Income inequality undermines minimum wage support

According to the new study, analysing more than 130,000 protests and eight controlled experiments, higher income inequality actually weakens public support for raising minimum wages, creating a troubling psychological cycle that could worsen economic disparities.

The counterintuitive findings reveal what researchers call “right” reasoning, where people look at existing wage gaps and draw conclusions, that’s what should be. “When the rich earn more than the poor, it is often inferred that the rich should make more money than the poor,” said M. Asher Lawson, a co-leader researcher at Insead, France.

Psychology behind the paradox

The team found that when income inequality reaches higher levels, Americans are less likely to participate in economic protests and are more resistant to minimum wages. This creates what Lawson calls a self-continuation cycle: “As a result, the existence of higher income inequality ultimately legitimizes itself in the heart of the public. This in turn undermines support for policies such as higher minimum wages, such as potentially lowering inequality minimum wages.”

The study, published in the Journal of Experimental Psychology: General, examines protest data from 2017 to 2023 in 823 U.S. counties. County with higher inequality always showed fewer and smaller economic protests, while non-economic demonstrations remained unaffected.

Liberal voters are easier than expected

Perhaps the most surprising thing is how political ideology affects these patterns. Although conservatives have always supported minimum wages, regardless of the level of inequality, liberals are more sensitive to the inequality they observe. “Conservatives support minimum wage regardless of the income distribution they see in the hypothetical society, but liberals are more likely to support lower minimum wages when income is inequality,” explained Daniela Goya-Tocchetto, co-leading researcher at SUNY BUFFALO.

This unexpected finding suggests that well-intentioned free voters, because they pay close attention to the economic situation, become more susceptible to psychological traps that inferred should be based on what they should have been.

Federal minimum wage environment

The study was because the federal minimum wage remained at $7.25 an hour, but has not changed since 2009 despite high inflation. A full-time worker who earns a federal minimum can only go home for $15,080 a year, a federal poverty threshold for access to government programs like Medicaid.

The study’s rat-tracking experiment revealed another disturbing pattern: When people make minimum wage decisions, their attention disproportionately focuses on the actual wages of the lowest earners rather than considering broader economic principles or fairness.

Beyond anchoring and affordability

The researchers gave a simpler explanation of their findings. People not only anchor their judgments to existing low wages, because this effect persists even if participants consider non-monetary benefits. It’s also not about perceived affordability – participants actually believe that people in high-quality societies should get less goods and services.

In an experiment involving 800 participants, those who watched a high-quality society selected 1.6 items from a list of 25 goods and services that the minimum wage workers should be affordable. The gap is most noticeable to enjoy disposable items such as fitness membership and restaurant dining.

Potential solutions

The study also found potential remedies. The effect of inequality largely disappears when people compare society side by side rather than assess society alone. Seeing simple behaviors of multiple income distributions simultaneously helps people apply their established principles more consistently.

Building on this insight, researchers developed an intervention in which participants first looked at the income distribution, then created their ideal society and eventually compared the two societies. This approach successfully reduces the gap between minimum wage recommendations for high-level and low-quality societies.

Impact on policy exchanges

These findings raise strategic challenges to minimum wage advocates. “Highing that inequality is high may have the unintentional effect of normalizing higher levels,” Lawson warned. Instead, he suggested that “emphasizing how much inequality is reduced and making a higher minimum wage is a key path to achieving this.”

This study adds to growing evidence that minimum wage policies can effectively reduce inequality. Historical analysis shows that after work and freedom in March 1963, the minimum wage increased, resulting in a 20% reduction in the racial income gap. Similarly, Brazil’s minimum wage has accounted for 30% of the country’s income inequality since 1994.

A broader model

This “involving” reasoning occurs in many cases where people confuse things with what they should be. This trend evolves because existing practices are often persistent for good reason, making them a reasonable template for future behavior. However, this spiritual shortcut can perpetuate harmful inequality when structural factors create problematic states.

The study offers both warnings and hope. While our psychology may object to economic justice in subtle ways, understanding these biases can help advocates design more effective ways to build support for policies that create a more equitable society.