Study Reveals How People Misjudge the Wealth of the Top 1%

A new study has revealed that people consistently underestimate the wealth of the world's richest individuals. As income inequality rises, driven by significant gains among the top 1%, public understanding of the true scale of wealth held by these individuals remains limited. In the United States, despite growing wealth disparity, support for wealth redistribution policies has not increased since the 1970s. Over this period, the share of income held by the top 1% of Americans surged from 10% to 19%.

In a series of four studies, led by Barnabas Szaszi and colleagues, the researchers explored how well people comprehend wealth distribution in society. In one study, 990 U.S. residents were asked to estimate the minimum annual household income required to belong to various income percentiles. The participants consistently underestimated the income of the top 1%, while their estimates for lower percentiles were more accurate. A follow-up survey of 834 U.S. citizens, incentivized with cash rewards for accuracy, produced similar results.

Published in PNAS Nexus, the research highlights a widespread misunderstanding of the income thresholds at the higher end of the distribution.

In two additional studies, participants were shown images and income figures for fictional members of a society, allowing the researchers to manipulate the concentration of wealth. Participants continued to underestimate the income of the top 20% but were more accurate when estimating the earnings of lower quintiles.

The researchers suggest this underestimation may be due to a cognitive phenomenon known as “scope insensitivity.” As people attempt to grasp large numbers, they mentally consolidate them into broad categories such as “rich,” leading to diminished sensitivity to specific figures. For example, the difference between a billionaire earning an extra million and someone earning $50,000 a year suddenly earning a million is perceived very differently.