Researchers find people underestimate income of top 1%

People selectively underestimate the wealth of the world’s richest people, a study finds. In many countries, rising income inequality is driven by the sharp rise in incomes of the richest 1% of Americans. In the United States, support for wealth redistribution policies has not increased since the 1970s, even as the share of income held by the richest 1% of Americans has increased from 10% to 19%.

Barnabas Szaszi and his colleagues conducted four studies to determine how well people understand the wealth held by others. In one, 990 U.S. residents recruited online were asked to estimate minimum annual household income thresholds for various percentiles of U.S. earners.

Participants underestimated the income thresholds of the top 1 percent of earners, but were more accurate in estimating the income thresholds of the lower percentiles. These results were replicated in a survey of 834 U.S. citizens who were incentivized to guess accurately by promising them cash rewards for correct answers.

The study was published in PNAS Nexus.

In two other studies, participants were shown photos and income figures for members of a fictional society, allowing the authors to manipulate the extent to which wealth was concentrated in the top 1%. Participants underestimated the average income of the top 20%, but not the bottom quintiles.

The authors suggest that the underestimation of the wealthiest people’s incomes may be due in part to a phenomenon known as “scope insensitivity,” in which people become less attentive to specific amounts, replacing those amounts in their minds with a catch-all category such as “rich.” For example, a billionaire earning a million more is not perceived as someone earning $50,000 a year who suddenly makes a million dollars.