Perceptions of Inequality: Examples & Impact

Instructor: Victoria Leo

Victoria teaches college, authors books, has a therapy practice and masters degrees in anthropology and psychology.

Equality of access to the resources required to create a healthy, fulfilled, and happy life has declined in the US over the past two decades. However, perceptions of inequality are not an exact match to actual levels of inequality. Risk aversion increases in groups that experience discrimination and inequality. Tools to improve disadvantaged groups' access to advancement are discussed, as are the reasons for the mismatch between reality and perception.

The Roots of Aversion to Unfairness

From earliest childhood, we humans focus on our perceptions of fairness in the world around us. Parents report that they are constantly mediating concerns and conflicts concerning what each child considers an equitable allocation of the family's material resources and parental attention. You can remember these squabbles in your own life.

The focus on fairness continues into adulthood. An important predictor of whether professionals will remain with an employer or seek a different position is their perception of fairness on the part of their manager, in everything from job assignments and verbal praise, to formal evaluations. The focus on fairness shows up in people at every salary and job level. Demands for fairness have had a powerful impact throughout history of course. Think about every great revolution from 1776 to 1989. From the founding of the United States to the fall of the Berlin Wall and the Soviet Empire, didn't they all result from people's refusal to accept unfairness in a political system?

The Impact of Group Perception

The group that a person identifies with the most strongly will determine their perception of whether the culture is unequal or not. A group can be disadvantaged in terms of interpersonal treatment by others, by admission to prized locations (like a university, bathroom, or other public facility) and other criteria. However, the most important criterion in industrialized market economies like the United States is income level because income level predicts other critical factors like health and morbidity/mortality, education level, opportunities for advancement into greater power in society, and so on.

The most salient factors in group definition in the United States are:

  • Race (skin color)
  • Ethnicity (culture, language, religion)
  • Male vs. female
  • Rural vs. urban
  • Work in a trade vs. work in an office
  • No higher education vs. college-educated

Rural Work
Rural work

Surveys consistently show that a high percentage of American men don't believe that sexism exists, that more white Americans think that racism has ended than persons of color do, that high-income people (especially white men) believe that their favored status is entirely a reflection of their own good choices, and so on. The perceptions of less-favored groups are starkly opposite.

Economists, sociologists and others who work with income and other data agree with the less-favored groups that these problems still persist - and the gaps are becoming worse. Why do these perceptions differ so much? What is reality?

Impact of Perception

Perception of inequality impacts an individual's belief in their ability to achieve goals. If you are doomed, why bother? Thus, a group's perception of their relative inequality can stall their ability to advance. Stereotype threat has been studied in every ethnic group and among women. If you tell a mixed group of students that their test scores will help a researcher determine whether black (Asian or other) students are as capable as white students, or whether women are as capable as men, the scores of the group that is supposedly being studied will drop significantly. Simply being reminded of relatively-unprivileged status reduces these students' belief in themselves.

Does Perception Match Reality?

Noted economist Thomas Piketty has done seminal work on reality vs. perception of inequality, and how people change their response to risk as a result of that perception.

Perceptions seem most influenced by prevailing ideologies. Scandinavian nations prize equality and fairness, and citizens have a heightened awareness and concern about the issue, although these are the most egalitarian nations on Earth. In America, where inequality is increasing rapidly, the prevailing ideology of a nation that is a pure meritocracy causes perception problems. The prosperous Americans want to believe the ideology that tells them that their prosperity is entirely due to their own natural superiority and hard work. Disadvantaged groups and individuals might see their lack of real opportunity clearly and reduce their risk-aversion in consequence.

A group's perception of their position in society is honed by reading or watching news stories of problems or new research results involving their group and, especially among the young, heavy consumption of social media.

The Impact of Perceptions on Risk-Taking

Inequality can lead to big differences in risk-aversity. Dr. Piketty and others have pointed out that there are two groups that are generally more risk-prone and one group that is generally more risk-averse in an unequal society.

Taking Risks with Your Money
Taking risks with your money

Both the least-privileged and the most-privileged groups engage in high levels of risk-taking. The privileged do so because they know that they have money to spare and can buy their way out of most troubles. Those who perceive themselves as having no chance to succeed, buy lottery tickets with their limited funds and try get-rich-quick schemes. The medium-privilege groups are the ones who live below their income so they can save, and then make conservative investments with their funds, because they perceive themselves as being able to improve their lives. Thus, different demographics will have vastly different levels of risk aversion: the most risk-averse are the people in the middle.

Example: Perceptions of Inequality's Causes

Americans who are falling farther and farther behind the prosperous groups tend to identify the following three elements as causal agents of their plight:

  1. Legal immigration
  2. Illegal immigration
  3. Automation, which allows companies to make one-time investments in machines and software in place of ongoing labor costs.

Analysts like Piketty have shown that the actual causes of increasing unemployment among less advantaged groups are the latter two items plus ballooning executive compensation. The compensation issue is almost never mentioned as a factor by these less-privileged groups.

Does Risk-Taking Increase?

Psychology and sociology research indicates that as convictions of a group's lack of fairness and equality increase, members become more apt to attempt to circumvent the rising tide of inequality through risky choices. It appears that when people mischaracterize the cause of their dilemma, they lose their ability to choose effective solutions.

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