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Friday, January 13, 2023

How Much (More) Should CEOs Make? A Universal Desire for More Equal Pay

Kiatpongsan, S., & Norton, M. I. (2014).
Perspectives on Psychological Science, 9(6), 587–593.


Do people from different countries and different backgrounds have similar preferences for how much more the rich should earn than the poor? Using survey data from 40 countries (N = 55,238), we compare respondents’ estimates of the wages of people in different occupations—chief executive officers, cabinet ministers, and unskilled workers—to their ideals for what those wages should be. We show that ideal pay gaps between skilled and unskilled workers are significantly smaller than estimated pay gaps and that there is consensus across countries, socioeconomic status, and political beliefs. Moreover, data from 16 countries reveals that people dramatically underestimate actual pay inequality. In the United States—where underestimation was particularly pronounced—the actual pay ratio of CEOs to unskilled workers (354:1) far exceeded the estimated ratio (30:1), which in turn far exceeded the ideal ratio (7:1). In sum, respondents underestimate actual pay gaps, and their ideal pay gaps are even further from reality than those underestimates.


These results demonstrate a strikingly consistent belief that the gaps in incomes between
skilled and unskilled workers should be smaller than people believe them to be – and much
smaller than these gaps actually are. The consensus that income gaps between skilled and
unskilled workers should be smaller holds in all subgroups of respondents regardless of their age,
education, socioeconomic status, political affiliation and opinions on inequality and pay. As a
result, they suggest that – in contrast to a belief that only the poor and members of left-wing
political parties desire greater income equality – people all over the world, and from all walks of
life, would prefer smaller pay gaps between the rich and poor.