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Even Harvard B-school alums are fretting over income inequality

Sep 09, 2015

The national discussion over income inequality has for the most part been shaped by class. During the 2012 elections for instance, Mitt Romney, the former private equity titan and Harvard Business School grad, advocated for across-the-board tax cuts, which would have, in dollar terms, gone mostly to the wealthy. He also happened to secure the votes of folks who earn more than $100,000 by a wide margin.

For years, conservative outlets tried to downplay the trend of rising income inequality. As late as 2012, National Review was calling the trend a "myth." But as evidence of growing wealth and income disparities has continued to mount, those in favor of a less activist government have changed their tune. The 2015 Survey on U.S. Competitiveness, a poll of more than 2,700 Harvard Business School alumni on the U.S. economy and American firms' competitiveness, represents the latest sign of this shift in attitudes.

Harvard Professors Jan Rivkin and Michael Porter, and Harvard Business School Senior Fellow Karen Mills titled their report on the survey's findings, "The Challenge of Shared Prosperity," underscoring the surprising finding that the American and global business elite are starting to believe that income inequality is a serious threat to the country and to their businesses. They find that, "respondents remain pessimistic on balance about the likelihood that firms will lift American living standards by paying higher wages and benefits in the near term. Shared prosperity is not around the corner."

Digging into the numbers reveals some surprising facts about the opinions of America's business elite. One would think, from the political discourse on the subject, that these folks believe that the huge discrepancies in gains in income in recent years is a just outcome, but the survey reveals something different. The following figures show what Harvard Business School alumni think the distribution of future income gains will be and what they should be:

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Rivkin, Porter, and Mills explain the results:

Though these predicted gains [shown in Figure 13a] may seem extremely skewed toward the top 1%, the alumni predictions are somewhat less unequal than the actual distribution of gains in recent years. Compared to the average alumni prediction of 41%, Berkeley’s Emmanuel Saez calculates that those in the top 1% of the income distribution captured 55% of total real income growth in the period 1993–2014 and 58% of the gains during the 2009–14 economic recovery.

What's even more surprising is how evenly the typical respondent believes income gains should be spread. The authors write:

Our findings replicate and confirm prior research findings that people wish inequality to be less extreme than they believe it to be. Our survey is the first to assess predictions and preferences for future gains and is a rare study to do so for respondents who, on average, sit near the top of the income distribution. Overall, respondents appear to have a strikingly strong preference for greater equality.

The survey is less clear on what to do about these problems. While a significant portion of respondents see rising income inequality and persistent poverty as threats to their businesses, the single biggest problem identified by Harvard alums was slow economic growth. The solutions alums proposed for boosting growth, like tax reform and streamlining regulations, may conflict with solutions needed to combat income inequality, like wealth redistribution and the strengthening of private-sector unions. Furthermore, it's one thing to say income inequality is a problem in a survey, it's another to actively support government policies that might fight the problem at the expense of the wealthy.

But the Harvard survey shows that even America's business elite recognize that wealth and income inequality is a problem for society and their businesses.

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