Research of Public Views on Government Policies Regarding Income Inequality

Introduction

Income inequality has been on the rise in recent years, Carmen Reinicke of CNBC found that the top one percent of earners in the United States took home an average of 26.3 times more than the bottom 99% of earners in 2015, which is a significant increase from even 2013. The question that this research is seeking to answer is “Is it perceptions of the national economy (e.g. sociotropic attitudes) or an individual’s self-interest that determines attitudes towards government policies regarding income inequality”? Income inequality is a hot-button political and economic issue and finding the origin of the public’s views on policies regarding it could give good insight into how the average American uses economic information they are presented with to form opinions.

This issue also tends to be the sources of much confusion amongst politically-inclined individuals; some saying it’s one of the most pressing issue facing American society today, others saying it’s an issue that’s hard to address, and others saying it’s not an issue at all. Despite the vast amount of literature that covers the topic of income inequality, few of them look views of income inequality as a dependent variable; most literature covers this topic in the form of how income inequality affects the voting patterns and attitudes of individuals from different areas, in which case income inequality is acting as the independent variable.

It is the purpose of this study to flip the current literature on its head and find what information the average American uses to form their attitudes towards policies that attempt or aim to tackle the issue of income inequality. Although existing literature does not deal directly with the research question at hand, it is imperative that the existing literature on public views on income inequality be used as the foundation for the hypothesis and as a guide on how to conduct the research itself.

Economic Context

Getting into the current literature surrounding this topic, while most studies may be looking at income inequality in a different way, there is still a lot of insight that can be gained from the studies looking at how income inequality impacts the general population’s political attitudes. One study found that individuals with lower income from states that have higher wealth disparities between classes were more likely to view income inequality as a nationwide issue.

Another study found that the growth of income inequality from 1972 to 2008 gave rise to unhappiness amongst lower-income households; however, this unhappiness was explained not by the income of the household, but by “perceived unfairness and a lack of trust”. Similarly, another study found that people living in areas with greater local income inequality felt that American meritocracy was not working for them, and that they weren’t being fairly compensated for their work, while higher-income individuals felt that meritocracy was absolutely at work.

Putting the results of these studies together, one can form a decent starting point for a hypothesis and how to frame an argument about income inequality. One could form the base that individuals living in areas of higher income inequality with lower incomes may be more inclined towards following their own self-interests in regards to how they view policies addressing income inequality, while higher-income individuals may look more towards socio-tropic trends and the national economy for information to base their attitudes towards policies regarding income inequality upon. These studies also give great insight into how to approach the data; all three relied upon surveys of individuals from different areas across the United States that were cross-referenced with economic data regarding the levels of wealth disparity amongst the members of the population.

Common Sense

For almost any study, assumptions that are considered to be “common sense” are made at the start in order to give the study a starting point; this study is no exception. However, there is a lot of literature on income inequality that can give some grounds for why some “common sense” assumptions are actually wrong and some are right. To start, the common sense that holds up can be seen in a study focusing more on individuals’ local context in relation to income inequality found that individuals living in areas with visible income inequality (e.g. New York City) were more likely to support the expansion and backing of labor unions.

Another study looking to see how income inequality shapes political perspectives found that Americans favor expansion of public education in response to income inequality, suggesting that creating greater opportunity for all is the popular direction for political solutions to rising inequality. Another assumption many correctly make is that income inequality is self-reinforcing; periods of higher (or lower) income inequality are more likely to produce higher (or lower) income inequality in the future. These studies reveal what can and can’t be assumed at the start of the study and give insight into how to conduct the study; using a combination of national surveys, existing census data, and cross-sectional analysis allows for the greatest accuracy and elimination of confounding variables.

Subverting Expectations and Biases

Many would most likely assume that growing income inequality, especially in urban areas where greater income disparity is more visible, that lower-income individuals would be swayed towards liberalism and voting in favor of Democrats. Many would also be wrong in these assumptions, as a study found that the meteoric rise in income inequality over the last few decades has actually been a driving force for promoting conservatism, instead of increasing support for redistributive policies, amongst the general population.

A study looking at class-based partisan voting found that in Republican states, income doesn’t play much of a role in terms of social attitudes, whereas in Democratic states, high-income voters are more socially liberal than low-income voters. This study also found that starting in the 1990s and continuing into the 2000s, high-income individuals in Democratic states have been moving away from the Republican party, which shows that rich people residing in Democratic states may be less inclined to focus on their personal self-interests and more inclined to consider social and national economic policies more heavily when voting.

Another study that looked into differences in how policies and government actions respond to rich and poor citizens found that the government tends to respond equally to rich and poor in its policies. These studies help ground the research in reality by placing a check on assumptions that are believed to be “common sense”, allowing for greater recognition and elimination of biases that may pop up throughout the study. These studies also help further define the economic context of the study by looking into the structure of income inequality and how it has grown and changed over the last few decades.

How Much Does Self-Interest Matter

All of the studies that have been reviewed thus far have worked to provide a foundation for this research, helping eliminate biases, confounds, and opening new perspectives while also outlining what methods should be used. However, none of them really answer the research question at hand, they just allow for better inferences and conjecture.

However, this isn’t to say that there is no research to be had on this question; one study found that when compared with self-interest, sociotropic attitudes and group identifications were better predictors of candidate and policy preferences and another concluded that economic self-interest does not usually impact the general public’s political attitudes.

It is expected that the results of these studies will be applicable to the specific political issue of income inequality, and that the conclusions of these studies will be proven true in the regression analysis. Now it is important to note that these studies are coming up on their twentieth and thirtieth birthdays, so they can’t really be used as an accurate measure for the American public today. However, they do give a starting point for the hypothesis and expectations for the study, as the findings work to subvert what many would think is common sense.

Many people would assume that low-income individuals would be more likely to take their own personal plights into account when forming attitudes on policies regarding income inequality and these studies prove that assumption wrong, showing that group identity and sociotropic evaluations weaken the already weak relationship between self-interest and political preferences. These studies directly relate to the research question as they measure the control that economic self-interest and sociotropic attitudes have on the general public’s political attitudes.

The information here can be used as a starting point for the hypothesis and gives key insights into how the independent variables should be measured and analyzed (e.g. what kind of survey questions to ask) as well as granting justifications for starting assumptions and expectations when it comes to exactly how self-interest and sociotropic attitudes relate to views on policies aimed at attenuating income inequality.

Hypothesis, Variables

The hypothesis of this study is “Individuals who perceive the national economy to be getting worse will be more supportive of government efforts to attenuate income inequality”, the null hypothesis being “Individuals who perceive the nation economy to be getting worse will be less supportive of government efforts to attenuate income inequality”. This hypothesis is primarily based upon two of the studies reviewed in the literature review, one of which found that sociotropic attitudes held greater control over individuals’ political attitudes, the other finding that economic self-interest does not typically impact the political attitudes of the general public.

This hypothesis is also based partially upon one of the basic assumptions used by economists; that individuals base their financial choices partially on their future prospects and how they think the economy is doing as a whole, these perceptions should hold more control over political opinions relating to policies regarding income inequality than how an individual perceives their current socio-economic standing.

The first independent variable, V161140x (renamed to MACRO), is a summary of survey questions asking “Now thinking about the economy in the country as a whole, would you say that over the past year the nation’s economy has gotten better, stayed about the same, or gotten worse?”. This variable is measuring the public’s perception of the economy, or the “sociotropic attitudes” side of the research question. Should this prove to have a greater impact on views Americans have of policies related to income inequality, it would be consistent with the starting expectations and assumptions based upon prior studies. It is important to note, however, that this variable is viewing the economy through a retrospective lense, so a prospective lense will also be included.

The second independent variable gives this lense, V161141x (renamed to MACRO2) asks “What about the next 12 months? Do you expect the economy, in the country as a whole, to get better, stay about the same, or get worse?”. This gives a look into how individual’s future prospects may or may not impact how they view income inequality right now, as it would stand to reason that if individuals perceive better prospects, they may be more hesitant to take redistributive measures against income inequality.

The third independent variable is INCOME, which simply measures the monthly income of the respondents. This variable is measuring the self-interest side of the research question, and shouldn’t prove to have a significant hold on perceptions of government efforts to attenuate income inequality based on what was found in the literature review. However, should this prove to hold more weight than MACRO and MACRO2, an alternate explanation may have been found, showing that the aforementioned economic assumption holds the most weight in how individuals form their attitudes towards redistributive policies.

The dependent variable will be V162276 (remained to INEQUALITY) which asked respondents “The government should take measures to reduce differences in income levels”. This is the “bread and butter” of this study, what Americans think about policies aimed at attenuating income inequality, using this as the dependent variable will show how much of an impact things like income and perceptions of the national economy have on Americans’ views of policies regarding income inequality. Analyzing these variables will reveal any correlation and/or causal relationships between individuals’ perceptions of national economic health (i.e. sociotropic attitudes), personal income, and their views on policies aimed at attenuating income inequality.

To operationalize these variables, MACRO, a summary of survey questions asking “Now thinking about the economy in the country as a whole, would you say that over the past year the nation’s economy has gotten better, stayed about the same, or gotten worse?” This will provide a retrospective lense to the respondents’ perceptions of the health of the national economy. This variable’s scale is -2 to 2; -2= “much worse”, 0=“stayed the same”, and 2=“much better”. MACRO2 acts as the prospective counterpart to MACRO, and asks “What about the next 12 months? Do you expect the economy, in the country as a whole, to get better, stay about the same, or get worse?” and this variable’s scale is also -2 to 2; -2= “much worse”, 0=“stayed the same”, and 2=“much better”.

This accounts for both the economic assumption that individuals base their current actions on their perceived future prospects and the impact of sociotropic attitudes, both of which should hold significant weight in how individuals view government efforts to attenuate and combat income inequality. INCOME simply measures the monthly income of the respondents and no modifications were made. This variable is measuring the self-interest side of the research question, showing how an individual's’ current personal financial situation impacts their views on government efforts to attenuate income inequality.

The dependent variable, INEQUALITY, which asked respondents “The government should take measures to reduce differences in income levels”. (Do you [agree strongly, agree somewhat, neither agree nor disagree, disagree somewhat, or disagree strongly]?), the response options exist on a scale from -2 to 2; -2=”Strongly Disagree”, 0=”Neither Agree nor Disagree”, and 2=”Strongly Agree”. This variable is to operationalize the concept of being in favor or opposition of government efforts to attenuate income inequality.

Before analyzing the regression, it’s important to take a look at the ANOVA output from the regression analysis. This shows that the degrees of freedom (or “n”) of the analysis is 3270; this is important because it shows that the analysis is using a significant sample size and shouldn’t fall victim to skewed results that come from small samples. Also, although it’s not displayed in the ANOVA table, the Adjusted R-Squared for this model was 0.284, which means that this model is accounting for 28.4% of the change in the dependent variable, which is very promising, and indicates that the model is significant to the research question. This also shows that the regression model is significant, and that the independent variables are actually acting upon the dependent variable.

Results

Now getting into the actual regression analysis, this shows some rather surprising results. The first of the surprises is that MACRO is completely insignificant in relation to INEQUALITY, however, MACRO2 is significant and can be used to indicate respondent views on government actions on income inequality. It is also important to note that the relationship between MACRO2 and INEQUALITY is positive, meaning that those who think the economy will get better in the next year are more in favor of the government taking action to attenuate income inequality. While this greatly deviates from the hypothesis, it does offer interesting insight, showing that individuals with better prospects believe that more should be done to combat income disparity.

Another interesting result, is that the relationship between INEQUALITY and INCOME is negative, meaning that those with lower incomes are more supportive of government actions against income inequality; however, while this is interesting, it’s not unexpected, as it’s easy to see why individuals who make less money would be in favor of redistributive policies. The greatest indicators of support for government attenuation of income inequality seem to be race, ideology, and party affiliation, as WHITE, PARTY, and IDEOLOGY were all significant and had coefficients of -0.143, -0.150, and -0.247 respectively.

Breaking these down one by one, the results for WHITE show that those who fall in the “non-white” category of that variable are more in favor of government action on income inequality, and that a one unit change in WHITE corresponds to a -14.3% change in INEQUALITY. The results for PARTY show that those who identify as democrats are also more in favor of government action against income disparity, and that a one unit change in PARTY yields a -15% change in INEQUALITY.

Finally, the results for IDEOLOGY show that those who identify as more liberal are also more in favor of government action to attenuate income inequality, and a one unit change in IDEOLOGY yields a -24.7% change in INEQUALITY, the largest coefficient of any variable in the model. These results were expected however, more politically liberal individuals, who also tend to be non-white, are typically more supportive of redistributive policies.

The most interesting aspect of these results however, is that MACRO is shown to be very insignificant to INEQUALITY, and can’t be used as an indicator of how individuals’ views on policies aimed at income inequality. However, MACRO2 is a significant indicator of individuals’ views on redistributive policies, which poses an alternate explanation and answer to the research question and hypothesis; that it’s not how people think the economy has changed recently, but instead it’s more of how they think the economy will change in the future.

This holds true to the economic assumption of individuals acting upon their perceptions of future prospects, the positive relationship between MACRO2 and INEQUALITY shows that as people believe the economy will improve over the next year, they are also more supportive of policies that will attenuate the issue of income inequality. These results also support the studies that form the foundation of the hypothesis, and show that sociotropic attitudes such as perceptions of the national economy, party identification, and ideology are better indicators of how people view government actions against income inequality than variables dealing with an individual’s personal self-interest, like INCOME for example.

Overall the results stay true to the starting assumptions of sociotropic attitudes holding greater weight on political attitudes and that individuals base their current attitudes on future prospects; however, the results also show that the hypothesis is off in that perceptions of how the economy has changed in the recent past don’t hold any significance on how individuals view redistributive policies.

Conclusion

The initial research questions of this study was “Is it perceptions of the national economy (e.g. sociotropic attitudes) or an individual’s self-interest that determines attitudes towards government policies regarding income inequality?” and the results fell in line with past studies that found sociotropic attitudes to hold the most weight on what political attitudes are formed by individuals. However, this study was specifically targeted towards economic perceptions and income inequality and it wasn’t initially known if these dated studies that formed the basis of the hypothesis would still hold up in this more targeted scenario.

The results show that these studies still hold water, and that the hypothesis of this study, “Individuals who perceive the national economy to be getting worse will be more supportive of government efforts to attenuate income inequality.” was in fact wrong; perceptions of how the national economy has changed recently holds no statistical significance on how individuals view government efforts to attenuate income inequality.

However, the economic assumption used to form the hypothesis was proven true, as perceptions of how the economy will change in the near future hold significance over views on policies related to income inequality, and even more interesting, that the two variables are positively related, showing that individuals who believe that the economy will improve in the near future are more supportive of government efforts to attenuate income inequality.

Of course no study is without flaw, and this study certainly has a few, including but not limited to a sample that’s on the smaller size, ideally this study would have closer to 4000 or more respondents. Also, there is an argument to be made that MACRO and MACRO2 could have suffered from multicollinearity as they measure very similar questions and act as operationalizations of very similar concepts. However, this isn’t the first, and most certainly won’t be the last, study on income inequality in the neverending pursuit of knowledge of how Americans form their political attitudes, and there are some recommendations that can be made from this study for future scholars.

This study provides a starting point for sources, assumptions, and which variables to look at, but future studies should try to use independent variables that have greater specificity and different attributes from the ones used in this study to avoid finding redundant results. Perhaps using one that measures self-interest via the tax brackets the respondents fall into and measuring sociotropic attitudes with how individuals think the economy will change in the distant future as well as the near future.

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