Americans perceive income inequality ‘far too pessimistically’

Americans perceive incomes and income inequality ‘far too pessimistically,’ according to a US study that surveyed 500 people online and asked them questions about their politics, and their estimates of incomes for different racial groups and overall income inequality in the US.

The study is titled Distorted Perceptions of Incomes and Income Inequality in America.

Writing about their findings in the journal Psychological Science, psychological scientist John Chambers, an assistant professor at St. Louis University, plus colleagues Lawton Swan and Martin Heesacker of the University of Florida, conclude that Americans’ perceptions of income inequality are largely over-inflated compared to the actual situation obtained from census data.

They did the study to clear up some conflicting findings from previous research about whether people are able to assess income and income inequality accurately or not, as Prof. Chambers explains:

“With the genuine rise in wealth inequality over the past several decades, and the popular media’s intensive coverage of this issue, we wondered how income inequality is perceived by the average American.”

Americans believe the income inequality gap is bigger than it is

When they analyzed the survey responses against census data they found:

  • Respondents tended to overestimate the number of American households that are just managing to get by.
  • On average, the respondents believed that 48% of American households earn less than $35,000 a year, compared to census data that shows the figure to be only 37%.
  • They also believed, on average, that only 23% of American households bring in $75,000 or more per year, whereas census data shows this to be 32%.
  • Respondents also believed the income inequality gap was much larger than it actually is.
  • They believed the richest 20% of Americans earn around 31 times more per year than the poorest 20%, whereas in reality this figure is 15.5 times.
  • The overestimated income gap was found to be largely due to a misperception about how much the richest 20% of Americans earn per year. Respondents believed this to be on average nearly $2,000,000, whereas the 2010 census shows this to be around $169,000.

Liberals more inclined to overestimate inequality

When they analyzed the responses according to political leanings, the researchers were interested to find it was those who called themselves liberals who tended to overestimate the size and rate of growth of the income inequality gap – more so than conservative counterparts.

Prof. Chambers:

“People’s attitudes towards public policy are shaped by their perceptions of current economic conditions. The perceptions, and misperceptions, we documented may have important implications for public policy debates, such as support or opposition to wealth redistribution policies, minimum wage standards, and social welfare programs.”

He and his colleagues were genuinely surprised at how:

“Almost all of our study participants – regardless of their socio-economic status, political orientation, racial ethnicity, education level, age, and gender – grossly underestimated Americans’ average household incomes and overestimated the level of income inequality. Despite their very diverse backgrounds and personal circumstances, most of our study participants perceived incomes and income inequality far too pessimistically.”