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How Fair Is American Society?

Americans tend to be overly optimistic about economic equality between white and black citizens, according to a new study by Yale researchers. SOM’s Michael Kraus discusses why people systematically misperceive the reality of the wealth and income gap and what can be done to make the American dream more than a myth.

How can you solve a problem if you can’t see it? A recent study by Yale researchers compared beliefs about racial economic equality with the reality estimated by economic population data. They found that Americans think our society is much fairer in terms of how wealth and income are shared across racial groups than what the numbers indicate. These overly optimistic perceptions may help explain why the wealth and income gaps persist.

In “Americans misperceive racial economic equality,” Michael W. Kraus of Yale SOM; Jennifer A. Richeson, the Philip R. Allen Professor of Psychology at Yale; and Julian M. Rucker, a doctoral candidate at Yale, write, “Our results suggest a systematic tendency to perceive greater progress toward racial economic equality than has actually been achieved.”

For instance, one question in the study asked: “For every $100 earned by an average white family, how much do you think was earned by an average black family in 2013?” The average respondent guessed $85.59, meaning they thought black families make $14.41 less than average white families. The real answer, based on the Current Population Survey, was $57.30, a gap of $42.70. Study participants were off by almost 30 points.

The gap between estimate and reality was largest for a question about household wealth. Participants guessed that the difference between white and black households would be about $100 to $85, when in reality it’s $100 to $5. In other words, study participants were off by almost 80 points. Participants were also overly optimistic about differences in wages and health coverage.

Compounding the problem, when quizzed on whether the country has gotten more equal over recent decades, participants overestimated the degree of progress by more than 20 points.

Michael Kraus argues that these misperceptions fit conveniently with the idea of the American dream—that every individual, regardless of background, can succeed with talent and hard work. “Those beliefs can lead us astray, can lead us to not see the world for what it is. There’s a lot of work that still needs doing if our economic reality is going to match up with our narratives of opportunity.”

The study points to two likely mechanisms behind the excessive optimism. One is a belief that society is generally fair. People who held such a belief tended to overestimate the level of economic equality in America more than others. High-income white participants were most likely to both hold the view that society is fair and to overestimate economic equality relative to low-income white participants and black participants across the income distribution.

A second relevant factor was a person’s diversity of social networks. In particular, black participants with higher self-reported social network diversity were more accurate in their estimates of racial equality.

According to Kraus, this work helps shine a light on the challenge of achieving greater economic fairness in American society. “A more honest assessment of what our society looks like, as painful as those conversations might be, will lead us to see the world for what it is and may actually actively lead us to have the kinds of policy discussions that will ultimately solve these problems.”

Q: What did you learn through this study?

The biggest takeaway is that people in general in American society are overly optimistic about how much we share economic resources between different demographic groups. Our study is about black Americans and white Americans. Participants in our study estimated that things are relatively fair in terms of economic outcomes, but in fact, when you look at the best estimates based on publicly available economic data, you find wide chasms in terms of income and wealth disparities between black and white Americans. Those chasms have been huge for decades. And our participants in the studies think that those divides are smaller and that they’re naturally closing.

Q: Can you describe how large those chasms are?

The wealth gap is the largest. The gap between white and black Americans in terms of accumulated wealth is a gap of about 95 points. So what that means is for every $100 that an average white family has in wealth, an average black family has $5.

When our participants estimate wealth gaps between black and white Americans they guess numbers that are closer to $100 to $80, so a 20 point gap in black-white wealth. People think there’s a little bit of a gap but it’s closing. In reality, the gap is not 20 points, it’s 95 points, and that’s the magnitude of difference that we see in our studies.

Income shows a similar but smaller pattern. Our participants will overestimate black-white income disparities are between 15-20 points, when the actually gap is more than 40 points.

We are overly optimistic about the ways in which economic outcomes are distributed in our society. We think it’s much fairer by wide margins than it actually is.

Q: Your study also found that people think the issue is getting better over time.

In our studies, everybody surveyed has beliefs that things are improving. Respondents were much more averse to admitting racial economic inequality in the present than in the past. There was a tendency to see economic inequality between black and white Americans as naturally decreasing over time, a pattern that is inconsistent with reality.

Q: That sense of progress is a powerful narrative.

A big part of it is the widespread belief in the American dream in our society. You tell your children stories about working hard and striving to overcome economic and social obstacles in their way. As American as these narratives are, in this case, they can lead us astray; they can lead us to not see the world for what it is. There’s a lot of work that still needs doing if our economic reality is going to match up with these narratives of opportunity.

Q: Are there meaningful variations you found based on the characteristics of your respondents?

Across all of our respondents, everybody is overly optimistic, but there is some individual variation. The people who are the most optimistic about equality between black and white Americans are the wealthiest white Americans in our sample. Psychologists see this as motivated reasoning. If you are high status in society based on your race and based on your income, you are even more likely to adhere to beliefs that society is fair. Because of your elevated position in society you really want to believe that your position is fairly determined. Rather than acknowledge your high status in an unfair system, it is far easier to shift your beliefs about the system itself by endorsing beliefs that society determines economic outcomes fairly.

We also find some evidence for networks predicting the extent that you will believe that society shares economic outcomes fairly between black and white individuals. Our social spaces tend to not be demographically diverse and not economically diverse. We tend to live and work with people who look like us, who live in houses that are similar to us, who go to schools with similar individuals who look like us.

What that does is it can create this divide of understanding between people. What we find in the data is that if your network is more diverse, and this is particularly for the black Americans in our sample, then this diversity of network predicts greater accuracy in your beliefs about black-white equality. So if you have contact with people who are from a different race, you have the opportunity to gather information about how your economic circumstances might differ from your own.

Q: We recently covered a study that found that more integrated communities get more value from venture capital. Is that similar?

I think that in general the world is changing. It’s becoming more global and more diverse, and when you come in contact with people from different backgrounds, you have to shine a light on the ways in which you see reality differently. You don’t have objective data, necessarily, all of the time. In fact, in some ways your perceptions of the world are going to be totally distorted by your beliefs and your group memberships. But other people have different vantage points, and those vantage points can be informative.

And so your ability to interface with people from different backgrounds can actually give you the best look at what reality really looks like. You can imagine that the people in our samples who are most overestimating would benefit from greater contact with diverse sets of people. Contact with more diverse communities and their unique experiences with economic opportunities or discrimination can be informative if one is to develop more accurate perceptions of the real economic conditions of society.

Q: What are some of the major policy discussions that you think this work should inform?

There’s a general policy pivot that I think this suggests. Though economic inequality is a topic of public debate, we think that debate is focused too much on the outsized influence that the top of the distribution has on everybody else. If you create a more equal society by intervening at the top of the distribution, you will still have the problem of racial economic inequality that we observe in this work.

If you take a historical look at inequality, a lot of inequality in our society is built on systems of discrimination, and on slavery if you go back far enough. So this means that I see black-white racial inequality in society as causal to general inequality.

The good news is that there are some economic solutions, policy solutions, that could remedy these differences. One of the big ones is to really aggressively fight racial discrimination in home lending and real estate practices. One of the best ways to develop wealth is to own a home. If you solve these kinds of discriminatory structural practices in society, you will reduce the black-white economic inequality gap. And that will reduce inequality in society more broadly.

If you’re in a market of ideas about what to change in society, we would start there. We hope that this paper gets the public to think more about the racial component of economic inequality.

Q: How important is it to see that problem accurately?

One of the dangers that we see happening is that we want to move past issues of race all the time because they are difficult to talk about, because they bring up really painful pasts that we have lived in this country. It’s much more comfortable for us to avoid those thoughts. “Let’s think about it as something that happened in the past and move on to a brighter future.” Our paper suggests that what happens when you avoid thoughts of racial inequality is that you believe that economic differences between racial groups in society are naturally solving themselves.

When we perceive that kind of reality we can go on with our lives. It feels kind of comfortable. But in avoiding racial inequality, we will miss an opportunity to contend with one of the major challenges in our society. We want our society to be genuinely meritocratic. We want our society to live up to the American dream and we can’t do that if this inequality exists. And we definitely can’t solve the problem if we don’t know it exists.

Q: That whole question of how much the history of discrimination is still alive has become salient in recent months with the events in Charlottesville and elsewhere.

We’ve really been reminded of how much work there still is left to do. But I want to caution that it’s really painful for a lot of people to live in this moment, and so there is going to be a natural psychological motivation to want to see this go away, to see it solving itself in the ways in which we like to think of economic inequality based on race solving itself. And that’s the danger. What we really want to do is we want to intervene on the bias that we see and we want to take a more active policy role, a more active interpersonal role in bravely confronting race in our society and having discussions about it, in talking with our children about it, in conducting business in that way as well.

Q: What else stands out to you in this work?

The gap in wealth is huge. It deserves its own attention because it’s most problematic for a belief in meritocracy, because you accumulate wealth not because of anything you did. Maybe your parents or grandparents did. Wealth is based on unequal sharing of resources in the past. It really shouldn’t be surprising that wealth differences are so high between black and white Americans, and the fact that it is really speaks to the blindness that we have about issues of race in American society.

Q: Does your study give any hints about how to move forward?

One of the things that we find is that our optimistic perceptions of racial equality in society are quite malleable, at least in some of our studies. When we ask people, you made those estimates of income inequality between black and white Americans—what if we said that we want you to think about an alternative United States, one where discrimination still exists in various domains? What do you think the gap is now? That increased the accuracy for our participants.

That suggests there is a path forward. A more honest assessment of what our society looks like, as painful as those conversations might be, will lead us to see the world for what it is and may actually actively lead us to have the kinds of policy discussions that will ultimately solve these problems.

That’s where our work is going next. There is research that suggests that most people like to be accurate. So confronting bias by showing real economic outcomes might lead people to adjust their policy decisions. That’s the hope for the future.

Department: Research