AbbyFogartyThesis.docx

21 

Full text

(1)

The Impact of Inequality on Perceived Need

Abby Fogarty

(2)

Abstract

Economic inequality continues to reach historic highs globally, and the U.S. currently ranks as the most unequal among industrialized nations. Links between high economic inequality and negative outcomes such as low life satisfaction are well documented, but much less is understood about the mechanism by which they occur. In this study, 408 adults participated in a word de-coding game and were randomly assigned to one of four conditions manipulating inequality and scarcity using points awarded in the game. Results of 2x2 ANOVAs showed that when

inequality was high, participants felt they needed more points and were less satisfied with their game experience. There was also evidence that participants felt they had fewer points when inequality was high, indicating that there may be multiple pathways through which inequality contributes to negative outcomes. Taken together with prior research, these findings suggest that in societies with high economic inequality, upward comparisons may cause individuals to feel like they need more and are poorer than individuals with the same wealth in a more equal society.

(3)

The Impact of Inequality on Perceived Need Economic Inequality

Economic inequality refers to the extent to which income and wealth are distributed unevenly across a group of people. It is distinct from poverty in that it is always a relative measure— inequality can be high in a society with low levels of poverty. Rising economic inequality is a global trend; across industrialized nations, the United States ranks as the most unequal. American inequality has reached historic highs, with findings that the richest 0.1% earn 188 times as much as the bottom 90% (Saez, 2019). Statistics such as these have resulted in a surge of research surrounding implications of extreme inequality. One consistent finding is that people report being less satisfied in conditions of high inequality; however, the mechanism by which this occurs is poorly understood. We proposed an association between high inequality and an increase in perceived needs, which can lower satisfaction when those inflated needs are not met. This process occurs, in part, because of people’s innate tendency to compare what they have to what others have.

Social Comparisons

(4)

relative measurement. In the absence of absolute measurements, people use social comparisons to inform their economic identity.

Social comparisons can occur when individuals compare themselves to others who they perceive as better off (an upward social comparison) or worse off (downward social

comparison). Upward social comparisons are weighed more heavily than downward comparisons in determining relative rank (Ferrer-I-Carbonell, 2005). Workers are less satisfied with their income when they compare themselves to wealthier neighbors (Luttmer, 2005). Job satisfaction is more accurately predicted by income relative to coworkers than absolute income (Brown, Gardner, & Qian, 2008), and the ranked position of an individual’s income predict general life satisfaction more than their actual income (Boyce, Brown, & Moore, 2010). The skew towards upward comparisons may be causing people to be more impacted by growing wealth at the top rather than a decrease in the poor.

Research has also shown that the effects of social comparisons are exaggerated in conditions of higher income inequality, making upward comparisons especially powerful. An analysis of life satisfaction across the U.S. found that people were more strongly influenced by the income of their neighbors in counties with a higher level of income inequality compared to counties with a lower level of income inequality (Cheung & Lucas, 2016). This suggests that in conditions of high inequality, where upward comparisons are more extreme, people’s

perceptions of how much they need to be satisfied are altered even when their absolute position does not change.

(5)

even with low rates of poverty. Upward social comparisons to the ultra-wealthy may be weighted more heavily than downward social comparisons to the poor, causing inequality to feel like a relative disadvantage that can lead to lowered satisfaction. Even if society were free of poverty, individuals in a highly unequal society may still experience these negative impacts.

Perceived Need

Upward comparisons in conditions of inequality can cause individuals to feel less satisfied with what they have; however, the mechanism by which inequality translates to lowered satisfaction is not entirely understood. Some studies rest on the assumption that inequality relates to satisfaction by causing individuals to feel poorer as a result of comparison. However, little testing has been conducted to support this hypothesis. Another mechanism shows promise as a potential pathway: perceived needs (Payne, Brown-Iannuzzi, & Hannay, 2017).

We propose that high inequality leads to an increase in the level of perceived needs— people feel that they need more in order to be satisfied. Comparing themselves to others who have significantly more than they do doesn’t cause people to feel lower on the economic ladder, rather, it affects how much they feel that they need in order to be satisfied. It follows that the more economic inequality in a society, the more elevated the levels of perceived needs we can expect to find. As perceived needs rises, people rate themselves as less satisfied with what they have, thus explaining the link between inequality and lowered satisfaction.

(6)

Methods Participants

Participants for the study were recruited using Amazon Mechanical Turk, with experimental tasks being completed online. Using G-power, we determined that in order to achieve 90% power to detect a small effect size of 0.20, we would need to recruit at least 400 participants. A total of 408 participants were recruited and 78 were excluded for failing to demonstrate that they understood the instructions, leaving us with a final N = 330. Before beginning the study,

participants read and signed consent forms approved by the IRB. At the close of the survey, participants received $1.80 in compensation.

Demographic information was collected including gender (55.2% men, 43.3% women, 1.5% non-binary), ethnicity (6.7% Hispanic, Latino, or Spanish origin), race (83.0% White, 12.1% Black, 4.2% Asian, 1.5% American Indian or Alaska Native, 1.8% Native Hawaiian or Pacific Islander, 0.9% Other), and age (M = 37.15, SD = 11.53). Participants identified their average annual incomes from the options of Less than $20,000 (13.3%), $20,000 to $34,999 (18.5%), $35,000 to $49,000 (15.5%), $50,000 to $74,999 (27.9%), $75,000 to $100,000 (13.9%), and Over $100,000 (10.9%). Political identification was 52.4% Liberal, 24.9% Conservative, 22.1% Moderate, 0.6% Other.

(7)

Procedure

In this study we implemented a 2x2 between-subjects experimental design manipulating inequality (high or low) and scarcity (scarcity or no scarcity) in the form of a game. After playing the game, participants were debriefed and completed standard demographic measures. Experimental Game

Participants were told that the game had two phases and that they would be playing it with other participants. They received instructions for the first phase and then completed it. After

completing the first phase, they received instructions for the second phase; yet all participants ended up playing just the first phase of the game and, when it was time to play the second phase, they were debriefed about that phase not actually existing.

The instructions received at the start of the game stated that the first phase consisted of a word-coding task where the goal was to gain as many points as they could, with their

performance determining how many points they earned. Participants were told that these points were important because in the next phase they would be able to use them to improve their chances of earning extra money. They were also told that further instructions about the second phase of the game would be received after completion of the first phase (again, in reality, no participant played the second phase of the game). At this point, participants answered two attention check questions about the instructions they had just read.

Participants then read this description of the word-coding task:

“In this task, you have to encrypt a series of words. This means that you have to substitute each letter of each word by the corresponding number in the key. Here is an example of the task.

(8)

Key for encryption: D=2 B=1 E=3 I=4 R=5 T=6 Correct Answers: Tree = 6533 Bird = 1452”

Participants were reminded that the more words they encrypted correctly, the higher their performance would be and the more points they would earn. As a consequence of earning more points, they would then have a better chance of earning extra money in the second phase of the game. They completed a practice task to test their comprehension which served as a third attention check. Participants were then told that they would have 50 seconds to encrypt as many words as they could and that they could begin the task by advancing to the next screen. The next page consisted of 30 possible words to be encrypted, each with their own key. Participants completed as many as they could within 50 seconds, after which they received the prompt “Your answers are being analyzed and your performance is being calculated. Your performance score will be available in a couple of seconds.”

At this point in the game, participants were randomly assigned without their knowledge to either the High Inequality (HI) or Low Inequality (LI) condition. The inequality manipulation consisted of a change in how many points the top 1% earned: Participants in the HI [LI]

conditions were shown the following message:

“You have performed at the top 40%. At this level of performance participants earn 14 points. So you have earned 14 points. For a point of reference, participants that perform at the top 1% earn 102 points [28 points in the LI condition].”

(9)

extra questions and greatly increase their chances of getting the bonus. What is more, winning the bonus was unlikely without any extra questions.

At this point participants were randomly assigned to either the Scarcity or the No Scarcity condition. Specifically, scarcity was manipulated by the number of extra questions that

participants were able to buy (zero in the Scarcity condition and one in the No Scarcity

condition). Participants in the Scarcity condition were told that the price of each extra question was 20 points and that, given their score, they would not be able to buy any extra questions. Participants in the Scarcity condition and the HI condition also saw this message: “For a point of reference, top-scoring participants were able to buy up to 5 extra questions.” Participants in the Scarcity condition and the LI condition were told “For a point of reference, top-scoring

participants were able to buy 1 extra question.” Participants in the No Scarcity condition were told that the price of each extra questions was 14 points and that, given their score, they would be able to buy 1 extra question. Participants in the No Scarcity condition and the HI condition also saw this message: “For a point of reference, top-scoring participants were able to buy up to 7 extra questions.” Participants in the Scarcity condition and also the LI condition were told “For a point of reference, top-scoring participants were able to buy up to 2 extra questions.” Participants in all conditions were told that participants with 1 extra question won the bonus about 50% of the time. After reading this information, participants were asked five questions, which constituted our main measures. Participants were also asked to write three complete sentences about their thoughts on the study as a way to ensure English proficiency.

(10)

Measures

The independent variables (high versus low inequality and scarcity versus no scarcity) were manipulated between-subjects, leaving us with four experimental groups created by crossing High/Low Inequality with Scarcity/No Scarcity.

Inequality. Inequality was manipulated by the number of points that participants were told that

others had earned during the word task and the number of extra questions that they were then able to buy. Across all conditions the number of points earned by participants was kept constant at 14 points. In the High Inequality condition, participants were told that top-scoring participants earned about seven times as many points as they did and were able to buy 5 or 6 more questions. In the Low Inequality condition, top scorers earned only twice as many points and were able to buy just one more question.

Scarcity. Scarcity was manipulated by participants’ ability to purchase extra questions. All

participants were told that it was very hard to win without any extra questions, but participants with 1 extra question won the bonus about 50% of the time. Hence scarcity meant not being able to purchase any extra questions and no scarcity meant being able to purchase one extra question. In the Scarcity condition, extra questions cost 20 points each and they were unable to purchase any. In the No Scarcity condition, the questions cost 14 points each and participants could purchase one.

(11)

Needs Perception to Play the Game. The primary dependent variable, needs perception, was measured with a question asking participants if they felt they had enough points to play the game. Answers ranged from “I feel like I have many more points than I need to play this game” to “I feel like I have significantly fewer points than I need to play this game” on a five-point Likert scale.

We also measured perceived number of points needed to play the game on a slider from “None” to “A lot”.

Points Earned. Participants were asked to rate how many points they had in the game on a slider with the anchors “None (0)” to “A lot (100)”. This gauged their perception of how much they had, i.e, how poor they felt.

Satisfaction. A slider question asking participants to rate how satisfied they were with the amount of points they earned served as the measure for overall satisfaction. Participants rated their satisfaction with the amount of points they earned in the game on a slider from “Not at all satisfied (0)” to “Extremely satisfied (100)”.

Subjective Status. Participants were shown a ladder with numbered rungs representing where

(12)

Results

We excluded 78 participants for failing attention checks or the English check, leaving N=330 across four conditions. We used two-way ANOVAs to analyze differences between group means.

The first two-way ANOVA examined the effect of inequality and scarcity on satisfaction with the game (Figure 1). Participants in the high inequality condition reported lower satisfaction (M = 26.61, SD = 27.34) than those in the low inequality condition (M = 35.68, 25.93), F(1, 326) = 9.40, p < .01, 2 = .03. There was also a main effect of scarcity such that those in the scarcity condition reported lower satisfaction (M = 25.71.12, SD = 25.66) than those in the no scarcity condition (M = 36.44, SD = 27.25), F(1, 326) = 13.43, p < .001, 2 = .04. The interaction was nonsignificant (F = .94).

Inequality Scarcity 0 5 10 15 20 25 30 35 40

Effect on Satisfaction

Low High Independent Variable R ati n g o f Sa ti sf ac ti o n

Figure 1. Main effects of inequality and scarcity on satisfaction with the game.

(13)

(M = 3.53, SD = 1.07) than those in the low inequality condition (M = 3.26, 1.15), F(1, 326) = 4.89, p < .05, 2 = .02. Those in the scarcity condition also reported higher needs perception (M = 3.69, SD = 1.15) than those in the no scarcity condition (M = 3.11, SD = 1.02), F(1, 326) = 22.92, p < .001, 2 = .07. The interaction was nonsignificant (F = .21).

Inequality Scarcity 2.8 2.9 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8

Effect on Needs Perception

Low High Independent Variable R ati n g o f N ee d s P er ce p ti o n

Figure 2. Main effects of inequality and scarcity on needs perception to play the game.

Another two-way ANOVA showed main effects of both scarcity and inequality on how many points participants felt they had in the game (Figure 3). Participants in the high inequality condition reported having fewer points (M = 25.94, SD = 24.08) than those in the low inequality condition (M = 35.14, 20.52), F(1, 326) = 14.32, p < .001, 2 = .04. Those in the scarcity

(14)

Inequality Scarcity 0 5 10 15 20 25 30 35 40

Effect on Perception of Points

Low High Independent Variable R ati n g o f P o in ts E ar n ed

Figure 3. Main effects of inequality and scarcity on perception of points earned.

(15)

Inequality Scarcity 0 1 2 3 4 5 6

Effect on Relative Position

Low High Independent Variable R ati n g o f R el ati ve P o si ti o n

Figure 4. Main effects of inequality and scarcity on relative position.

Discussion

Economic inequality is associated with lower life satisfaction as well as a myriad of other negative social consequences, but the mechanism by which this occurs is poorly understood. We proposed perceived needs as a potential pathway, contributing to lower satisfaction as the result of people feeling that they need more. In this experiment, we compared levels of perceived needs between high and low inequality conditions as well as between conditions in which people either had their needs met (no scarcity) or not (scarcity). Results of the study found that perceived needs may provide a partial explanation of the relationship between inequality and satisfaction.

(16)

ladder with ten rungs. The ladder measure showed that both inequality and scarcity had a significant effect on ratings. Participants ranked themselves as worse off compared to other players when inequality was high, despite participants across conditions being told they ranked in the top 40% of players. This suggests that social comparisons are being employed to inform economic status (in this case, within the context of the game), and that upward social

comparisons are leading those in high inequality conditions to rank themselves lower than those in the more equal conditions.

Perceived need was also found to be elevated in conditions of high inequality compared to low inequality conditions, supporting our hypothesis and previous literature that has proposed perceived needs as a mechanism by which inequality impacts satisfaction. The lack of a

significant interaction between inequality and scarcity on needs perception shows that poverty, which was induced by the scarcity condition, has a separate and well-pronounced effect on satisfaction. An interaction such that needs perception was unchanged across high inequality conditions, regardless of whether or not their needs were met in the scarcity condition, would have suggested that the effect of inequality on needs perception is so strong that they level the effects of actual poverty. However, the main effect of scarcity on satisfaction shows that deprivation has a distinct effect on such well-being measures such as satisfaction.

(17)

the no scarcity condition were significantly more satisfied with their points than those in the scarcity condition. Taken together, these results indicate that both addressing poverty and

economic inequality are important in mitigating the negative social consequences associated with both.

Another mechanism that has been proposed to take the place of needs perception is a decrease in subjective wealth as a result of inequality. Previous studies have found evidence that income inequality lowers self-perceived social status and groups evaluate themselves as less wealthy in high inequality conditions compared to low inequality conditions (Schneider, 2019; Sánchez-Rodríguez, Jetten, Willis & Rodríguez-Bailón, 2019). In these cases, extreme upward social comparisons in more unequal conditions may cause people to feel that they have less—not just relative to others, but as a subjective measure of their absolute wealth. Feeling poor may then lower satisfaction in the same way that actually being poor does. In our study, we found that participants felt they had significantly fewer points in conditions of high inequality compared to low inequality conditions, supporting the theory that people feel poorer when inequality is high. This is in addition to our main finding that needs perception was heightened by inequality, suggesting that both mechanisms are important to understanding the relationship between inequality and satisfaction.

(18)

Limitations

The current study was limited in some ways due to demographic features and elements of the design that could be made stronger in future studies. The participant population was

overwhelmingly white, preventing results from being fully representative of the entire

(19)

Acknowledgements

Thank you to Dr. Payne for allowing me the opportunity to complete this project within his lab, and to Jason Hannay and Daniela Goya Tocchetto for overseeing my research and answering many questions. Thanks to Dr. Muscatel for her support and encouragement in completing this thesis. Thank you to Dr. Zvara, Dr. Payne, and Jason for serving on my committee. Finally, I would like to thank my funding. This project was supported by the Gump Family Undergraduate Research Fund administered by Honors Carolina. It was also supported by the Lindquist

(20)

References

Boyce, C. J., Brown, G. D., & Moore, S. C. (2010). Money and Happiness. Psychological

Science, 21(4), 471–475. doi: 10.1177/0956797610362671

Brown, D. J., Ferris, D. L., Heller, D., & Keeping, L. M. (2007). Antecedents and consequences of the frequency of upward and downward social comparisons at work. Organizational

Behavior and Human Decision Processes, 102(1), 59–75. doi:

10.1016/j.obhdp.2006.10.003

Brown, G. D. A., Gardner, J., Oswald, A. J., & Qian, J. (2008). Does Wage Rank Affect Employees’ Well-being? Industrial Relations, 47(3), 355–389. doi: 10.1111/j.1468-232x.2008.00525.x

Cheung, F., & Lucas, R. E. (2016). Income inequality is associated with stronger social comparison effects: The effect of relative income on life satisfaction. Journal of

Personality and Social Psychology, 110(2), 332–341. doi: 10.1037/pspp0000059

Ferrer-I-Carbonell, A. (2005). Income and well-being: an empirical analysis of the comparison income effect. Journal of Public Economics, 89(5-6), 997–1019. doi:

10.1016/j.jpubeco.2004.06.003

Festinger, L., 1954. A Theory of Social Comparison Processes. Human Relations, 7(2), pp.117-140.

Kawachi I, Subramanian SV. (2014). Income inequality. Social Epidemiology, eds Berkman LF, Kawachi I, Glymour M (Oxford Univ Press, New York), 126–152.

Luttmer, E., 2005. Neighbors as Negatives: Relative Earnings and Well-Being. The Quarterly Journal of Economics, 120(3), pp.963-1002.

(21)

physical and mental health. Social Science & Medicine, 147, 144–149. doi: 10.1016/j.socscimed.2015.10.030

Payne, B. K., Brown-Iannuzzi, J. L., & Hannay, J. W. (2017). Economic inequality increases risk taking. Proceedings of the National Academy of Sciences, 114(18), 4643–4648. doi: 10.1073/pnas.1616453114

Sánchez-Rodríguez, Á., Jetten, J., Willis, G. & Rodríguez-Bailón, R., 2019. High Economic Inequality Makes Us Feel Less Wealthy. International Review of Social Psychology, 32(1), p.17.

Figure

Updating...

References

Updating...

Related subjects :