Introduction
In today's world, inequality has reached staggering levels. The richest 85 people on the planet now own as much wealth as the poorest 3.5 billion. This extreme disparity is not just a matter of economics - it profoundly shapes how we think, behave, and live our lives, even if we're not objectively poor ourselves. In "The Broken Ladder," psychologist Keith Payne explores the far-reaching consequences of inequality on individuals and society as a whole.
This eye-opening book reveals how merely feeling poor compared to others can impact our health, decision-making, and worldview as much as actually being poor. Through fascinating research and experiments, Payne demonstrates that inequality changes the way our brains work, encourages risky behavior, fuels political division, and even alters our perception of reality. Most importantly, he shows that these effects stem not from absolute poverty, but from our subjective sense of where we stand on the social ladder relative to others.
As we'll see, the implications of this research are profound. Even as overall prosperity has increased, rising inequality has left many of us feeling worse off and more stressed. This in turn drives a host of social ills, from poorer health outcomes to political polarization. By understanding these psychological dynamics, we can start to address inequality more effectively and mitigate its harmful effects on our lives and communities.
The Psychology of Feeling Poor
Relative vs. Absolute Poverty
One of the key insights of "The Broken Ladder" is that feeling poor has less to do with our actual material circumstances than with how they compare to those around us. Payne illustrates this with a thought-provoking example: By today's standards, even Louis XIV of France, with all his riches and palaces, lived in what we would consider abject poverty. He lacked basic amenities like hot running water, air conditioning, or modern healthcare. And yet, he certainly didn't feel poor in his time.
This highlights how our sense of wealth or poverty is inherently relative. Research shows that only about 20% of people who report feeling poor are actually poor by objective measures. The other 80% may have middle class or even upper-middle class incomes, but still feel financially strained compared to their peers or aspirational lifestyle.
Payne gives the example of a family doctor earning $200,000 a year - an objectively high income. But if she lives next to a brain surgeon making $800,000, she may feel relatively poor in comparison. Depending on her expenses and social circle, she might even feel like she's struggling to get by, despite her six-figure salary.
The key point is that we don't have an internal gauge for measuring "enough" money the way we do for basic needs like food or water. Instead, we rely on social comparisons to assess our financial status. If others around us seem to have nicer things or fewer money worries, we're likely to feel poor ourselves - regardless of our actual income level.
The Consequences of Feeling Poor
This subjective sense of poverty can have very real and serious consequences, even for people who aren't objectively poor. Payne outlines a sobering list of negative outcomes associated with feeling financially inferior:
- Increased rates of depression and anxiety
- Higher likelihood of chronic pain
- Greater risk of weight issues, diabetes, and heart problems
- More susceptibility to conspiracy theories
- Decreased work performance
- Poorer decision-making
Remarkably, these effects occur not just from actual poverty, but from the mere feeling of being worse off than others. Our primate brains are highly attuned to social status, and perceiving ourselves as lower on the ladder triggers a cascade of psychological and physiological responses.
Payne describes an experiment with monkeys that vividly illustrates this. When monkeys were given cucumber slices in exchange for small stones, they were content to repeat the trade. But when they saw another monkey receive a grape (a tastier treat) for the same task, they became agitated and started refusing the cucumber or even throwing it back at the researcher.
This reaction shows how deeply ingrained our sense of fairness and social comparison is. Like the monkeys, humans become frustrated and demoralized when we perceive unfair disparities - even if our absolute situation hasn't changed. In a world of extreme inequality, where the ultra-wealthy keep accumulating more, it's no wonder many of us are left feeling increasingly poor and dissatisfied.
How Inequality Shapes Behavior
Risk-Taking and Short-Term Thinking
One of the most striking ways inequality affects us is by encouraging risky and potentially self-destructive behavior. Payne describes an experiment where participants were given arbitrary scores supposedly reflecting their wealth relative to peers. Those made to feel relatively poor were much more likely to gamble with money they were given, even when the odds weren't in their favor.
Importantly, this held true even for objectively well-off participants. The mere perception of being worse off than others was enough to trigger riskier choices. In another version, those made to feel poor were more likely to choose smaller immediate payouts over larger delayed ones - showing how inequality can lead to short-term thinking.
These findings help explain real-world patterns, like why lottery tickets and predatory loans are more popular in poorer neighborhoods. When people feel they're at the bottom, taking risks can seem like the only way up. Unfortunately, this often backfires and perpetuates cycles of poverty.
Social Division and Political Polarization
On a broader scale, inequality fuels social division and political partisanship. Payne and colleagues demonstrated this with an investment game experiment. Participants who thought they'd earned more than others voted to cut taxes, while those who thought they'd earned less voted to raise them.
More troublingly, the "high earners" viewed those who disagreed with them as incompetent and irrational. They even supported disenfranchising the "low earners" from having a vote on the rules. Meanwhile, the "low earners" wanted everyone to have an equal say, even those who disagreed.
This mirrors real-world political dynamics, where rising inequality has corresponded with increasing polarization. As gaps widen, those at the top grow more contemptuous of those below and more resistant to policies that might level the playing field. This creates a vicious cycle where inequality begets more inequality.
Health and Wellbeing Impacts
The Health Costs of Inequality
It's well established that poverty is associated with worse health outcomes. But Payne reveals that in developed countries, one's subjective experience of status is actually a better predictor of health than actual income. In other words, feeling poor affects health and longevity about as much as being poor.
This occurs through various mechanisms, but stress is a major factor. Studies show that lower social status correlates with higher levels of stress hormones and inflammation. In one experiment with monkeys, researchers found that simply moving up the social hierarchy led to improved health markers, even without any change in diet or environment.
For humans, living in a highly unequal society means constantly comparing ourselves unfavorably to others, triggering chronic stress responses. This helps explain why a middle-class person in high-inequality Singapore has statistically worse health outcomes than a middle-class person in more egalitarian Finland.
Mental Health and Cognitive Effects
Beyond physical health, inequality takes a toll on our mental wellbeing and cognitive functioning. Payne describes how inequalities in power, wealth, and status can skew our perceptions of reality in subtle but important ways.
For instance, people who feel powerless are more prone to seeing patterns in randomness (like religious figures in toast) and believing in conspiracy theories. This "pareidolia" effect stems from a psychological need for order and control in the face of unpredictable circumstances.
In experiments, participants made to feel powerless were three times more likely to see non-existent images in random visual noise. They were also more susceptible to conspiracy theories. As societies grow more unequal and many feel increasingly powerless, this could have worrying implications for the spread of misinformation and erosion of shared truth.
Workplace Impacts
Performance and Satisfaction
The workplace is where most people experience inequality most directly and frequently. Conventional wisdom holds that pay disparities create healthy competition and motivate employees to work harder. But Payne argues that extreme inequalities actually undermine performance and job satisfaction.
He cites a study of Major League Baseball teams which found that greater pay inequality was associated with worse team performance. Even star players performed worse on teams with high pay disparities. This suggests that more equitable distribution boosts overall morale and cohesion in ways that benefit everyone.
In the corporate world, ballooning executive pay coupled with stagnant wages for ordinary workers breeds resentment and disengagement. Contrary to popular belief, the most stressed workers aren't high-powered CEOs, but those in the middle and bottom ranks who feel squeezed and powerless. This chronic stress impairs cognitive function and productivity.
Innovation and Risk-Taking
While some argue that high rewards for top performers drives innovation, Payne contends that extreme inequality can actually stifle creativity and healthy risk-taking. When the stakes are too high, people become more risk-averse and less likely to challenge the status quo.
He gives the example of the pharmaceutical industry, where the promise of massive profits from blockbuster drugs has paradoxically led to less innovation. Companies focus on minor tweaks to existing drugs rather than pursuing riskier but potentially groundbreaking research.
In more egalitarian environments, people feel more psychologically secure to take creative risks without fear of falling too far behind. This may help explain why some of the most innovative companies, like Google in its early days, had relatively flat pay structures.
Societal Consequences
Erosion of Democracy
As inequality rises, Payne argues that it threatens the very foundations of democracy. When wealth becomes too concentrated, the rich gain outsized political influence while the poor become increasingly disengaged.
We see this playing out in declining voter turnout among lower-income groups and the growing influence of money in politics. Payne's research shows that feeling economically inferior makes people less likely to participate in civic life and more cynical about government.
More insidiously, extreme inequality can lead those at the top to view themselves as superior and more deserving of power. Recall the experiment where "high earners" wanted to disenfranchise those who disagreed with them. As gaps widen, the wealthy may grow more resistant to democratic processes that could jeopardize their position.
Social Cohesion and Trust
Beyond formal political structures, inequality erodes the social fabric that holds communities together. As people segregate into bubbles of similar socioeconomic status, there are fewer opportunities for cross-class interactions and empathy-building.
Payne cites research showing that inequality reduces social trust and increases perceptions of unfairness. This makes people less willing to support public goods and social programs that benefit the community as a whole. It can also fuel social unrest, crime, and political instability as those at the bottom feel they have less to lose.
Economic Impacts
While defenders of inequality argue it's necessary for economic growth, Payne presents evidence that extreme disparities actually hamper overall prosperity. When wealth is too concentrated at the top, there's less consumer spending to drive the economy. Inequality also reduces economic mobility, wasting human potential and innovative capacity.
Moreover, the stress and health impacts of inequality translate into enormous economic costs in the form of healthcare spending, lost productivity, and social services. By some estimates, the price tag of inequality in the U.S. runs into the trillions of dollars annually.
Addressing Inequality
Policy Solutions
Payne argues that given the far-reaching negative impacts of inequality, ambitious policy solutions are needed. These could include:
- More progressive taxation to reduce accumulation at the top
- Strengthening labor protections and unions
- Investing in education and job training to boost mobility
- Expanding the social safety net
- Campaign finance reform to reduce political capture by the wealthy
He emphasizes that fighting poverty alone is not enough - inequality itself must be directly targeted. This means not just raising the bottom rungs of the ladder, but also lowering the top ones.
Individual Strategies
While large-scale change requires collective action, Payne offers some strategies individuals can use to mitigate the psychological impacts of inequality:
Be mindful of social comparisons: Notice when you're comparing yourself unfavorably to others and try to redirect those thoughts.
Choose comparisons wisely: Focus on your own progress over time rather than comparing yourself to others who may have very different circumstances.
Cultivate gratitude: Regularly reflect on what you're grateful for to counter feelings of lack.
Connect with diverse groups: Build relationships across class lines to gain perspective and reduce in-group/out-group thinking.
Clarify your values: Reflect on what truly matters to you beyond social status or material wealth.
Take civic action: Engaging in community service or activism can increase feelings of agency and connection.
Workplace Approaches
For business leaders and policymakers, Payne suggests some ways to create more equitable and productive work environments:
- Implement more transparent and equitable pay structures
- Limit executive compensation and tie it to employee wellbeing metrics
- Foster employee ownership and profit-sharing
- Prioritize internal hiring and training to create advancement opportunities
- Create more collaborative, less hierarchical management structures
- Offer robust benefits and work-life balance policies for all employees
The Path Forward
Payne concludes by emphasizing that extreme inequality is not an inevitable feature of modern economies. Many developed countries have managed to achieve strong growth while maintaining much lower levels of inequality than the U.S. Moreover, the U.S. itself had significantly more economic equality in the mid-20th century.
Ultimately, how we structure our economies and societies is a choice. By understanding the true costs of inequality - not just economic, but psychological, social, and democratic - we can make better choices. Payne argues that reducing inequality is not just a matter of fairness, but of creating healthier, happier, and more stable societies that benefit everyone.
This will require overcoming entrenched interests and ideologies that defend the status quo. But as more people recognize how inequality affects their own lives and communities, momentum for change can build. By working together to create a more level playing field, we can start to repair the broken ladder of social mobility and build a society where everyone has a fair chance to thrive.
Key Takeaways
Feeling poor relative to others can have as much impact on health and behavior as actually being poor.
Inequality fuels risky decision-making, short-term thinking, and self-destructive behaviors.
Living in an unequal society increases stress and negative health outcomes across the socioeconomic spectrum.
Extreme disparities undermine workplace performance, innovation, and satisfaction.
Rising inequality erodes social trust, civic engagement, and democratic institutions.
Addressing inequality requires both policy changes and individual mindset shifts.
Creating more equitable societies benefits everyone, not just those at the bottom.
Conclusion
"The Broken Ladder" offers a compelling look at how inequality shapes our psychology and behavior in profound ways. By revealing the hidden costs of disparity - from poorer health to political dysfunction - Keith Payne makes a powerful case for why inequality matters, even for those who aren't objectively poor.
The book's insights have significant implications for how we approach a range of social issues. Rather than focusing solely on absolute poverty, policymakers may need to consider relative deprivation and status anxiety. Business leaders might rethink compensation structures that create vast internal inequalities. And as individuals, we can work to break free from the psychological traps that inequality sets for us.
Ultimately, "The Broken Ladder" is a call to repair our fractured societies and economies. By understanding the true toll of inequality, we can start to build systems that allow everyone to feel secure, valued, and capable of reaching their full potential. In doing so, we may find that a more equal world is not just fairer, but happier, healthier, and more prosperous for all.