Not so wise: median estimates around the globe underestimate income inequality

A recent study by Michael Norton and Sorapop Kiatpongsan finds that for all countries studied median estimate of income inequality is much lower than reality:

In their study, Norton and Kiatpongsan asked about 55,000 people around the globe, including 1,581 participants in the U.S., how much money they thought corporate CEOs made compared with unskilled factory workers. Then they asked how much more pay they thought CEOs should make. The median American guessed that executives out-earned factory workers roughly 30-to-1 — exponentially lower than the highest actual estimate of 354-to-1. They believed the ideal ratio would be about 7-to-1.

“In sum, respondents underestimate actual pay gaps, and their ideal pay gaps are even further from reality than those underestimates,” the authors write.

Americans didn’t answer the survey much differently from participants in other countries. Australians believed that roughly 8-to-1 would be a good ratio; the French settled on about 7-to-1; and the Germans settled on around 6-to-1. In every country, the CEO pay-gap ratio was far greater than people assumed. And though they didn’t concur on precisely what would be fair, both conservatives and liberals around the world also concurred that the pay gap should be smaller. People agreed across income and education levels, as well as across age groups.