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Wednesday, October 26, 2016

If critics of income inequality are wondering why the growing gap between rich and poor hasn’t been a more potent political issue in the upcoming elections, a new study offers some answers: Americans grossly underestimate this inequality. That’s one of the key findings of a survey showing the gap between CEO and average worker pay in America is more than 10 times larger than the typical American perceives.

In the report, Harvard University and Chulalongkorn University researchers analyzed survey data from 40 countries about perceptions of pay gaps between rich and poor. In every country, respondents underestimated the size of the gap between CEO and average worker pay. In the United States, for example, the researchers found the median American respondent estimated that the ratio of CEO to worker income is about 30 to 1. In reality, the gap is more than 350 to 1.

The study also found the median American respondent said the ideal pay gap is about 7 to 1 — a lower ideal than respondents in many industrialized countries. Additionally, no major industrialized country has anywhere close to a 7 to 1 pay gap. That ratio is more than seven times lower than the actual gap in social democratic countries like Denmark and Sweden.

In an interview with the Harvard Business Review, one of the researchers who conducted the study said Americans’ inaccurate beliefs about the pay gap may be the reason economic inequality hasn’t become more of a political issue.

“The lack of awareness of the gap in CEO to unskilled worker pay — which in the U.S. people estimate to be 30 to 1 but is in fact 350 to 1 — likely reduces citizens’ desire to take action to decrease that gap,” Harvard’s Michael Norton said.

Early in the 2014 election cycle, Democrats seemed poised to make economic inequality a central focus of their campaigns, following the high-profile election victories of economic populists like Sen. Elizabeth Warren and New York City mayor Bill de Blasio.

But as the Washington Post reported, internal Democratic Party polling “found that talking about income inequality does not register strongly with the American public and risks accusations of class warfare.” Recent polling from the Pew Research Center found while a large majority of Americans acknowledge the growing gap between rich and poor and see it as a problem, there is little public consensus on the cause of — or proper counter to — that trend.

That lack of consensus, coupled with a lack of understanding of the enormity of the pay gap, has complicated Democrats’ efforts to make inequality a rallying point. In an interview with the Washington Post, Democratic pollster Geoff Garin said another obstacle is the belief that inequality has no concrete ramifications for voters’ daily lives.

“It doesn’t have a personal immediacy and there are lot of other things that speak to income inequality that are much more immediate and much more tangible and much more real to people,” he told the newspaper.

Recent news events, however, suggest that economic inequality does, indeed, have very tangible consequences.

Strife between police and protestors in Ferguson, Missouri, for example, has spotlighted economic inequality’s potential connection to criminal justice. Similarly, Standard & Poor’s has released reports showing the widening gap between rich and poor threatens America’s overall economic growth and is exacerbating state budget crises. And a study published by the National Bureau of Economic Research finds that America’s higher rate of infant mortality than Europe “is driven almost exclusively by excess inequality in the United States.”

Despite all this, though, economic inequality remains a peripheral political issue. Why? Based on the data, it is not because the problem is insignificant — it is more likely because Americans’ misperceive just how unequal their country has become.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at [email protected], follow him on Twitter @davidsirota or visit his website at

Photo: Joe Lustri via Flickr

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  • Talking about income inequality sounds very much like what Lenin was preaching just before the communist took over Russia. What ever happened to working hard to get ahead? People now seem content to get government handouts, and let illegals take over the workplace. Let’s get the people to revolt against the rich, and take that wealth and distribute it to all the people. Let’s take that wealth from those that worked hard to attain that wealth and give it to those that would rather sit on their butts and receive handouts. Sounds like communism to me.

    • bobnstuff

      Do you understand just how big the income gap is. Do you believe your boss is 350 times more valuable then you, works 350 times harder, makes 350 times more money for the company then you. They aren’t talking about government handouts, they are talking about wages earned. Fair pay. Let me put it this way for every $10,000 you make they make $3,500,000. Do you fell they are worth it? This isn’t return on investment, most CEO’s start with no investment but get it as part of the pay package.

      • Apparently the company and their share holders think these people are worth it, otherwise they would not pay it. Personally, I don’t think anyone should get paid that much, including sports figures, but that doesn’t mean that I, or anyone else is entitled to part of what they have earned. I don’t think I’m entitled to part of your pay because you make more money than I, and I certainly don’t think you are entitled to any part of my accumulated wealth. What you are talking about is nothing more than communism. That same thing I keep getting attacked for pointing out about the liberal agenda. Isn’t it ironic?

        • JPHALL

          No, not the many shareholders. It is the Board of directors, themselves CEO’s and major shareholders.

          • bobnstuff

            It an old boys club. I sit on your board and vote you a raise and you sit on my board and vote me a raise. You don’t even have to be good at the job. The fact is they don’t do anything to earn it. Bob Nardelli ran Home Depot stock into the grown and got $17 million to go away.

          • JPHALL

            Yeah, the same for Meg Whitman and Carley Fiorina, two Republican sweet hearts. Subject: Re: New comment posted on Why Economic Inequality Is Not A Bigger Political Issue

          • Damn. That sounds like our elected officials.

          • bobnstuff

            No they get fired then they get job with the big paycheck for services rendered. Look at Eric Cantor.

        • charleo1

          “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.” Adam Smith. Now as much as Smith adored profits, he lectured that true wealth is not created by the monied elite, but by the
          the value added by the labour class. Now, if by rigging the system some of the wealthy class are being overly, “attended to,” as Smith put it, and whereby their rigging, they are under paying for their labor, and in effect stealing that which rightly belongs to the consumer, and unfairly harming the market itself. Then, to create a healthy economy for all, the error, the over attendance, must be corrected. Note: All that helps labour, should not be allowed to be characterized as a form of Communism that has never been practiced in any Country in the history of mankind. Where all proceeds are equally divided, as to need. To do so is to distort both, the Communism being currently practiced, and the real issue of wealth, and income inequality. So as neither may not be recognizable at all. As if to say, we’ll call it that, and the dumb clucks won’t know the difference. It is an insult to common sense, and the truth.

    • Independent1

      You make yourself look dumber and dumber with each post you make. Have you actually ever worked?? Nothing is dumber today than your comment ‘What ever happened to working hard to get ahead?”

      Reagan destroyed that bond that existed between corporate management and its workers that was built up over decades: “You work hard for me and I’ll do right by you.” Reagan destroyed that when he purposely suckered the Air Traffic Controllers into striking, which was illegal, by letting them think he would negotiate with them and then after tricking them he summarily fired them all; making a clear example for all levels of corporate management that it was not important for company managements to honor their commitments to their employees, all that was important was the a bottom line and ensuring that companies did everything they could to please the stockholders.

      It was not long after Reagan summarily fired the majority of the ATC union workers (all but the supervisors), before companies started laying off people who had been good employees and worked hard, just so they could replace them with less experienced workers they could get away with paying less; just to make the profits look better to stockholders.

      Getting ahead today has nothing to do with WORKING HARD!! It’s all about LUCK!! Come up with the right idea that will sell to today’s entertainment/technology obsessed world population and you’re an instant success. I defy you to point out anybody who in the past 30 years has actually gone very far based on ‘HARD WORK’. The company today that honor loyal, hardworking employees, are few and far between. Employee loyalty to any company is virtually nonexistent today. It’s all about finding that gimmick, like Facebook, or the ipad, or whatever.

      You and your clueless, mindless RWNJ cronies need to WAKE UP AND GET WITH REALITY!!!!!!!

  • neeceoooo

    This is the same mentality that thinks the middle class is at 250.000 per year (Mitt Romney). The middle class is more like 50.000 to 60.000.

    • Allan Richardson

      When Europeans coined the term “middle class” (or “bourgeoisie” in French), they WERE thinking about people who made a high income via business investments rather than hereditary titles, and such families would be comparable to $250K incomes in today’s US. But since this country was founded to be “classless,” it came to refer to anyone who worked a moderately well paying job and (usually) owned a home, car, telephone, TV, etc and is not in poverty. The old European middle class was perhaps 5 percent of the population, whereas OUR middle class is supposed to be the middle 80 percent or so. In other words, “regular” folks. This was made possible by government policies which made the wages of typical jobs large enough to live comfortably. Today the wages of a “typical” job are closer to the poverty line, and it is NOT Obama’s fault. It is a conscious policy CHOICE of some of our wealthiest people with the help of Republicans going back before Reagan.

  • Allan Richardson

    There are several problems with the “work hard to get ahead” idea as the ONLY explanation for income inequality, even though that would be a good idea for every INDIVIDUAL to attempt. However, in some jobs no amount of hard work will get a worker ahead, because management has predetermined that the job ITSELF is one in which anyone minimally competent is just as productive as the most exceptionally skillful worker (in other words, as long as an employee is not stupid enough to COST the company customers or cause damage to products or equipment, no amount of additional skill can CREATE more sales or draw more customers).

    There are also too many people who made the mistake of choosing the wrong parents: they are raised in a home with little or no exposure to fine literature, the arts, or science, and their community has too few resources to give them any assistance. And as soon as they are old enough to hold ANY job, they have to go to work to support themselves (and maybe a family), and cannot afford the time off to get a better education. Other children, however, grow up with all the advantages, help with studies, successful role models, and connections to get into good colleges (and get the “gentleman’s C” without really trying hard), and get good, high paying executive jobs after graduation. Even when they screw up (like Paris, Miley, etc.) they have the financial resources to continue living prosperous lives, even between stays in minimum security jails.

    In most public corporations, the board of directors, which “speaks for” the stockholders (many of whom have no idea what the names on their proxy card at stockholder meeting time mean), is part of a clique of directors of competing (really?) companies, and they “nominate” (as the only candidate for each position) one another as directors, wait for the proxy cards to roll in, and “certify” the results. They then appoint members of their clique, for the most part, as CEOs and other senior corporate officers. And when they set the CEO pay and perks, they have no reason to drive a hard bargain, since they are spending stockholders’ money. So there is no “open market” for CEO positions; it is all financial incest. And incidentally, if the CEO’s time is 350 times more “valuable” to the company than that of a minimum wage employee, should the CEO dock his OWN pay by 350 times as much when HE gets to work, back from lunch, or to a meeting, a minute late? Think how much a minute’s tardiness is costing the company’s stockholders!

    But the biggest reason such extreme inequality is bad is that it DOESN’T WORK. Money flowing uphill to the CEO class is like water flowing downhill into the Dead Sea; most of it stops circulating. The extreme upper class has no need for consumer products of over 300 times what a family in poverty needs. Short of losing vast sums in a business investment (which is very hard when your money is drawing interest faster than your lawyers can spend it), having to pay a truly humongous fine for breaking some law, or buying and wrecking a new Lexus every day on purpose, there is no way to SPEND a trust fund faster than it accumulates.

    The result is recession, or even depression. And it happens even when good, decent people get rich; it’s pretty much automatic. The only way to restore circulation is for an entity which watches over the entire economy, such as government, to collect heavy taxes, not as “confiscation” or “punishment for success” but as the “dues to make the country a good place to get rich,” and spend it in some way that will circulate it. Giving relief to people who are STRUGGLING to survive with that money is one way to get it circulated, because these people spend ALL of it; they do not make enough to live on AND save. This is far from communism. In case kenndeb doesn’t know it, communism either impoverishes (by taking ALL of a capitalist’s fortune), sends into slavery, or executes the rich. As far as I know, no rich people have gone into poverty, been imprisoned or been executed by any of the liberal American administrations which have been irresponsibly called “communist” since the founding of the Soviet Union.

    In fact, the wealthy generally do BETTER when the market is supplemented by a tiny bit of what kenndeb calls “socialism.” When everybody else does well, the wealthy do even better (because they have more, and more affluent, CUSTOMERS). The only way the wealthy “lose” is in a smaller ratio between their income and everybody else’s.

    FDR, Truman, Ike, Kennedy, Johnson, Carter, Clinton and even Nixon showed that Keynes was right, while Raygun and both Bushes, in trying to make Laffer’s voodoo economics work, have in fact proved it doesn’t.

    • charleo1

      A very good synopsis, all around. Pushing back the number one, and number two reasons wealth, and income inequity is not the number one issue in the upcoming election. Ignorance, and willful ignorance. That half of Americans are unaware there is an election. And, the other half are named kenndeb, and think the entire subject is a Communist plot, taken out of Lenin’s revolutionary manifesto.
      As the truth will set us free, this passage should be carved in stone:
      “But the biggest reason such extreme inequality is bad is that it DOESN’T WORK. Money flowing uphill to the CEO class is like water flowing downhill into the Dead Sea; most of it stops circulating.”

      That, my friend, is brilliance!!!!!!

      • Allan Richardson

        Thank you for the compliment. I was inspired, after a delay of several years, to apply this analogy to economics, which was inspired by the lyrics of a song composed by Ms. Sue Kroupa Riley, music director of Unity Church of Clearwater, Florida, applying the comparison to SPIRITUAL attitudes (which, after all, are the roots of economic behavior). The Sea of Galilee receives an abundance of fresh water from mountain streams and passes it on to the Jordan, and by “unselfishly” circulating it, supports much life, whereas the Dead Sea receives the water from the Jordan and “hoards” it, making it impossible to support life. I recommend looking on for a CD containing this song, “There are Two Seas in Galilee,” which expresses the idea much more poetically than I can. Or do a search on “Sue Kroupa” or “Sue Riley.”

        • charleo1

          While it’s obvious our current crop of Right Wingers are idiots following orders, and in many respects thru obstruction, intentionally practicing what they know to be poor economic policy for political gain. Like refusing to invest in repairing, and modernizing infrastructure, or failing to invest in retraining, and expanding the availability, and affordability of trade skills, and secondary educations in math, science, hydraulic, chemical, and electronic engineering. In what could be the Country’s answer to sustainable standards of living. In a future global economy, that will have an inexhaustible supply of dirt cheap, unskilled, or minimally skilled labour. To sit behind a modern machine that does the work of 100 men. And will supply the World, and those economies that can afford them, with an endless supply of textiles, cell phones, gadgets, The next generation of kids could be the innovators of that future. Or, the rich could secure another tax break, and most of those kids will be stocking the shelves at Walmart with the latest gadget Apple in China invented, or improved. That’s longterm. Short term the economy’s sharp decline in demand, that’s yet to be remedied, is the direct result of huge amounts of capital flowing out of industrialized economies worldwide, to the top. Then after ample investments in emerging markets, some buying back stock, buying out competition, paying handsome dividends, and obscene pay packages to top management, is simply being hoarded into great stagnant piles of unused wealth. Ostensibly, this is the capital supply siders say will then be plowed back into the business to expand it’s capacity, to create more jobs, and increase wages, and benefits. But none of that happens, if the demand is too weak to justify the expansion. So then, the strategy becomes one of wealth protection. Lobby for tax relief, special loopholes, the use of off shore tax havens, or keeping the unused capital off shore, or the return of taxable profits thru subsidies, or one the Republicans especially like, “economic incentives.” Or by cutting social programs, and driving down wages, which exacerbates the core problem. All of what we’ve been seeing over the last decade. But none of these manipulations, ever incentivizes that storehouse of capital to make it’s way back down to the cash starved, recession clobbered, Middle of the part of the economy, they are anxiously awaiting to recover, so they can invest. And that’s what I got of out of your much more beautifully said, picture evoking, description. The kind all of the economic writers look for, to explain a terribly unwieldily subject in a way, everyone can readily understand. So again, from my perspective, well done. I hope everyone gets around to reading at some point.

  • ScotDog

    More than 50% of Americans get their news from FOX News. That might explain why they haven’t heard of it.