Unless you live under a rock, you'd know that government (and yes, even some insanely rich people like Warren Buffett) is calling for an increase in taxation for the rich in effort to save education, social programs, and so on.
You'd think that regular Joes, who makes nowhere near the proposed $250,000 a year threshold for increased taxes, wouldn't be opposed to such thing. After all, they're not being taxed. But many actually do. Why is that?
Economists have usually explained poor people’s counter-intuitive disdain for something that might make them better off by invoking income mobility. Joe the Plumber might not be making enough to be affected by proposed hikes in tax rates on those making more than $250,000 a year, they argue, but he hopes some day to be one of them.
In this theory, it makes sense that people who make $200,000 a year to be opposed to the increased taxation scheme, even if they aren't affected now. After all, $250,000 a year is a reachable goal, so they don't want to set themselves up to get taxed more if they earn more in the future.
But that theory also predicts that the wider the income gap, the more supportive people would be to government efforts to boost their incomes. Someone who makes $15,000 a year would presumably be so far down the ladder that he or she couldn't care if the wealthy got taxed more.
So, you'd think that poor people would be the first in line to defend income redistribution programs (or socialistic hand outs, depending where you are on the political spectrum), but you'd actually be wrong.
Here's the surprising result of an economic study that poor people are actually the most vociferously opposed to programs that increase their own income if such action also help those poorer than themselves:
Instead of opposing redistribution because people expect to make it to the top of the economic ladder, the authors of the new paper argue that people don’t like to be at the bottom. One paradoxical consequence of this “last-place aversion” is that some poor people may be vociferously opposed to the kinds of policies that would actually raise their own income a bit but that might also push those who are poorer than them into comparable or higher positions. The authors ran a series of experiments where students were randomly allotted sums of money, separated by $1, and informed about the “income distribution” that resulted. They were then given another $2, which they could give either to the person directly above or below them in the distribution.
In keeping with the notion of “last-place aversion”, the people who were a spot away from the bottom were the most likely to give the money to the person above them: rewarding the “rich” but ensuring that someone remained poorer than themselves. Those not at risk of becoming the poorest did not seem to mind falling a notch in the distribution of income nearly as much. This idea is backed up by survey data from America collected by Pew, a polling company: those who earned just a bit more than the minimum wage were the most resistant to increasing it.
Poverty may be miserable. But being able to feel a bit better-off than someone else makes it a bit more bearable.
Read more at The Economist: Link