Economic Inequality, Income Mobility, and Well-Being: How Much (More) Should CEOs Make?

The Economic Inequality, Income Mobility, and Well-Being symposium took place at SPSP's 16th Annual Convention in Long Beach, California. This presentation, by Michael Norton of Harvard Business School, is titled ""How Much (More) Should CEOs Make?: A Universal Desire For More Equal Pay."

The authors assess people's preferred wage differentials between rich and poor, and determine whether these ideal ratios are commonly-held. Using survey data from 40 countries, researchers compare respondents' estimates of the actual wages of chief executive officers and unskilled workers to their ideals for what those wages should be. They show that ideal pay gaps between CEOs and unskilled workers are significantly smaller than estimated pay gaps, and that there is consensus across countries, socioeconomic status, and political beliefs for ideal pay ratios. Moreover, data from 16 countries reveals that people dramatically underestimate actual pay inequality. In the United States the actual pay ratio of CEOs to unskilled workers far exceeded the estimated ratio which in turn far exceeded the ideal ratio. People underestimate pay gaps, and their ideal pay gaps are even further from reality than their erroneous underestimates.