KRW likely to recoup more of year-to-date losses along with yuan appreciation in coming weeks, says Scotiabank
Regulatory Series on Cryptocurrencies: Grayscale Investments Becomes FINRA Approved Diversified Crypto Fund
Australia’s investor lending rises in August as rate cuts and APRA changes create positive impact on housing finance
When doctors and parents disagree on how to treat a sick child the emotional and financial costs can be huge
German bunds narrowly mixed after October ZEW economic sentiment improves, eurozone September CPI eyed
Distress, status wars and immoral behaviour: the psychological impacts of inequality
It is well known that economic inequality is rising. In most industrialised nations the distribution of wealth and income is becoming increasingly concentrated. In the United States, the top 10% of earners make more than nine times as much on average as the remainder, and in Australia the ratio approaches five.
It is also well known that rising economic inequality is associated with a range of economic and social ills. More unequal societies tend to have worse health, more obesity, more violent crime, more political instability, and more institutional corruption.
What is less well known is that economic inequality also has psychological effects. For example, there is evidence that people in more unequal societies tend to have lower levels of life satisfaction and higher rates of depression. These and other psychological effects on individuals may help to explain the larger scale social effects of inequality.
An important new review article makes a strong case for the explanatory role of two phenomena in particular. Nicholas Buttrick and Shigehiro Oishi argue economic inequality breeds mistrust and status competition. These have downstream effects on health and well-being in more unequal societies.
Buttrick and Oishi demonstrate that inequality is associated with a generalised distrust of other people. People who see large economic disparities tend to believe the economic system is unfair and others are advancing themselves by questionable means.
This lack of trust is amplified by high levels of class-based segregation in unequal societies, which reduces opportunities for people to interact outside their socioeconomic bubbles. The combination of distrust and unfamiliarity contributes to a lack of social cohesion and a sense that socioeconomic divides are deep and inevitable.
Mistrust undermines social connection and civility. Studies comparing US states find that residents of more unequal states are less likely to participate in social groups, a form of disengagement associated with poorer health outcomes according to Australian research. Wealthy residents of these states are also less likely to contribute to charity.
People in more unequal American states even show differences in their personality and willingness to engage in immoral behaviour. One study found they score relatively low on agreeableness – a trait that includes tendencies to be friendly and cooperative.
Another revealed that people from these states were more likely to conduct Google searches for academic cheating aids.
Diminished trust in economically unequal societies may have large social effects. Low generalised trust partially accounts for the relationship between inequality and mortality observed in a sample of 33 countries, which endures even when public health expenditures are statistically controlled. It also partially explains the link between inequality and homicide rates in those countries.
In short, a society where people do not trust one another is at risk of ill health and violent crime. Such societies tend to have relatively large economic disparities.
According to Buttrick and Oishi, mistrust is only one of the psychological processes that account for inequality’s adverse social effects. The other is status competition. People in highly unequal societies are more concerned with where they stand on the status hierarchy.
Status anxiety may appear as fears of losing one’s economic standing or concerns about how others perceive it. That concern may manifest itself in consumerism. Residents of more unequal US states engage in more searches for high status consumption items, such as luxury brands.
This preoccupation with displaying high standing may even influence people’s sense of self. In a study led by my research group, people from more economically unequal countries were most likely to see themselves as above average on desirable characteristics. “Self-enhancement” of this sort is a key ingredient of narcissism.
Cause or effect?
Research on inequality paints a grim picture of its psychological implications. However, does the unequal distribution of income or wealth cause these implications? Perhaps inequality, mistrust, status anxiety, ill health and social disconnection are all merely symptoms of an underlying disease of the economic system.
This alternative account cannot be dismissed in full, but it is clearly not the whole story. Causal links between inequality and its supposed effects can be demonstrated by longitudinal and experimental research.
For example, a recent study tracked national income inequality and life satisfaction from 1984 to 2012 in a large representative survey of Germans. In years when inequality was relatively high, life satisfaction tended to be lower. This relationship was completely accounted for by higher levels of economic worry in more unequal years.
Experiments also demonstrate inequality can cause ill effects. In one study, participants engaged in a public goods game in which they could make mutually beneficial contributions to neighbours or free-ride on them. Subsequently they could decide whether to maintain or break their links to those neighbours.
Participants were randomly assigned to begin the game under conditions of equality, or medium or high inequality. The study found when inequality of wealth was visible, higher inequality had adverse consequences.
Under these conditions, richer participants were less likely to contribute to poorer ones and behaved in a self-interested way to retain their wealth. Overall cooperation among participants dropped, the network of social connections thinned out and opportunities for wealth creation were missed.
Findings such as these indicate economic inequality has very real psychological and social consequences. Understanding how inequality affects mind and behaviour will be crucial if we are to make adequate sense of its broader social effects.
Nick Haslam receives funding from the Australian Research Council.