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Income Inequality

Give to Those at the Bottom? Sure, as Long as They Stay There

When it comes to reducing inequality, Americans may be open to bolder solutions for reining in those at the top than for ones boosting people at the bottom.

But sometimes that depends on how close to the bottom they are.

Over 70 percent of Americans in a recent New York Times-CBS News poll favored raising the federal minimum wage from its current level of $7.25 to $10.10. And they not only favored by a wide margin raising taxes on people earning over $1 million a year, they also narrowly favored (50 percent to 45 percent) capping the amount of money top corporate executives could earn. They did overwhelmingly oppose raising wages to $15 per hour for fast-food and other hourly workers.

Consider for a second just how radical pay limits would be for the United States if they were actually put into place: To pick some numbers purely for illustrative purposes, such limits might mean that, even if your boss or board of directors thought you were worth $10 million a year, you would have to leave half of that on the table because the law said you couldn’t earn more than $5 million.

One possible explanation for these results is that average Americans simply feel more distance, in economic terms, between themselves and the rich than between themselves and low-wage workers. They feel no hesitation about rolling back the income of wealthy people because being rich is so far from their experience that they simply can’t imagine it or identify with people who are.

Raise the minimum wage high enough, though, and you begin to move low-wage workers reasonably close to average-wage workers. That’s something the average-wage people aren’t especially wild about. And the point at which you cross into dicey territory may come around $15 per hour. There are several states — among them Arkansas, Louisiana and Mississippi — where the median income for an entire household is only somewhat higher than that amount.

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Protesters in Los Angeles during a May Day rally. Many were calling on government to lift the minimum wage.Credit...Sandy Huffaker/Getty Images North America

It turns out there’s preliminary evidence to support both parts of this conjecture. A recent peer-reviewed study by three economists — Ilyana Kuziemko, Emmanuel Saez and Stefanie Stantcheva — and Michael Norton, a professor of marketing, surveyed 10,000 Americans through Amazon’s Mechanical Turk platform. They randomly assigned portions of them into a “control group” and a “treatment group.” Respondents in both groups were asked if they supported an increase in the estate tax, but those in the control group were given no additional information, while those in the treatment group were informed that the tax affects only the wealthiest thousandth of all Americans. Support for the estate-tax increase was a mere 17 percent among those who received no additional information, but 53 percent among those who did.

Mr. Norton posited that the higher support among the more informed participants reflected two sentiments: the fact that, from their perspective, the estate tax “does not apply to me, and it only applies to those super-super rich people, which means it doesn’t apply to people like me either.”

As for the minimum wage, Mr. Norton and Ms. Kuziemko, along with the business professors Ryan W. Buell and Taly Reich, recently wrote a peer-reviewed paper suggesting that those who make just above the minimum wage are skeptical of increases in the wage floor.

They tested a phenomenon that may explain this finding, known as last-place aversion, with a series of laboratory experiments, one of which randomly gave money to subjects in such a way that each was separated by a dollar, then gave them an additional $2, which they had to either pass along to the person just above them or just below them on the stylized economic ladder. The authors found that the subjects nearly always gave the money to the less well-off person — except, that is, for the second-to-last ranking subjects, who gave the money to the better-off person with considerable frequency. The authors concluded that those in second-to-last place were highly resistant to any change that would drop them into dead last place.

The authors then tested the proposition on a real-world policy example — the minimum wage — using their own survey data. They found that, while raising the minimum wage was enormously popular over all, support for the increase dropped among those making only slightly more than the minimum. “People who make just above the minimum wage are surprisingly not in favor of raising it,” Mr. Norton said.

Channeling the thoughts of those who might support boosting the minimum wage modestly but oppose raising it to $15 per hour, he added: “If the increase brings low-wage workers close to my wage, I’m not sure I’m in favor. But if I’m sure they’re not going to leapfrog me, then it’s fine to give them more.”

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A version of this article appears in print on  , Section B, Page 2 of the New York edition with the headline: Give to Those at the Bottom? Sure, as Long as They Stay There. Order Reprints | Today’s Paper | Subscribe

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