(Mis)perceptions of Inequality

Inequality is arguably the defining societal issue of the 21st century. The debate over “who gets what’ underlies policy debates ranging from taxation to health care to wages and permeates society at all levels, attracting increasing interest from policymakers, academia, and the general public (1,2). Most scholars agree that the level of economic inequality within Western societies is at its highest in almost a century; in the U.S., for example, inequality is at its highest peak since before the Great Depression (3–5). Furthermore, the incomes of the top 1% in many countries around the world is rapidly increasing (6). Documenting the actual levels of inequality within and across countries is generally considered a critical input to the design of economic and social policy (7–10); we suggest that assessing laypeople’s understanding of those levels, and how that understanding predicts their policy preferences, attitudes and behaviors, is also critical. In this review, we document the often large differences between actual levels of inequality and citizens’ (mis)perceptions of those levels. This inaccuracy extends to people’s beliefs about the distributions of income, wealth, and social mobility, as well as their beliefs about their place in these distributions. We focus on potential causes that lead to these misperceptions and discuss the implications that misperceived inequality—but not actual inequality—have for policy and redistribution preferences. We conclude by highlighting research exploring the consequences of correcting these erroneous beliefs.