
354 29.6 6.7
States

Created with Datawrapper Source: Sorapop Kiatpongsan and Michael I. Norton, Get the data

Thisisthesecondhigh-prolepaperinwhichNortonhasarguedthatAmericanshave
astrikinglyEuropeannotionofeconomicfairness.In2011,hepublishedastudywith
DukeUniversityprofessorDanArielythataskedAmericanshowtheybelievedwealth
shouldbesplitupthroughsociety.Itincludedtwoexperiments.Intherst,
participantswereshownthreeunlabeledpiechartsmeanttodepictpossiblewealth
distributions:onethatwastotallyequal;onebasedonSwedensincomedistribution,
whichishighlyegalitarian;andonebasedontheU.S.wealthdistribution,whichis
wildlyskewedtowardtherich.(TheyusedSwedishincomedataasamodel,rather
thanwealth,tostrikeaclearercontrastwiththeUnitedStates.)*Then,thesubjects
weretoldtopickwheretheywouldliketolive,assumingtheywouldberandomly
assignedtoaspotontheeconomicladder.Withtheirimaginaryfateuptochance,92
percentofAmericansoptedforSwedenspiechartovertheUnitedStates.

Inthesecondexperiment,ArielyandNortonaskedparticipantstoguesshowwealth
wasdistributedintheUnitedStates,andthentowritehowitwouldbedivviedupin
anidealworld(this,itseems,servedasthetemplateforNortonsmostrecentstudy).
Americanshadlittleideahowconcentratedwealthtrulywas.Subjectsestimatedthat
thetop20percentofU.S.householdsownedabout59percentofthecountrysnet
worth,whereasintherealworld,theyownedabout84percentofit.Intheirown
privateutopia,subjectssaidthatthetopquintilewouldclaimjust32percentofthe
wealth.

TheActualWealthDistributionoftheU.S.,WhatAmericansThinktheWealthDistributionIs,and
WhatTheydLikeIttoBe

AsinNortonsmorerecentstudy,responsesvariedabitbyage,income,andpolitical
party,buttherewasoverallagreementthatAmericawouldbebetterowithasmaller
wealthgap.

EstimatedandIdealWealthDistributionbyIncomeandPoliticalAliation
Peopledrasticallyunderestimatethecurrentdisparitiesinwealthandincomeintheir
societies,Nortontoldmeinanemail,andtheiridealsaremoreequalthantheir
estimates,whicharealreadymoreequalthantheactuallevels.Maybemost
importantly,peoplefromallwalksoflifeDemocratsandRepublicans,richandpoor,
allovertheworldhavealargedegreeofconsensusintheirideals:Everyonesideals
aremoreequalthanthewaytheythinkthingsare.Theoretically,Americansarent
exceptionalintheirviewsaboutdistributionatalltheyhaveasenseoffairness
similartothatofGermans,French,andAustralians,andmostAmericanswouldbe
oendediftheyactuallyknewthedegreeofeconomicinequalitythatexistsinthis
country.

ButletssayallofAmericawokeuponemorningandcouldciteThomasPiketty
chapterandverse.WouldtodaysmoderatessuddenlydemandScandinaviantaxrates
andmasswealthredistribution?Wouldourpoliticsbecomemoreprogressive?
Itsonethingtotalkaboutfairnessintheabstract;itsanothertoagreeonpoliciesthat
wouldaddressit.Gallup,forinstance,hasconsistentlyfoundthatasolidmajorityof
Americansbelievewealthshouldbedistributedmoreevenly.Butfewersupportthe
ideaofimposingheavytaxesontherichinordertodoit.ThePewResearchCenter
reportsthat45percentofRepublicansalreadybelievethegovernmentshouldat
leastdosomethingtoreduceinequality.ButgoodluckndingGOPvoterswhoare
beggingforamorerobustwelfarestate.

Top Comment
Thoseatthetopovervaluetheircontributionsandundervaluethecontributionsofthoselower
down:thisishumannature.More...
-punkTaoist

1.9kComments JoinIn

Americansbroadlysupportideasthatdontrequirethemtomakeanobviouspersonal
sacrice,likeraisingtheminimumwage;theyrelesshappytomaketradeos.
Europeanshavelonghadsocialdemocracybakedintotheirpolitics;wehavea
libertarianstreak.MaybethatwouldchangeifmoreAmericansknewjusthowdire
inequalityhasbecome.ButIwouldntbankonit.

*Correction,Oct.2,2014:Thisarticleoriginallymisstatedthatoneofthepiechartsin
NortonandArielys2011studywasbasedonSwedishwealthdata.ItwasbasedonSwedish
incomedata.(Return.)

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