A Problem of Riches? The Effects of Rising Top-end Inequality and Inclusive Growth on the Perceived Fairness at the Top and Bottom of the Income Distribution

Inequality is not necessarily related to inequity, and is even preferred over equality if perceived as fair. Recent scholarship thus highlights the need to focus on unfair inequality when examining outcomes such as redistributive preferences. This article investigates when rising income inequality translates into perceived unfair inequality and through which channels these perceptions form at the top and bottom of the distribution. Building on distributive justice theory, I argue that contemporary dynamics of exclusive growth—rising inequality due to gains concentrated at the top—heighten perceptions of overreward at the top, whereas fairness perceptions of the bottom hinge on whether growth is inclusive, i.e., diffuses into the lower half of society. Recent comparative research typically links actual inequality to injustice perceptions directed at the bottom but not at the top, leaving open the conditions under which top incomes come to be seen as unfair. Thus, I redirect the focus from overall inequality to the structure of inequality and income growth for specific parts of the distribution to identify when inequality becomes normatively contentious. Empirically, I combine five waves of ISSP data with macro data on income inequality and disposable incomes of representative percentile groups to estimate multilevel hybrid models with individuals nested in country-years nested in countries. The perceived fairness of CEO and worker pay serves as an indicator to evaluate the fairness of the top and bottom of the income distribution, respectively. The gap between both fairness evaluations then constitutes the degree of perceived unfair inequality. Robustness checks are conducted within a “multiverse analysis framework” to ensure that the results withstand a range of other plausible modelling choices, thereby enhancing transparency and addressing the issue of model uncertainty. Preliminary results show that perceived unfair inequality is driven through two distinct channels: At the top, rising top-end inequality increases perceived overreward of CEOs. In contrast, inequality has no effect on the perceived fairness of bottom incomes. Instead, disposable income growth of the bottom 50% reduces the perception that workers are unfairly underpaid. Therefore, perceived unfair inequality increases under rising inequality due to perceptions of unfairness being directed at those at the top. Conversely, it narrows when growth is shared more widely by decreasing perceptions of unfairness at the bottom. In sum, these results support the notion that rising inequality can raise concerns about the deservingness of the rich (McCall, 2013), while inclusive growth is necessary to dampen perceived unfairness at the bottom.