NC Budget and Tax Center

When it comes to income inequality, study finds we are fooling ourselves

In this space yesterday, I provided an overview of how widespread income inequality is in North Carolina. As a brief reminder, North Carolina households in the top fifth hold more income than all of the remaining households combined in the state. Although income inequality hit a modern high last month in the United States, a 2011 study found that a lot of Americans’ hold a perception that does match up with this reality.   

Duke Professor Dan Ariely and Harvard Professor Michael Norton asked approximately 5,500 Americans (whose median income was $45,000) how they thought wealth is actually distributed in the nation. The study found that Americans perceived the distribution of wealth to be more equal than it actually is. In fact, 92 percent of respondents said their optimal level of inequality was even more equitable than their flawed perceptions, meaning they want to live in much more equal communities.

By definition, wealth includes more than just income—like assets and debt. However, the respondents’ answers shed light on just how much Americans underestimate disparities. This is a good time to reflect on how our misperceptions of reality impact our policy choices, especially if our aim is to build pathways to the middle class and restore the American Dream.

If you want to learn more about income inequality from Hedrick Smith, a legendary journalist and national expert on the topic, consider attending the next NC Policy Watch Crucial Conversation on October 23rd. Details are here and be sure to RSVP early.

One Comment

  1. jaykimball

    October 4, 2012 at 8:52 pm

    This is why education is so important. Most of us have a hard time keeping up with the reality of this complex world. Another stunning fact. 46% of Americans think the earth is less than 10,000 years old.

    Regarding income inequality, the US Gini Index – a measure of inequality – is at an all time high, in the ranks of Rwanda and Uganda.

    Last week I heard veteran investigative reporter and Pulitzer Prize winner Hedrick Smith, speaking on “Who Stole the American Dream?” He talked about the destruction of the middle-class – how it happened, and what to do about it. It explores the rise of corporate lobbying, and social engineering that moved wealth from the middle-class to the corporate elite. I posted a video of that talk, here: http://8020vision.com/2012/09/24/hedrick-smith-who-stole-the-american-dream/