5 Factors That Fuel Income Inequality

Peter Belmi still remembers how surprised he was when one of the Stanford Graduate School of Business courses he took, called “Paths to Power,” turned out much differently than he expected.

Belmi, now a professor at the University of Virginia’s Darden School of Business, thought he would be hearing about the work and sacrifice it took for executives to reach the top of their field, and he did hear some of that. Mostly, though, the class was a lesson in workplace politics, power plays and the competitive – and sometimes not so meritocratic – advancement dynamics in many corporate structures in Silicon Valley and elsewhere.

“Having always heard that hard work will lead to success, I freaked out,” he said. “I struggled to accept the idea that it was necessary to engage in political maneuvering to get ahead. Or at least, it seemed as if there was this widespread idea that you needed to play politics to get ahead in most workplaces in the U.S. If that was what it took to have power, did I even want it?”

Peter Belmi studies income inequality as a professor at the Darden School of Business. (Photo by Susan Wormington)

Belmi grew up in the Philippines before making his way to Stanford. Though he had not formally heard the term “the American Dream” before coming to the U.S., his parents raised him to believe that dedication, sacrifice and hard work will be rewarded with success.

However, income inequality in the United States, where the top 10 percent earns more than nine times more than the bottom 90 percent, has consistently threatened that paradigm.

Belmi has made it his mission to find out why.

Back in that Stanford class, he noticed many of his classmates were as disconcerted as he was by what it took to get to the top.

Among the most concerned were those from humble backgrounds or from underrepresented groups.

“That got me thinking about inequality more broadly,” he said. “What do people believe they have to do to get power? Why do they feel that way? How is that contributing to inequality?”

Since leaving Stanford two years ago, he has published five papers on inequality, with seven more in progress. Most of his research focuses on the insidious structural and psychological factors that contribute to social and income inequality, often in spite of people’s best intentions. He hopes that, by understanding how conscious and unconscious biases fuel the problem, we can correct for those tendencies and create more equal opportunities.

Belmi has incorporated this research into his classes at Darden, where he is a beloved teacher known for his own nuanced take on the “Paths to Power” class and a regular speaker at student clubs like Pride at Darden, Graduate Women in Business and others focused on underrepresented groups.

Here are five of his most interesting findings so far.

Illustrations by Alexandra Angelich, University Communications

1. Advancement dynamics in organizations place a higher premium on independence than interdependence

Belmi laid out this theory in his dissertation at Stanford after the “Paths to Power” class. 

He argued that individuals from disadvantaged backgrounds tend to believe that to be a good employee, they must connect and adjust to others in social contexts. They must show deference to authority, rely on others and be good team players.

“However, some workplaces do not reward such behaviors, instead promoting employees who are independent, expressive, confident and self-promoting,” Belmi said. “As a result, low-class individuals feel that they are unlikely to succeed in the workplace – that they do not belong in such settings and do not have the appropriate skills to succeed.”

Belmi and co-author Kristin Laurin used several surveys and experiments to show that when organizations emphasize Machiavellian-style politics to get ahead, they demotivate individuals from disadvantaged backgrounds from seeking power.

“Political maneuvering goes against that community-focused identity and causes many from disadvantaged backgrounds to opt out of the pursuit of power,” Belmi said. Middle- and upper-class workers, on the other hand, are more likely to accept workplace politics as part of the deal, even if they find it distasteful.

Companies can correct for this tendency by repeatedly demonstrating a commitment to fostering a strong community and providing clear, merit-based structures for promotions that cuts down on internal politics. To the extent that politics is an unavoidable reality, one way that managers can help low-status individuals overcome their aversion to it is by reframing what power-seeking means.

“If employees see a connection between attaining power and helping the community they came from, they are more motivated to play the game,” Belmi said.

2. Institutions that are not inclusive can elicit deviant behavior.

In a 2015 paper with his Stanford adviser, Margaret Neale, and co-authors Rodolfo Cortes Barragan and Geoffrey Cohen, called “Threats to Social Identity Can Trigger Social Deviance,” Belmi conducted an experiment with two groups.

The first group was asked to imagine that they worked for a manager who made a somewhat off-putting and possibly racist comment about the intelligence of black Americans; the second was asked to imagine that they worked for a manager who had a more inclusive stance. Black workers in the first group proved 55 percent more likely to endorse counterproductive behavior – like slacking off or misrepresenting hours worked – than their counterparts in the second group.

“People have a universal desire for respect, and there are substantial costs when they feel they are not respected,” Belmi said.

He said managers should also remember seemingly small slights can add up and stoke feelings of hopelessness.

“When people encounter bias in mainstream institutions because of their social identity – class, race, gender, sexuality or something else – it reinforces in their mind the narrative that society is stacked against them and their group,” Belmi said. “It’s particularly painful, because negative stereotypes are ubiquitous and people just can’t disassociate from their social identity.”

3. ‘I’ll Help You, You Help Me’? Not Necessarily

Reciprocity – the idea that you are morally obligated help people who help you – is a pretty widely accepted social norm. However, a 2015 study by Belmi and Stanford professor Jeffrey Pfeffer found that it does not necessarily apply in the workplace.

In fact, Belmi said, many workplaces do just the opposite: Instead of encouraging people to reciprocate based on moral obligation, they encourage people to make decisions based on calculation and instrumentality.

In four separate studies, Belmi and Pfeffer found that people who would reciprocate favors in a social context – such as dinners or rides to the airport – were less likely to reciprocate those same favors in a business or professional setting, unless they believed that the person could be of value to them later.

“Many norms and activities that occur at work weaken our tendency to reciprocate based on moral obligation and increase our tendency to make decisions based on strategic calculation,” he said.

According to Belmi, organizational contexts that reward and reinforce such instrumental thinking can create fundamental dilemmas for members of under-represented groups, who tend to value loyalty, community, reciprocity and repaying past obligations.

“It’s difficult to thrive in an environment where the prevailing norms of how people should behave clash with their moral standards and personal values,” he said.

4. Making it to the top changes people’s worldview.

When people are in privileged positions, they start to believe that the system will work for everyone as it did for them.

Belmi and Neale studied about 1,900 individuals, providing scenarios that put some in a more privileged position and others in a less privileged position.

Those who believed they were more privileged were much more likely to be comfortable with the idea of an unequal society.

“People say they like equality, but they become less committed to that idea as they move up the hierarchy”, Belmi said.  

5. Existential fear, especially fear of death, spurs our quest for power.

In addition to pursuing power for extrinsic reasons, like status and money, Belmi proposed that people also pursue power for existential reasons.

“The dominant narrative about power is that people want the money, influence and other perks that come with it,” Belmi said. “But we also find that people seek power because it helps them manage their existential concerns.”

He explored this theory in a paper with Pfeffer called “Power and Death: Mortality Salience Increases Power-Seeking While Feeling Powerful Reduces Death Anxiety.”

They conducted several experiments leading working adults to contemplate their mortality and then asking them how much they want to pursue power. Those who were confronted most harshly with their mortality reported wanting power more, particularly men.

Having power, Belmi suggested, helps people with their existential concerns by making them feel that they have some sense of worth or value in the world.

“We cling to institutions and worldviews larger than ourselves,” whether civic, religious, corporate or otherwise, Belmi said. “Humans fundamentally want to feel their lives matter and their legacy will continue when they are gone.”