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On Pay Gaps, Biases, and Zero-Sum Thinking

Making good public policy is hard enough without having to deal with peoples’ behavioural tics

We may think there is a wide gap between rich and poor — and resent it in subtle ways — but we really don’t even know half the story. In a wide-ranging presentation, Michael Norton, a professor at Harvard Business School and member of Harvard’s Behavioral Insights Group, spoke about how people think about and experience the earnings gap, as well as the damaging effect of zero-sum thinking on sensitive social issues such as race-based biases. Norton spoke at a behavioural decision research conference organized by Smith School of Business.

Video Highlights

0:08    In an international study, people were asked to estimate the earnings of a senior executive of a multinational firm and an unskilled factory worker, and then to say what they thought they should earn. In no country were the estimates even close to the purported ideal pay gap. On average, people believed the executive-to-factory worker earnings ratio was 11 to one and gave the ideal as six to one. In reality, the earnings ratio is much wider: Switzerland’s is 150 to one and Sweden’s 80 to one. In the U.S., the earnings gap is off the charts. “People have no idea about the shape of income and wealth, let alone the actual numbers.”

10:56     Policy implications: One survey found wide consensus on the need to address the income gap but little consensus on remedial measures, such as increasing the minimum wage, that would reduce the gap. The only policy initiative that seemed to garner wide agreement was to tax the estate of high-income earners.

12:42    Peoples’ lived experience of inequality: Air rage incidents are more likely to occur in airplanes with a first class section, particularly when passengers board planes from the front of the cabin and are forced to walk through these favoured sections.

15:10    In one study, subjects were given a dollar and told to pass it on to someone in a different income bracket. The study found that people would rather give money to those richer than they are than to those close to their own income.

16:20    Viewing the world as a zero-sum game: Researchers asked Americans to rate their views of bias against blacks and whites. Black respondents rated anti-black bias in the 1950s as a 10 and in the present time as a 6. White respondents agreed that anti-black bias was particularly bad in the 1950s but rated the present situation much more favourably. Regarding anti-white bias, both black and white respondents agreed that in the 1950s, “it was great to be white,” said Norton, “but now white people think it’s much harder to be white.” Whites now believe that, on average, there’s more bias against whites than against blacks in the U.S. For white Americans, improved prospects for black Americans has come at the expense of whites; for blacks, there is no correlation. “This zero sum thinking is powerfully destructive because for any program that’s announced, one group sees it as a possible win for anyone and the other sees it as a win for only one or the other. When you look at a lot of reactions to social programs, even social programs that benefit low-income whites, if they also seem to benefit low-income blacks, they’re bad for me.”