YouTube Wealth Inequality Video Fails to Tell the Whole Story
A video detailing income inequality in America began to go viral on Friday, after Reddit posted it in its video forum. The video, which was uploaded by YouTuber Politizane, uses infographics to examine perceptions of wealth in America. The video breaks it down into three categories. What Americans perceive wealth distribution to be, what ideal wealth distribution looks like, and what that distribution actually is. All of this is done to the backdrop of morose piano music. The video ends with the startling statistic that the average CEO makes 380 times more than the average employee.
Does this video show the entire picture? Is wealth inequality that bad for the economy? The video is certainly astonishing in its depiction of income inequality, but the material depicted here is not. It really should not surprise us that most Americans view wealth distribution in such a skewed fashion.
Most Americans are likely to identify themselves as being in the middle class. Americans who functionally belong to the lower class or upper middle class still believe themselves to be part of the middle class. Sorting through the economic data on the middle class, I am likely to find enough information to peddle whatever factual truth I want to. I can manipulate economic data to say that from 1970-2011 more Americans moved into the upper middle class bracket than at any other time, which would imply that an increase in their wealth is not only justified, but good. What the data actually says is this:
“The Pew Research analysis finds that upper-income households accounted for 46% of U.S. aggregate household income in 2010, compared with 29% in 1970. Middle-income households claimed 45% of aggregate income in 2010, compared with 62% in 1970. Lower-income households had 9% of aggregate income in 2010 and 10% in 1970.”
But misperceptions about who resides in the middle class is not only found in the United States, Argentinians also classify themselves as middle class. This could very easily turn into a psychological discussion about how people perceive questions, and themselves, so I will end it with the fact that Americans are not the only individuals who misjudge income inequality and that we do this for a variety of reasons.
This is not to suggest that income inequality doesn’t matter, because it does. There are those that believe that income inequality damages our economy, but this belief is not shared by all. The work David A. Moss of Harvard Business School seems to suggest there is a cause and effect relationship with income inequality and bank failures (see graph below).
There is just as much research out there to contradict the work of Moss.
The study that the YouTube video comments on is this one by Michael Norton and Dan Ariley. Each of the respondents was working with the same definition of wealth:
“Wealth, also known as net worth, is defined as the total value of everything someone owns minus any debt that he or she owes. A person’s net worth includes his or her bank account savings plus the value of other things such as property, stocks, bonds, art, collections, etc., minus the value of things like loans and mortgages.”
A far more interesting part of the study is in the last paragraph:
“Finally, and more broadly, Americans exhibit a general disconnect between their attitudes toward economic inequality and their self-interest and public policy preferences (Bartels, 2005; Fong, 2001), suggesting that even given increased awareness of the gap between ideal and actual wealth distributions, Americans may remain unlikely to advocate for policies that would narrow this gap.”
This has also been dubbed the, "What’s the matter with Kansas" effect. This is based off the book of the same name by Thomas Frank. It is the idea that individuals can be persuaded to, and often do, vote against their own economic interests. Even as we believe in the existence of growing intense disputes between the rich and the poor, we are still not likely to be in favor of supporting measures that address it.
See, it isn’t that we do not regularly discuss income inequality. It’s just during election seasons those discussions turn into charges of class warfare. Our ability to talk about income inequality is stunted because no politician wants to be seen as being derisive of those who have amassed wealth, and because at the end of the day don’t we all want to believe in our ability to do the same?