Is inequality as high/low as you believe it to be? Are your perceptions biased in any way? Do you think your beliefs are based on real data or broad assumptions you formed? Actual levels of inequality and citizens’ (mis)perceptions of those levels often differ significantly. Individuals’ estimates are consistently much lower than the actual level of inequality, indicating that people all over the world have false impressions of the inequality level in their own country. The main issue is that people’s behavior and preference for redistribution are driven by misperceptions about the distribution of income and wealth in their country which, in turn, influence their attitudes towards policies ranging from taxation to healthcare. A misperception of inequality could lead to wrong results in the implementation and effectiveness of policy aimed at balancing the distribution of income within the population. Therefore, it is essential to understand how people form perceptions and how these perceptions can be adjusted and corrected.
How inequality perceptions are formed
There are many plausible hypotheses which may explain the formation of misperceptions about inequality. First, people may draw biased conclusions by overgeneralizing from their immediate environment and reference group. Indeed, most people believe they fall in the middle of the income distribution because in daily life they observe people who are richer and people who are poorer than they are. Moreover, the self-enhancement bias, which is an innate human drive to promote and protect a positive self-concept, contends that people tend to overestimate their position in the income distribution by assuming that they are closer to average. This is also explained by individuals’ social identity theory, according to which, people have a natural desire to feel accepted and define themselves as socially connected to a group which, in this case, is the one with middle-income individuals. People may also mistakenly interpret the income range they see in daily interactions as representative of the range across the country. For example, residents of villages where incomes and property values are rather equal may underestimate the wealth gap in their nation. Indeed, when estimating inequality, people may rely on the availability heuristic, that is a mental shortcut according to which the prevalence and likelihood that an event occurs depends on how easily it is recalled by the individual. People might recall vivid examples of those who are extremely wealthy or poor (who are more mentally available than the median earner), which could influence their overall perceptions of inequality. Similarly, people may base their perceptions of inequality on salient, local information, which causes them to excessively extrapolate from their own experience when estimating national inequality.
A second influence comes from media, especially television, which leads people in developing countries to compare their consumption to the one seen in wealthy nations, creating the perception of relative deprivation. Moreover, the ease at which television makes people recall the magnificent celebrities’ lifestyle, may subsequently create “availability cascades” according to which one perception triggers a chain reaction that increases the perception’s plausibility by becoming more prevalent in public discourse.
Ideology is a third potential factor that may predispose people to “see” the degree of inequality they believe it exists due to wrong ideas they might have formed throughout history. A relevant example is the high level of sensitivity to inequality among people in post-socialist countries, which may be a result of the ideological legacy of communism. Due to this, it is commonly believed that income disparities may be overstated by socialists and understated by conservatives. Hence, people’s opinion is shaped by economic contexts and history, which strongly correlate with their perception of inequality.
Political regimes and views are other factors that predict perceptions of inequality. Revolutions, coups, and political violence could emerge in countries where individuals are not prone to be subdued to a dictatorship since the higher the income gap, the more the poor perceive they can benefit from expropriating and overthrowing their rulers. On the contrary, inequality between groups is less likely to be perceived by people who generally support and accept hierarchies. Furthermore, the democratization of a country usually put expectations on people about possible redistribution policy which give a greater benefit to low-income individuals. For such reason, when elites in unequal autocracies anticipate the establishment of a democracy regime, they may be more resistant to support it since they will anticipate that their resources will be spread out among more people, and that they may end up being relatively poorer than before.
Finally, perceptions do not appear to be static; in fact, some countries have experienced quite remarkable shifts in perceptions. A plausible reason is a “cohort effect” according to which younger cohorts, which are gradually making up a larger portion of the population, may hold different opinions with respect to older cohorts. This is attributable to a possible higher level of education, awareness, and social contact with peers.
In conclusion, when it comes to inequality, there is a clear gap between perception and reality. Making people realize how far reality is from their ideals may influence their behaviors and preference so that any policy implemented to reduce inequality could benefit society as a whole. This is also important because a high level of perceived inequality is often correlated with high crime and mass violence since the “poorer” feel like they can gain more by expropriating income and resources from the “richer”. A correct understanding of how perceptions are formed is crucial to avoid any misleading beliefs in terms of “who gets what” and “who deserves what”. For this purpose, it is essential to correct people’s perceptions of inequality so as to adjust inaccurate opinions about relative income position in the population and to allow for the redistribution policies to be effective in achieving their goals in improving total welfare.
Bussolo, M., GiolbasIván, A., & Torre, I. (2021, November 4). I perceive therefore I demand: the formation of inequality perceptions and demand for redistribution.
Gimpelson, V., & Treisman, D. (2017, August 21). Misperceiving inequality.
Niehues, J. (2014, August 14). Subjective Perceptions of Inequality and Redistributive Preferences: An International Comparison.
Kaiser, J. P. (2022, October 10). Growth and Inequality: Experimental Evidence on How Misperceptions Affect Redistribution.