Most of us believe if we earned a bit more money, we'd have more free money to give. But the wealthier people get, the more expenses they accumulate, meaning there is not that much "spare" income. 
The result is that we often pass the buck, thinking that the wealthier people, or our future, richer selves, will have the capacity to give.

We think rich people should be more generous

When we think wealthier people should donate more, we are essentially looking at our own lifestyle and comparing it to their income. We think they have abundance even if they don't feel that abundance.
The point is that everybody feels constraint to give. It's about prioritizing and giving according to your own moral standards.

A mismatch between income and perception

According to a new study co-authored by Yale SOM’s Gal Zauberman, people of a wide range of income levels believe that they are giving what they should to charity—but that even richer people have more spare income and a greater obligation to give.<figure><picture>
 <source media="all and (min-width: 851px)" type="image/webp" data-srcset="/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.webp?h=6dade3ba&amp;itok=868L7uVB 1x, /sites/default/files/styles/square_xl/public/2020-11/BiggerHouse_final.webp?h=6dade3ba&amp;itok=hkmy0fSP 2x" srcset="https://insights.som.yale.edu/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.webp?h=6dade3ba&amp;itok=868L7uVB 1x, https://insights.som.yale.edu/sites/default/files/styles/square_xl/public/2020-11/BiggerHouse_final.webp?h=6dade3ba&amp;itok=hkmy0fSP 2x">
 <source media="all and (min-width: 560px) and (max-width: 850px)" type="image/webp" data-srcset="/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.webp?h=6dade3ba&amp;itok=868L7uVB 1x" srcset="https://insights.som.yale.edu/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.webp?h=6dade3ba&amp;itok=868L7uVB 1x">
 <source type="image/webp" data-srcset="/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.webp?h=6dade3ba&amp;itok=868L7uVB 2x" srcset="https://insights.som.yale.edu/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.webp?h=6dade3ba&amp;itok=868L7uVB 2x">
 <source media="all and (min-width: 851px)" type="image/png" data-srcset="/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.png?h=6dade3ba&amp;itok=868L7uVB 1x, /sites/default/files/styles/square_xl/public/2020-11/BiggerHouse_final.png?h=6dade3ba&amp;itok=hkmy0fSP 2x" srcset="https://insights.som.yale.edu/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.png?h=6dade3ba&amp;itok=868L7uVB 1x, https://insights.som.yale.edu/sites/default/files/styles/square_xl/public/2020-11/BiggerHouse_final.png?h=6dade3ba&amp;itok=hkmy0fSP 2x">
 <source media="all and (min-width: 560px) and (max-width: 850px)" type="image/png" data-srcset="/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.png?h=6dade3ba&amp;itok=868L7uVB 1x" srcset="https://insights.som.yale.edu/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.png?h=6dade3ba&amp;itok=868L7uVB 1x">
 <source type="image/png" data-srcset="/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.png?h=6dade3ba&amp;itok=868L7uVB 2x" srcset="https://insights.som.yale.edu/sites/default/files/styles/square/public/2020-11/BiggerHouse_final.png?h=6dade3ba&amp;itok=868L7uVB 2x">
 <img src="https://insights.som.yale.edu/sites/default/files/styles/square_sm/public/2020-11/BiggerHouse_final.png?h=6dade3ba&amp;itok=GQMq8vJ5" alt="An illustration showing progressively richer neighbors, each pointing to the next">

 </picture><figcaption class="media__figcaption" dir="ltr">
 <a href="http://seandavidwilliams.com/" dir="ltr">Sean David Williams</a>

 </figcaption></figure><div><time datetime="2020-11-18">
 November 18, 2020
 </time></div>Billionaire Jeff Bezos’ <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;cad=rja&amp;uact=8&amp;ved=2ahUKEwiv1_GKvYztAhVBFlkFHV9JA8c4ChAWMAB6BAgGEAI&amp;url=https%3A%2F%2Fwww.vox.com%2Frecode%2F2020%2F4%2F2%2F21206205%2Fjeff-bezos-100-million-charity-food-banks-feeding-america&amp;usg=AOvVaw1ywn94dMCC3udlxXPjj0bF" dir="ltr">donation of $100 million to address hunger</a> drew wide criticism, in part because the amount—a massive sum to the average American—only represented a tiny fraction of his riches. A new study finds that such judgments are not only restricted to billionaires. We tend to apply this same moral argument—that those who are richer should donate a higher proportion of their income—to our next-door neighbors, bosses, and anyone else who earns more than ourselves.“Most of us cannot perceive how a person can have so much money without having tremendous abundance,” says Yale SOM professor of marketing Gal Zauberman. “We always think that if we only made a bit more, we'd have so much free money [to give].”The notion that higher earners have more “financial slack,” or spare money, leads us to think that they are ethically obliged to donate more. But as people get wealthier, they also accumulate greater expenses, so their perception of their own “spare” income doesn’t increase as much. The result, according to a study co-authored by Zauberman, is that each of us has a similar expectation of giving for ourselves, whatever our income level. At the same time, we consistently believe that people wealthier than us have greater capacity to give—as the authors put it, “passing the buck” for greater generosity to the wealthier, and to our future, richer selves.Previous studies have examined what motivates people to donate to charities and how people judge others’ generosity. But “nobody had quite connected how we judge others to our subjective perceptions of how much free money the other person has,” Zauberman says. “It was implicit in many ways, but we systematically connected the dots.”To investigate, Zauberman, Jonathan Berman of the London Business School, Amit Bhattacharjee of INSEAD, and Deborah Small of the University of Pennsylvania designed a series of experiments to gauge how much people thought they themselves could give to charitable causes, as well as how much they thought lower or higher earners should donate.First, participants in an online experiment were asked to imagine their lives if they earned $50,000 a year, and then asked how much they would give to charity if that was their household income. The team found that the less a person currently earned relative to $50,000, the more they anticipated donating if they were at that income level. To rule out the possibility that the participants were simply multiplying their current rate of giving by a larger income, the team surveyed them about their current donations. They found that on average, the participants had donated 0.93% of their income in the past year, and that fraction was not correlated with their actual income.In a second test, the researchers recruited participants in various income brackets, from under $10,000 to over $110,000. They were presented five hypothetical people at income levels from $20,000 to $100,000 per year, and asked how much each person was morally obliged to donate to charity. The participants said that those who earned more ought to give more—and the more the difference between the target’s income and their own, the more they thought the target should donate.The results show how people overestimate how much “unconstrained” money a higher earner has in hand. “When you compare, you’re essentially looking at your lifestyle and their income,” Zauberman says. “You don’t realize that as a person earns more, their expenses increase too, so they’re just as constrained as they were with a lower income.”This perception of spare money was highly consistent and present regardless of a participant’s own income level, he adds. “The less you earn compared to someone, the more you think they have spare money,” Zauberman says. “What’s interesting is not only do we think the wealthier should donate more, we think it because of this idea that they have abundance. But they themselves don't feel that abundance.”Zauberman remembers experiencing this mismatch between income and perception himself. “I’ve never felt as wealthy as I did in the first month that I moved from being a PhD student to being a faculty member,” he recalls. “I make more now than I did then, but I don’t feel nearly as wealthy.”<div data-sign-up-widget=""><button data-sign-up-widget-toggle="" aria-expanded="false" dir="ltr">
 
 
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 </button></div>In a subsequent experiment, participants were presented similar scenarios of higher-earning targets, but they were told that the “extra” income had been earmarked for specific expenses such as a retirement fund or college savings. Adding this detail reduced people’s expectations of donations from richer people, perhaps because it made their constraints more apparent.

According to a new study co-authored by Yale SOM’s Gal Zauberman, people of a wide range of income levels believe that they are giving what they should to charity—but that even richer people have more spare income and a greater obligation to give.

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Personal Development

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Money & Investments

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According to a new study co-authored by Yale SOM’s Gal Zauberman, people of a wide range of income levels believe that they are giving what they should to charity—but that even richer people have more spare income and a greater obligation to give.

Billionaire Jeff Bezos’ <a dir="ltr" href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;cad=rja&amp;uact=8&amp;ved=2ahUKEwiv1_GKvYztAhVBFlkFHV9JA8c4ChAWMAB6BAgGEAI&amp;url=https%3A%2F%2Fwww.vox.com%2Frecode%2F2020%2F4%2F2%2F21206205%2Fjeff-bezos-100-million-charity-food-banks-feeding-america&amp;usg=AOvVaw1ywn94dMCC3udlxXPjj0bF">donation of $100 million to address hunger </a>drew wide criticism, in part because the amount—a massive sum to the average American—only represented a tiny fraction of his riches. A new study finds that such judgments are not only restricted to billionaires. We tend to apply this same moral argument—that those who are richer should donate a higher proportion of their income—to our next-door neighbors, bosses, and anyone else who earns more than ourselves.

“Most of us cannot perceive how a person can have so much money without having tremendous abundance,” says Yale SOM professor of marketing Gal Zauberman. “We always think that if we only made a bit more, we'd have so much free money [to give].”

The notion that higher earners have more “financial slack,” or spare money, leads us to think that they are ethically obliged to donate more. But as people get wealthier, they also accumulate greater expenses, so their perception of their own “spare” income doesn’t increase as much. The result, according to a study co-authored by Zauberman, is that each of us has a similar expectation of giving for ourselves, whatever our income level. At the same time, we consistently believe that people wealthier than us have greater capacity to give—as the authors put it, “passing the buck” for greater generosity to the wealthier, and to our future, richer selves.

Previous studies have examined what motivates people to donate to charities and how people judge others’ generosity. But “nobody had quite connected how we judge others to our subjective perceptions of how much free money the other person has,” Zauberman says. “It was implicit in many ways, but we systematically connected the dots.”

To investigate, Zauberman, Jonathan Berman of the London Business School, Amit Bhattacharjee of INSEAD, and Deborah Small of the University of Pennsylvania designed a series of experiments to gauge how much people thought they themselves could give to charitable causes, as well as how much they thought lower or higher earners should donate.

First, participants in an online experiment were asked to imagine their lives if they earned $50,000 a year, and then asked how much they would give to charity if that was their household income. The team found that the less a person currently earned relative to $50,000, the more they anticipated donating if they were at that income level. To rule out the possibility that the participants were simply multiplying their current rate of giving by a larger income, the team surveyed them about their current donations. They found that on average, the participants had donated 0.93% of their income in the past year, and that fraction was not correlated with their actual income.

In a second test, the researchers recruited participants in various income brackets, from under $10,000 to over $110,000. They were presented five hypothetical people at income levels from $20,000 to $100,000 per year, and asked how much each person was morally obliged to donate to charity. The participants said that those who earned more ought to give more—and the more the difference between the target’s income and their own, the more they thought the target should donate.

The results show how people overestimate how much “unconstrained” money a higher earner has in hand. “When you compare, you’re essentially looking at your lifestyle and their income,” Zauberman says. “You don’t realize that as a person earns more, their expenses increase too, so they’re just as constrained as they were with a lower income.”

This perception of spare money was highly consistent and present regardless of a participant’s own income level, he adds. “The less you earn compared to someone, the more you think they have spare money,” Zauberman says. “What’s interesting is not only do we think the wealthier should donate more, we think it because of this idea that they have abundance. But they themselves don't feel that abundance.”

Zauberman remembers experiencing this mismatch between income and perception himself. “I’ve never felt as wealthy as I did in the first month that I moved from being a PhD student to being a faculty member,” he recalls. “I make more now than I did then, but I don’t feel nearly as wealthy.”

In a subsequent experiment, participants were presented similar scenarios of higher-earning targets, but they were told that the “extra” income had been earmarked for specific expenses such as a retirement fund or college savings. Adding this detail reduced people’s expectations of donations from richer people, perhaps because it made their constraints more apparent.

No Matter What We Earn, We Believe Our Richer Neighbors Have More to Give

We think rich people should be more generous

A mismatch between income and perception

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