How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay

Sorapop  Kiatpongsan; Michael I. Norton

Article | Perspectives on Psychological Science

How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay

by Sorapop Kiatpongsan and Michael I. Norton

Abstract

Do people from different countries and different backgrounds have similar preferences for how much more the rich should earn than the poor? Using survey data from 40 countries (N = 55,238), we compare respondents' estimates of the wages of people in different occupations—chief executive officers, cabinet ministers, and unskilled workers—to their ideals for what those wages should be. We show that ideal pay gaps between skilled and unskilled workers are significantly smaller than estimated pay gaps, and that there is consensus across countries, socioeconomic status, and political beliefs for ideal pay ratios. Moreover, data from 16 countries reveals that people dramatically underestimate actual pay inequality. In the United States—where underestimation was particularly pronounced—the actual pay ratio of CEOs to unskilled workers (354:1) far exceeded the estimated ratio (30:1), which in turn far exceeded the ideal ratio (7:1). In sum, respondents underestimate actual pay gaps, and their ideal pay gaps are even further from reality than those underestimates.

Keywords: inequality; fairness; justice; income; wage; cross-cultural; Wages; Equality and Inequality; Fairness; Income; Employees; Management Teams; Cross-Cultural and Cross-Border Issues;

Format: Print

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Citation:

Kiatpongsan, Sorapop, and Michael I. Norton. "How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay." Perspectives on Psychological Science 9, no. 6 (November 2014): 587–593.

The 2010 Patient Protection and Affordable Care Act intensified debates over the role of government in the distribution of healthcare. A nationally-representative sample of Americans reported their estimated and ideal distributions of healthcare (unmet need for prescription medications) and death (gains in life expectancy). Respondents across the demographic and political spectrum wanted mortality and healthcare to be distributed more evenly among the rich and poor than they estimated them to be. For example, respondents estimated that Americans in the poorest quintile lived 1.5 months longer over the previous 20 years while those in the richest quintile lived 4.7 months longer, but reported ideal figures of 2.5 and 3.6 months – both were far more equal than the actual figures: -1.8 and 7.2 months. Despite heated debates about healthcare, Americans share a consensus belief that current disparities in death and healthcare are far from their ideals.

How do the very wealthy spend their time, and how does time use relate to well-being? In two studies in the Netherlands, the affluent (N=863, N=690) and the general population (N=1232, N=306) spent time in surprisingly similar ways, such as by spending the same amount of time working. Yet, the nature of their time-use differed in critical ways that are related to life satisfaction. In Study 1, millionaires spent more time engaged in active leisure (e.g., exercising and volunteering) rather than passive leisure (e.g., watching television and relaxing). In Study 2, millionaires spent more time engaged in tasks at work over which they had more control. The affluent sample belongs to the top of the income and wealth distribution, representing a significantly wealthier sample than in previous studies. These results further our understanding of when and how wealth may translate into greater well-being.

Article | Advances in Experimental Social Psychology

Prosocial Spending and Buying Time: Money as a Tool for Increasing Subjective Well-Being

Elizabeth Dunn, A.V. Whillans, Michael I. Norton and Lara B. Aknin

Researchers have long been interested in the relationship between income and happiness, but a newer wave of work suggests that how people use their money also matters. We discuss the three primary areas in which psychologists have explored the relationship between spending decisions and subjective well-being, beginning with a brief review of seminal research on the benefits of buying experiences. We then offer an in-depth review of two other domains in which changes in spending decisions have been shown to increase well-being: using money to benefit others (“prosocial spending”) and giving up money to have more time (“buying time”). We discuss how, when, and why prosocial spending and buying time promote happiness. In doing so, we critically consider the evidentiary value of past findings (particularly our own) and provide links to all of our available data as well as practical recommendations about how to replicate our findings (e.g., which measures and manipulations produce the most consistent results). Taken together, our studies on prosocial spending and buying time underscore the value of conceptualizing money not only as a stable life circumstance but also as a tool that individuals can intentionally utilize to alter their own happiness levels.

Keywords: wellbeing; Money; Spending; Decision Making; Happiness;

Citation:

Dunn, Elizabeth, A.V. Whillans, Michael I. Norton, and Lara B. Aknin. "Prosocial Spending and Buying Time: Money as a Tool for Increasing Subjective Well-Being." Advances in Experimental Social Psychology 61 (2020). View Details

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