Why the “We are the 99%” Movement?

Earlier this year a movement began in the United States known as “We are the 99%.” If you live in America it’s hard to believe you would not have heard about it because of the considerable media coverage the Occupy Wall Street protesters have received in major cities across the country. It’s a good bet most of my foreign readers have heard about it too because of the world-wide economic depression we find ourselves in, and of some similar protests internationally.

Why such dissatisfaction in the land of opportunity, the country where almost everyone wants to live? Certainly the financial crisis that led to the economic downturn in 2008 helped start the movement as many unemployed and underemployed Americans looked at what they perceive to be injustice caused by Wall Street and other large financial institutions.

I believe one psychological reason for the movement is rooted in a phenomenon Robert Cialdini, PhD., likes to call “compare and contrast.” This phenomenon tells us we experience things as being more different than they actually are depending on how they are presented.

According to the Congressional Budget Office, between 1979 and 2007 Americans known as “the middle class,” approximately 60% of wage earners, saw their income increase by 40%. Most people would say that’s not bad, until they compare it to the top 1% of American wage earners who saw their income increase an average of 275% during the same period. To make matters worse, when you group the bottom 90% together that group actually saw their incomes go down by $900. While the reasons for these gaps are many, the bottom line is this; it’s human nature to compare and contrast and the widening gap is a cause of discontent.

Is a person good looking? You can only make that determination by comparing that person to other people. Do you make a lot of money? Again, that’s a relative term and can only be answered by comparing your income to someone else’s. Many people are happy with their salary…until they find out they make significantly less than some coworkers. When it comes to compare and contrast, we all do it to one extent or another.

We live in a time of unprecedented wealth and even people who don’t earn much live far better than their relatives from decades ago. Indeed, it’s rare when Americans don’t have cable television, a computer in their home and a cell phone – hardly necessities of life. Yet there’s a tremendous amount of dissatisfaction because of the perceived income gaps and that they only seem to be growing larger as time goes by.

How did we get here? One statistic I share in my Principles of Persuasion workshop has to do with CEO pay. In 1980 a typical CEO made about 42 times more than the average American worker. By 1990 that figure had grown to 109 times. In 1993, the Fed mandated full disclosure of CEO compensation in an effort to help curb this trend but unfortunately their plan backfired big time. I bet you didn’t know this; by 2005 the difference between the typical CEO and average American worker’s pay had ballooned to 525 times! You read that right, and can see it for yourself in the graph below. In all fairness, in more recent years the gap has shrunk to a mere 269 times.

How could this have happened? After all, some of the thinking behind the full disclosure of compensation was to let everyone see how much CEOs and other top executives were earning so stockholders could put the brakes on the incredible income growth. It failed because of consensus.

Consensus, sometimes referred to as social proof, is the principle of influence that tells us we look to the actions of others when making decisions and this is heightened when we’re not completely sure what to do. Prior to the federal mandate about compensation disclosure it was an educated guess as to what the market was paying other CEOs in a given industry. Once it because public knowledge it wasn’t unlike what we see with star athletes in sports. Salaries for those athletes have skyrocketed because once an athlete knows what other top performers make their sports agent begins to negotiate an even bigger deal for the athlete. It’s a keep up with the Jones’ mentality and so it’s been with CEO compensation.

Perhaps we’ve now reached the point the Feds thought we would back in the early 1990s when they implemented the full disclosure rule. The Fed thought people would say "enough is enough" back then but it seems to have taken a worldwide economic depression to wake up the voice of the majority of Americans. Where it goes is yet to be seen because there will be a tug of war between the average American comparing their income to the top earners and the power of consensus as companies vie for the best CEO talent they can find.

Brian, CMCT 
influencepeople 
Helping You Learn to Hear “Yes”.