If ever Americans were up for a bit of class warfare, now would seem to be the time. The current financial downturn has led to a $700 billion tax-payer-financed bank bailout and an unemployment rate stuck stubbornly above nine percent. Onto this scene has stepped the Occupy Wall Street (OWS) movement, which seeks to bring together a disparate group of protesters united in their belief that the current income distribution is unfair. “The one thing we all have in common is that We are the 99% that will no longer tolerate the greed and corruption of the 1%,” says their website. In an era of bank bailouts and rising poverty – and where recent data show that the top 1 percent control as much as 35 percent of the total wealth in America – it would appear that the timing of this movement to reconsider the allocation of wealth could not be more perfect.
Or, maybe not.
Support for redistribution, surprisingly enough, has plummeted during the recession. For years, the General Social Survey has asked individuals whether “government should reduce income differences between the rich and the poor.” Agreement with this statement dropped dramatically between 2008 and 2010, the two most recent years of data available. Other surveys have shown similar results.
What might explain this trend? First, the change is not driven by wealthy white Republicans reacting against President Obama’s agenda: the drop is if anything slightly larger among minorities, and Americans who self-identify as having below average income show the same decrease in support for redistribution as wealthier Americans.
Our recent research suggests that, far from being surprised that many working-class individuals would oppose redistribution, we might actually expect their opposition to rise during times of turmoil – despite the fact that redistribution appears to be in their economic interest. Our work suggests that people exhibit a fundamental loathing for being near or in last place – what we call “last place aversion.” This fear can lead people near the bottom of the income distribution to oppose redistribution because it might allow people at the very bottom to catch up with them or even leapfrog past them.
How does last-place aversion play out with regard to redistribution? In our surveys, we asked Americans whether they supported an increase to the minimum wage, currently $7.25 per hour. Those making $7.25 or below were very likely to support the increase – after all, they would be immediate beneficiaries. In addition, people making substantially more than $7.25 were also fairly positive towards the increase. Which group was the most opposed? Those making just above the minimum wage, between $7.26 and $8.25. We might expect people who make just below and just above $7.25 to have similar lifestyles and policy attitudes – but in this case, while those making below $7.25 would benefit if the minimum wage were raised to, say, $8.25, those making just above $7.25 would run the risk of falling into a tie for last place.
We’ve also found evidence of last place aversion in laboratory experiments. In one, we created an artificial income distribution by endowing individuals with different sums of money and showing them their “rank”– with each rank separated by $1. We then gave them an additional $2, which they had to give to either the person directly below or directly above them in the distribution. In this income distribution, of course, giving $2 to the person below you means he will jump ahead of you in rank. In our experiments, most people still give to the person below them – after all, the alternative is to give $2 to a person who already has more money than you. People in second-to-last place, however, who would fall to last place when giving the money to the person below them, are the least likely to do so: so strong is their desire to avoid last place that they choose to give the money to a wealthier person (the person above them) nearly half the time. If Americans behave like people in our experiments, then it could be challenging to unite those in the bottom of the income distribution to support redistribution.