Building a Better America — One Wealth Quintile at a Time

Income inequality in the United States has been on the rise for decades, and the Great Recession of 2007-2008 only made things worse for many groups. The immense gulf between the small group at the top and those at the bottom has led to protests and lively debate in recent years: Would reduced inequality be better for the country, or is the wealth of individuals a private matter?

A 2011 study published in Perspectives on Psychological Science by Harvard Business School and Duke University, “Building a Better America — One Wealth Quintile at a Time,” attempted to find the wealth distribution that was most preferred by Americans. The researchers conducted an online survey in 2005 using a sample of 5,522 people randomly drawn from more than 1 million Americans. Respondents were shown three unlabeled pie charts of countries’ income distributions: One was equal, with all quintiles holding 20% of national wealth. Another was based on Sweden’s income distribution: The upper quintile held 18% of the wealth, followed by 36%, 15%, 21% and 11% for the other quintiles. The last chart was, unbeknownst to participants, that of the United States: The upper quintile held 84% of the wealth, followed by 11%, 4%, 0.2% and 0.1%.

The study’s findings include:

When given the choice between the income distributions of Sweden and the United States, 92% of respondents preferred that of Sweden.
The preference for income distribution was consistent regardless of political affiliation: 90.2% of those who voted for President Bush in the 2004 election and 93.5% of those who voted for Kerry preferred the income distribution of Sweden to that of the United States.
Sweden’s income distribution was preferred across all income levels: 92.1% of those who made less than $50,000, 91.7% of those who made between $50,000 and $100,000 annually, and 89.1% of individuals who made over $100,000 annually preferred Sweden’s wealth distribution.
When asked about the wealth distribution of the United States, respondents “vastly underestimated the actual level of wealth inequality … believing that the wealthiest quintile held about 59% of the wealth when the actual number is closer to 84%.”
When asked about their ideal wealth distribution, respondents suggested a model that was more equal to what they expected the United States distribution to be and reported “a desire for the top quintile to own just 32% of the wealth.”
Respondents’ ideal wealth distributions were fairly consistent regardless of gender, income or political affiliation. They generally featured a more equal distribution of wealth where money was taken from the top quintile and given to the bottom three quintiles, but leaving the second quintile relatively the same.

Given the respondents’ desire for a more equal distribution of wealth in the United States, the authors questioned why there wasn’t more support for redistribution of wealth. They suggested that this was a result of lack of awareness about the actual wealth distribution in the United States, and a widely held belief in more social mobility than actually exists.

A related study, “Earnings Inequality and Mobility in the United States: Evidence from Social Security Data Since 1937,” used longitudinal data to better understand the reality of both short-term and longer-term mobility in the U.S.

Tags: economy, survey, inequality

Tags: economy

By Bakary Seckan August 1, 2012

Inequality , Personal Finance , Taxes