The Broken Ladder

1. Inequality affects our perceptions and behaviors more than actual wealth

Feeling poor matters, not just being poor.

Subjective status matters. Research shows that where people place themselves on a subjective status ladder is a better predictor of health and well-being than objective measures like income or education. This subjective sense of status is heavily influenced by inequality and social comparisons.

Relative deprivation drives behavior. Even when basic needs are met, high inequality can make people feel poor and behave accordingly. This explains phenomena like:

• Middle-class people taking greater financial risks in high-inequality areas
• States with higher inequality having worse health and social outcomes across all income levels
• People's happiness being more linked to relative income than absolute income

2. Social comparisons drive our sense of status and well-being

We are aware of these thoughts and emotions that are the culmination of the brain's computations, yet we remain unaware of those unconscious computations themselves, as the brain constantly monitors the context, makes comparisons, and simply announces its outcomes.

Our brains are comparison machines. We constantly and unconsciously compare ourselves to others to gauge our status and worth. This tendency is deeply ingrained in human psychology and even observable in other primates.

Comparisons shape perceptions. Our judgments of value, from material goods to our own abilities, are heavily influenced by social comparisons:

• Feeling wealthy or poor depends more on how we compare to others than absolute wealth
• Job satisfaction often depends more on relative pay than absolute pay
• Even basic perceptions like weight or color can be influenced by comparisons

Social media amplifies comparisons. Platforms that encourage constant social comparison can negatively impact mental health and well-being, especially for young people.

3. Economic insecurity fuels shortsighted decision-making and risk-taking

If we can't always get what we want, we try to get what we need. Sometimes that means taking huge risks.

Scarcity mindset. Economic insecurity, whether real or perceived, triggers a scarcity mindset that focuses on short-term survival at the expense of long-term planning. This can lead to:

• Higher rates of risky behaviors like gambling or substance abuse
• Difficulty saving or investing for the future
• Increased likelihood of taking on high-interest debt

Evolutionary mismatch. Our brains evolved to prioritize immediate rewards in uncertain environments, which can backfire in modern contexts:

• The "live fast, die young" strategy that was adaptive for our ancestors can lead to self-defeating behaviors today
• Areas with high inequality trigger these evolutionary responses even when basic needs are met

Breaking the cycle. Addressing economic insecurity through policies like guaranteed basic income or improved social safety nets could help reduce shortsighted decision-making and its negative consequences.

4. Inequality shapes political ideologies and polarization

As our economic worlds diverge, so, too, do our politics.

Inequality drives polarization. Research shows that as income inequality has increased, so has political polarization. This is likely because:

• Greater inequality makes people feel more threatened, leading to more extreme political views
• High inequality reduces trust in institutions and other people
• The wealthy and poor have increasingly divergent political interests as the gap widens

Perceptions matter more than reality. People's political views are shaped more by their perceived economic status relative to others than by their actual income or wealth. This helps explain phenomena like:

• Some middle-class voters supporting policies that primarily benefit the wealthy
• Working-class voters in different regions having dramatically different political leanings

Media and echo chambers. High inequality contributes to media fragmentation and political echo chambers, further reinforcing polarization.

5. Stress from inequality has tangible health consequences

When the rich get richer, everyone else feels poorer. That tendency helps explain why places with high inequality, where stately homes and luxury cars butt up against desolate streets, somehow increase the squalor in everyone's lives.

Inequality as a health risk. Research shows that living in high-inequality areas is associated with worse health outcomes across all income levels. This is likely due to:

• Increased chronic stress from status anxiety and economic insecurity
• Reduced social cohesion and trust
• Decreased investment in public health and social services

Biological impacts. Chronic stress from inequality has measurable effects on the body:

• Increased inflammation and stress hormones
• Weakened immune system
• Higher rates of cardiovascular disease and other stress-related illnesses

Mental health consequences. High inequality is also associated with higher rates of mental health issues like depression and anxiety, likely due to increased social comparison and status anxiety.

6. Racial and economic inequalities are inextricably linked

Racial bias is not the only reason that people could be against welfare spending, of course. Economists have pointed out that middle- and upper-class citizens have a rational interest in opposing welfare spending. From their perspective, cutting taxes on the affluent and cutting benefits to the poor is simply the self-interested thing to do. People might similarly oppose welfare spending on principled ideological grounds. They might value hard work and self-reliance, and as such regard welfare as a dependency trap, a position often taken by politicians and political elites. But Gilens's studies find no evidence that these are major motivations for ordinary citizens. Statistically speaking, if you want to predict who is predisposed against welfare, you can mostly ignore their economic principles. What you really need to know is their prejudices.

Mutually reinforcing inequalities. Racial and economic inequalities amplify each other in a vicious cycle:

• Historical racial discrimination created wealth gaps that persist today
• Economic inequality makes racial bias more likely and more impactful
• Racial stereotypes are used to justify economic policies that maintain inequality

Implicit bias affects outcomes. Even well-intentioned people often harbor unconscious racial biases that influence important decisions in areas like:

• Hiring and promotion
• Lending and housing
• Criminal justice

Addressing both is crucial. Effectively reducing inequality requires tackling both racial and economic disparities simultaneously through targeted policies and programs.

7. Corporate structures often exacerbate inequality's effects

One of the most astonishingly effective public health accomplishments in human history were antibiotics and public sanitation (sewer systems and chlorinated water). These innovations saved millions of lives and dramatically lengthened life spans in the twentieth century. They didn't do so by killing a single bacterium or preventing only one disease at a time. They were so successful because they had an across-the-board effect on thousands of infectious diseases.

Pay disparities impact performance. Research shows that extreme pay inequality within companies can actually hurt overall performance by:

• Reducing cooperation and teamwork
• Lowering morale and job satisfaction
• Increasing employee turnover

CEO pay disconnected from value. Studies suggest that CEO performance accounts for only a small percentage of a company's success, yet CEO pay has skyrocketed relative to average worker pay.

Alternative models exist. Some companies are experimenting with more equitable pay structures and finding benefits like:

• Improved employee engagement and productivity
• Reduced turnover and associated costs
• Better long-term company performance

8. Reducing inequality requires both systemic change and individual strategies

Understanding how wealth distributions shape our thinking can make us more adept at living within them. If enough people come to accept these ideas, they may enable us to take steps to reduce inequality itself.

Systemic approaches. Effectively addressing inequality requires policy changes like:

• Progressive taxation and closing tax loopholes
• Strengthening social safety nets
• Investing in education and job training
• Implementing universal basic income

Individual strategies. While systemic change is crucial, individuals can also take steps to mitigate inequality's effects:

• Choose social comparisons wisely, focusing on personal growth rather than status
• Practice gratitude and focus on intrinsic values
• Build diverse social networks across class lines
• Support businesses and policies that reduce inequality

Cultural shift needed. Lasting change requires shifting cultural attitudes about inequality, meritocracy, and social responsibility. This involves:

• Challenging myths about poverty and wealth
• Promoting empathy and understanding across class divides
• Reframing equality as beneficial for everyone, not just the poor

Last updated: November 19, 2024