The Poor are Much Poorer than You Think

If there is one thing we can agree on, from regular folks to think-tank economists, it’s that more and more people are falling into poverty. What most of us don’t realize is just how poor they really are.

A new study puts it bluntly: In 2005, the richest quintile of Americans owned about 84 percent of the nation’s wealth. The poorest two quintiles put together owned less than 1 percent– an amount so small as to make them literally invisible on a diagram charting this inequity:

The actual United States wealth distribution plotted against the estimated and ideal distribution across all respondents. Because of their small percentage share of total wealth, both the 4th and 5th quintile of earners are not visible in the "Actual" diagram.

You can draw your own conclusions about the ways the recession has affected these numbers. Here’s the back-story: In 2005, Michael Norton, of Harvard Business School, and Dan Ariely, of Duke University, polled 5,522 people – a nationally representative sample of women and men from 47 states, some rich, others middle class or poor; some leaning Republican, others voting Democratic – and asked them a series of questions about wealth in the United States. The result? None of them, not even the poorest, had any idea about the degree of inequity that is our status quo.

For example, the respondents estimated that the middle class owned about 10 percent of American wealth, though actually it’s just 3 percent.

“Americans appear to drastically underestimate the current level of wealth inequality,” the authors wrote in, “suggesting they may simply be unaware of the gap.”

Perhaps more surprising, very few of us – including the richest – believe that things should be this way. When group members sketched their notion of an ideal wealth distribution, they suggested that the top quintile own just 32 percent of the nation’s overall wealth, a division more closely mirroring Sweden. Yet all groups, even the very poorest, also desired some inequality.

The takeaway? We may fight tooth and nail about immigration and taxation but when it comes to a vision of the country we all want to live in, certain truths prevail. As the authors wrote: "Americans’ consensus about the ideal distribution of wealth within the United States appears to dwarf their disagreements across gender, political orientation and income.”