Would Private Charity Be More Effective If the Wealthy Were More Charitable?

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Conservative critics of government social welfare programs argue that private charity, which Americans engage in on a vast scale, can help those in need better and more effectively.

But that charity does little to address or reduce social inequality, for it turns out that it’s largely a form of self-help.

Several studies have shown that poorer Americans give more of their income to charity than richer ones do. When The Chronicle of Philanthropy looked at “America’s Generosity Divide” last year, it examined IRS data for households with incomes of $50,000 and up and found that those at the bottom of the income distribution–$50,000 to $75,000 annually–gave nearly twice as much of their income as those who make $100,000 or more (7.6 percent vs. 4.2 percent). The study also found that among the wealthiest, those who lived in neighborhoods with more economic diversity were more generous with their money than those who didn’t.

Back in 2009, reporter Frank Greve of the McClatchy Washington Bureau wrote a story that sparked interest in the subject of social class and generosity. That story cited Bureau of Labor Statistics data that showed that in 2007, households with incomes in the lowest fifth gave more than twice as much of their income to charity as those in the top fifth did (4.3 percent vs. 2.7 percent). And those figures probably don’t include all of the informal giving poor people do: buying food for panhandlers, giving struggling mothers cab fare, and remittances to friends and family abroad, all mentioned in the story, aren’t captured in this data.

That story in turn led University of California Berkeley researcher Paul K. Piff and several colleagues to conduct tests to find out what drove those charitable impulses. They found that lower class individuals were more generous, trusting, charitable and helpful than upper class ones; in their words, “lower class individuals acted in a more prosocial fashion because of a greater commitment to egalitarian values and feelings of compassion.”

Something else they found brought out the significance of compassion in the equation. One test involved two participants, one the research subject, the other an actor. The subjects were shown one of two films before meeting the actor: one was a film that highlighted human suffering while the other was a neutral snippet of conversation from the film All the President’s Men. When the actor arrived in an overstressed state, the poorer subjects offered help regardless which film they saw – but the richer ones who saw the film about suffering offered more help than those who did not.

All this suggests two things:

People give to people and causes they identify with. Much of what has been written about the generosity of the poor notes that poor people themselves know what it’s like to have to struggle to make ends meet and thus are more inclined to help out others similarly situated. (“What goes around comes around,” you might say: they can recall times when they needed similar help and know they might need it again.) And when the rich give, it’s often also toward things they identify with personally: alumni of well-endowed schools, colleges and universities give back to their alma maters, and those who lost loved ones to disease write large checks to organizations that search for cures, for instance.

With a gentle shove, people can be prompted to give outside their narrower frames of reference. That test with the two films reaffirms the point authors Richard Thaler and Cass Sunstein made in their bestselling book Nudge: Improving Decisions about Health, Wealth and Happiness. Small gestures designed to focus one’s attention on something—a fly on the back of a urninal, putting prices at the end of menu descriptions instead of setting them off by themselves, offering automatic savings programs—usually produce dramatic changes in behavior. Savings rates shoot up, people order more expensive menu items, and guys doing their business have better aim, saving janitorial expense. Those wealthier folks who saw human suffering before seeing someone who was suffering were more generous with their assistance as well.

Which suggests a strategy that could make private charity far more effective at reducing social inequality: Give the givers an incentive for giving that fights poverty.

Poor folks give even though they get no tax benefit; they make too little to itemize deductions, but the better off usually take advantage of the tax deduction for charitable giving. So why not let them take more off for donations to groups that serve the poor or help them help themselves? A small bonus for donations to such organizations might produce a huge improvement in their ability to fulfill their missions.

Some will no doubt object that figuring out who would qualify would be messy and subject to influence: For instance, one of those well-endowed colleges could argue that offering full scholarships to students from low-income families, which many Ivy-class schools now do, meets the criteria. But that might just make for a useful argument about what we should be doing with our charitable dollars–or it might demonstrate the value of public programs that ameliorate poverty.