Richer Man, Poorer Man: Does Rising Inequality Influence Assessments of the Nation’s Economic Health?
Political scientists often focus on the role of economic indicators in predicting election outcomes. When the economy is doing well, the chances of incumbents winning reelection rises; when the economy is faltering, challengers often fare better.
But how do voters evaluate the economic fortunes of the country? There are a myriad of economic indicators (e.g., the unemployment rate, income growth, GDP, etc.) measured at different geographies (e.g., nationally, statewide, etc.) for different categories of citizens (e.g., the wealthy, the poor). In recent years, income inequality has emerged as one of the favorite economic indicators. What role has rising income inequality played assessments of the national economy?
Not much, according to an exciting new article by Daniel Hopkins, a Georgetown political scientist.
Hopkins begins by looking at whether the rich and the poor differ in their assessments of the national economy. We might expect that wealthy Americans, who have experienced substantial income growth, are more likely to positively assess the national economy than poor Americans, who have experienced stagnant income growth. Especially as the income of the poor has fallen relative to that of the wealthy, we might expect low-income Americans to assess the economy in an increasingly negative light.
Hopkins examines more than thirty years of individual-level data from the Michigan Survey of Consumer Attitudes. As it turns out, rich and poor Americans report very similar perceptions about the state of the economy. “Whether wealthy or poor,” Hopkins writes, “Americans are reporting the same perceptions when it comes to overall economic performance. Given rising political polarization by income … and given the strong likelihood of partisan differences in economic perceptions, this near-unanimity is all the more striking. When asked about the nation’s economy, Americans at various income levels give answers that are quite similar.” (13) Even as income inequality has grown, the rich and the poor don’t diverge much in their assessments of the nation’s economic health. The finding suggests that poor Americans are not using their declining fortunes relative to the richest Americans to evaluate the state of the economy.
If Americans are not looking to income inequality in assessing the economy, what economic indicators do they use? Recent research by Larry Bartels suggests that low-income voters are more responsive to gains among high-income Americans. When the incomes of high-income Americans grow, low-income voters positively reward politicians, likely misperceiving economic growth at the top of the income distribution for economic growth more generally. But Hopkins reports something different. He finds that the strongest predictor of economic assessments is not the income growth at the top, but rather the income growth at the bottom. The income growth of the bottom 20th percentile is most strongly tied to perceptions of the national economic well-being. Most interestingly, he finds that this holds for low-, middle- and high-income Americans.
This paper throws a curveball into the growing consensus about the importance of income inequality for our economic, social and political life. It suggests that rising inequality does not influence how the rich and the poor view the state of the national economy, a variable that is considerably influential in shifting electoral outcomes. The rich and the poor report similar assessments of that nation’s economic health, and rising inequalities have not made the poor more pessimistic about the state of the economy.