The Broader Market

by Jordan Eizenga

Recent research by Peter Enns and Nathan Kelly suggests that during periods of rising income inequality, society tends to be less tolerant towards social programs.  Enns and Kelly study the “policy mood” of the United States between 1952-2006 and note a shift to conservatism among both the wealthy and the poor when income inequality is higher.  While the shift among the wealthy seems intuitive, the shift among the poor does not.  After all, social programs are disproportionately utilized by those with lower incomes.  Accordingly, one would think that lower income individuals would favor these programs. 

It is worth noting that the poor also more likely to perceive an increase in inequality than the wealthy.  So, the shift to conservatism among the poor cannot be explained away by a lack of awareness of inequality.  The poor are fully aware of the existence of rising income inequality.

Enns and Kelly argue that the rise in inequality and the shift to a conservative policy mood after 1970 could possibly be explained by the way outcomes are framed.  Given that inequality during this time largely occurred because of disproportionate increases in high income brackets, the media and the public have tended to focus on these gains from the individualist perspective.  That is, they have focused on the behavior and qualities of the individual that have allowed them to become financially successful.  In the period leading up to 1970, by contrast, there was an increase in incomes at the lower end of the income spectrum.  During this period, Enns and Kelly note that public framing focused on the role of government in providing important public services that created jobs and increased wages - the GI bill, which provided affordable post-secondary education to returning WWII veterans, is one such example.

However, a potentially more powerful explanation for the simultaneous rise in conservatism and inequality comes from Benjamin Friedman at Harvard who examined the link between economic growth and the tolerance for social programs (I wrote about this study a few months back).  According to Friedman, economic growth affords “greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy.”  However, when economic growth is poor, it is argued that the reverse is equally true. 

The data seems to support Friedman’s argument: between 1952 and 1970, the United States economy grew at annual rate of 4.29 (even after adjusting for inflation), while, since 1970, the United States has grown at a lower average annual rate of 2.89 percent.  This not only shows that rising income inequality occurred during lower growth years, but that rising conservatism did as well.  Thus, the lower rates of economic growth over the past four decades may explain the disquiet the public has toward public programs. The reason: individuals perceive themselves as pitted against one another.