Income Inequality Makes Rich People Stingier

A new study found wealthy people in states with skewed income scales were less generous.

Photographer: Patrick T. Fallon/Bloomberg

If Charles Dickens's Victorian London had more income equality, Ebenezer Scrooge wouldn't have been such a miser. 

That's the implication of new research that suggests inequality makes wealthy people less generous. The study published today in the Proceedings of the National Academy of Sciences is the first to probe how inequality influences altruism.

Some earlier research in the U.S. has observed that the rich are stingier than people with more modest incomes. But studies in Europe and Japan didn't find the same effect. "That was a bit of a puzzle for us," says Stéphane Côté, a professor at the University of Toronto's Rotman School of Management, who wrote the paper with colleagues from Toronto and Stanford. "That’s why we reasoned maybe a factor that seems to effect the rich is whether they live in a place that is highly unequal in terms of economic inequality."

The team used existing data from a nationally representative survey of 1,500 Americans called the Measuring Morality study. That gauged generosity through an approach called the "dictator game" that has been shown to correlate with real-life giving. Participants are told they have 10 raffle tickets and are given an opportunity to transfer some of them to another, anonymous participant.

When they sorted the results by states' levels of inequality1, the researchers found that rich people in states with the most skewed income scales were significantly less generous than their peers in states where wealth is more evenly distributed. They looked at the top 15 percent of the income distribution, or those households making at least $125,000 a year.

To validate the findings, the researchers recruited another 700 people online. These participants were shown fake data that portrayed their home states as either either having high or low inequality. Given the same opportunity to allocate raffle tickets to other participants, the wealthy who believed they were in highly unequal states were less generous than poorer people. The difference went away when people were told they were living in states with more even income distributions.

What's behind the findings? The authors say concentrating wealth in the hands of a few may lead to "the belief that one is more important and deserving than others." That sense of entitlement may make the rich less altruistic and lead them to "believe that resources rightly belong to them."

The study is subject to the usual caveats about social science research: Surveys and experiments like the dictator game are imperfect tools to understand people's behavior and intentions. No single study is the last word on any question.

The findings are consistent with unpublished research that shows cuts to social welfare programs, such as unemployment insurance, followed increases in inequality at the state level, says Lyle Scruggs, a political scientist at the University of Connecticut. "If the people in charge are even richer, are they less likely to care about those less fortunate, and therefore be less generous, as a mindset?" he said.

It also aligns with a familiar idea about wealth in America. "There is certainly a narrative thread through U.S. culture that people end up where they deserve to end up," said Kim Weeden, who chairs Cornell University's sociology department and is director of the Center for the Study of Inequality. "A corollary to that is if you’re exceedingly well off and at the top of the income distribution, you deserve to get there," she said.

If greater inequality means less charity, "the most obvious lesson is that we need to devise a system that doesn’t rely on pure generosity and altruism in order to make sure that children get enough to eat, or whatever the outcome is that we’re trying to affect," Weeden said. In other words, society can't bet on Uncle Scrooge changing his ways.

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  1. 1 They measured inequality with the widely used GINI co-efficient.