New insights into U.S. public perceptions of income inequality

The Washington Center for Equitable Growth and the Yale Institute for Social and Policy Studies co-sponsored a closed-door event earlier this month where academics from a variety of disciplines discussed the many and varied ways economic inequality and politics interact. Experts at the conference focused on how economic inequality led to disparities in political power, and how disparities in both economic and political power impact support for candidates and policies. The findings from the conference will be discussed and published later this summer, but a new working paper by Vladimir Gimpelson from the Higher School of Economics and Dainel Treisman from the University of California-Los Angeles adds an important perspective on the role of inequality in politics.

The paper, “Misperceiving Inequality,” finds that on the whole, the citizens of many developed and middle-income countries know very little about the level of income inequality in their own nations, whether inequality is increasing or decreasing, and where they are personally on the income spectrum in their nations. In the United States, 29 percent of American respondents to the International Social Survey Programme were able to correctly choose a picture representing the level of inequality in America. That’s not much better than if they had chosen randomly from the options given in the survey.

U.S. respondents also inaccurately estimated salaries for different occupations. Americans in particular guessed that doctors and the heads of federal government departments earned more than double their actual average pre-tax incomes yet they under-estimated the pre-tax income of the average chairman of a large company by almost 20 percent.

Do these misconceptions about inequality in the United States have an effect on politics? According to this latest research, citizens’ perceptions of inequality may correlate more strongly with their demands for the redistribution of incomes than facts about inequality. The researchers found that in countries where people thought inequality was high, more people supported government redistribution, but this demand had no relation to actual levels of inequality. Surprisingly, higher actual inequality was associated with a lower demand for redistribution.

This is not entirely surprising given a recent report by Ilyana Kuziemko of Princeton University, Michael Norton of Harvard University, Emmanuel Saez of the University of California-Berkeley, and Stefanie Stantcheva of Harvard. They found that U.S. respondents who view accurate information about inequality are more likely to perceive inequality as a serious problem, and are thus more willing to support two broad income redistribution policies in particular—increasing the estate tax and the minimum wage.

The findings in these two reports offer evidence that when perceptions of inequality change, politics are likely to be affected as well. And they highlight an important possibility—recent attention in the U.S. political sphere to economic inequality may be closely tied to the rising popularity of initiatives such as raising the minimum wage or implementing paid family leave policies. And as discussions about economic disparity become more prominent and begin to influence the perceptions of Americans, politicians may have to do more to address rising inequality.