W Does inequality affect support for the welfare state? Flashcards
Intro
Inequality affects support for the welfare state both due to self-regarding and other-regarding preferences. However, I argue that other-regarding preferences for increase in redistribution are often strained by societal fractionalisation and thus, only extend as far as certain in-groups. I focus on income inequality and attitudes towards redistribution by government transfers. I first discuss how inequality shapes support for the welfare state for all income brackets due to motivations of self-interest. Then, I discuss how inequality shapes altruistic preferences for support for the welfare state. I argue that due to the interaction between fractionalisation and inequality, the universality of altruistic preferences will depend on the level of societal fragmentation, particularly along ethnic lines.
essay layout
- intro
- self-interest of high-income
- self-interest of middle-income
- self-interest of low-income
- altruism restricted by immigration
- altruism greater effect on high-income
- inequality no effect
- conclusion
self-interest of high income
Whilst self-interest theories typically focus on low-income citizens, inequality affects support for the welfare state among high-income citizens due to the negative externality of crime which is created by inequality. Rueda and Stegmuller (2016) find that redistributive preferences of the rich are highly dependent on the macro level of inequality within a country or region due to the negative externality of crime. They support this using 4 ESS surveys 2002-9 which covers 129 regions and 14 countries, thus the analysis provides good variation in crime and inequality levels in the region to test the hypotheses. They find that the rich in more unequal countries/regions of Western Europe are more supportive of redistribution due to concerns with crime but they also find that the direct effect of macro inequality becomes statistically insignificant when explicitly estimating the effect of fear of crime. Therefore, notwithstanding issues of endogeneity, this suggests that the level of inequality affects support of the rich for the welfare state due to self-interested motives of concern with the level of crime.
self-interest of middle income
Self-interest also motivates the middle class to adapt their preferences for redistribution, but this is more due to the structure than the level of inequality. Lupu & Pontusson (2011) find that middle-income voters will be inclined to ally with low-income voters and support redistributive policies when the distance between middle-income voters and the poor is small relative to distance between middle and high-income voters. They support this using data from 15-18 advanced democracies and find consistent survey evidence amongst middle-income voters as they find redistribution and non-elderly social spending increases as dispersion skews to the middle-poor being closer. This suggests that the structure of inequality impacts the support for the welfare state of middle-income voters due to self-interest as their concern with redistribution is based on the extent to which they benefit or lose out economically.
self-interest of low income
Low-income citizens are likely to favour re-distribution due to self-interest as they are the group that largely benefits from this but this may be due to their wealth level more so than inequality. For example, Rehm, Hacker and Schlesinger (2012) find that the economically disadvantaged support the welfare state, this is well supported as they use cross national data from 13 countries across one policy dimension and they test it across several policy dimensions within a single polity. However, this support for redistribution may be more due to their own level of wealth rather than inequality in society as in a very wealthy but unequal society, the low-income citizens may have less incentive to advocate for redistribution as they are not facing economic hardship. So, I would argue that it is their level of wealth not income inequality which is the predominant driver their self-regarding preferences for redistribution.
altruism restricted by fractionalisation
Turning to other-regarding preferences, concern about social welfare may increase support for redistribution as inequality increases. But the extent to which inequality can affect altruistic preferences for redistribution is restricted by the level of societal fractionalisation along a politically charged cleavage. This is corroborated by Magni (2020) who argues that inequality triggers selective solidarity as exposure to inequality increases support for redistribution if it benefits native-born citizens. They support this with cross-national evidence from survey data as well as a survey experiment administered to a nationally representative sample of Italian citizens in order to address causality. Therefore, inequality may increase support for the welfare state but this may be restricted by divisions in society such as migrant vs native citizens. Similarly, Baldwin and Huber (2010) find that between group inequality has a large, robust and negative relationship with public goods provisions using a large dataset of 46 countries. This also utilises data from both developed and less developed countries by using the WVS, CSES and Afrobarometer survey which expands the applicability of the conclusion. However, these divisions must be politically charged as illustrated by Singh’s (2011) analysis of the Indian state of Kerala which illustrates that fractionalisation does not necessitate a negative relationship with public goods provisions as what matters is a subjective sense of ‘we-ness’. However, this research focuses on actual provision, so further research is needed to confirm this also holds for public attitudes but this may be indicative. Therefore, inequality may increase support for the welfare state but this may be hindered by the level of fractionalisation along politically charged lines.
altruism on higher income
There is also some evidence that altruistic preferences lead high-income citizens to be more responsive to changes in inequality. Dimick, Rueda and Stegmuller (2018) find support for the income-dependent altruism model which posits a positive interaction between individual income and income inequality due to the diminishing marginal utility of money which implies that the rich will be more willing to spend more on inequality as each £1 means less to them individually. So, they will be more responsive to changes in inequality as this figures more into their preference calculus than lower income citizens. They find support using the ESS data from 2002 to 2013. Whilst this is good cross-national data analysis, testing the hypothesis in regions other than Western Europe would further increase confidence in their findings.
not inequality
Some may argue that changes to inequality do not affect support for the welfare state. For example, O’Grady (2019b) argues that stable long-run preferences are shaped by early socialisation, so only large changes in economic circumstances will affect redistributive preferences. So, inequality may affect initial preferences that individuals are socialised into but changes to income inequality, unless extremely large, will not affect preferences. Whilst he uses panel data and a rigorous analytical method, this is only tested in one country - Switzerland. So, whilst the argument illustrates the ‘stickiness’ of preferences which should be taken into consideration in analysis, the hypothesis requires further empirical support from other geographical regions in order to entirely dismiss all of the cross national analysis that has been discussed.
conclusion
In conclusion, I have argued that inequality affects support for the welfare state due to the self-interest of all income brackets. The mere existence of inequality generates low-income support for the welfare state due to self-interest, whereas self-interested motivations of high and middle-income citizens will depend on the level and structure of inequality. Altruistic preferences may also mean that changes in inequality incentivise support for the welfare state. There is some evidence that altruistic preferences lead high-income voters to be more affected by inequality. Furthermore, altruistic preferences may be restricted due to societal divisions such as between immigrant and native populations, so the effect of inequality on altruistic preferences for welfare support will depend on the interaction with these divisions.
