Tag Archives: income inequality

The Income Gap at the Polls

In 1986, the economist John Kenneth Galbraith declared, “If everybody in this country voted, the Democrats would be in for the next 100 years.” But for decades, the consensus among scholars and journalists has been the opposite. In their seminal 1980 study on the question, using data from 1972, political scientists Raymond Wolfinger and Steven Rosenstone argued that “voters are virtually a carbon copy of the citizen population.” In 1999, Wolfinger and his colleague Benjamin Highton again came to the same conclusion: “Outcomes would not change if everyone voted.” Their argument rested upon the fact that polling data did not show large differences in opinions on most issues between those who voted and those who did not.

However, a growing literature both within the United States and internationally suggests that, in fact, policy would change rather dramatically if everyone voted.

Does this mean that Galbraith was right all along? Not exactly. The reason for the recent shift in the findings is not that the early studies were wrong, but that the preferences of voters and nonvoters are becoming increasingly divergent. In a paper published in 2007 and later expanded into a 2013 book, Who Votes Now, political scientists Jan Leighley and Jonathan Nagler found that wide gaps between voters and nonvoters have opened up when it comes to class-based issues. They argued further that the seeds of these differences were apparent in earlier data, but Wolfinger and Rosenstone overlooked the gaps by focusing on broad ideological labels (liberal or conservative) rather than specific policies. Voters, Leighley and Nagler found, are more economically conservative; whereas non-voters favor more robust unions and more government spending on things like health insurance and public schools.

Other data collected on the national and state level support Leighley and Nagler’s thesis.  A 2012 Pew survey found that likely voters were split 47 percent to 47 percent between Obama and Romney while non-voters preferred Obama 59 percent to 24 percent, a 35 point margin. A 2006 Public Policy Institute of California (PPIC) study found that non-voters were more likely to support higher taxes and more government-funded services. They were also more likely to oppose Proposition 13 (a constitutional amendment which limits property taxes), dislike thenGov. Arnold Schwarzenegger and support affordable housing.

It so happens that the gap between voters and non-voters breaks down strongly along class lines. In the 2012 election, 80.2 percent of those making more than $150,000 voted, while only 46.9 percent of those making less than $10,000 voted. This “class bias,” is so strong that in the three elections  (2008, 2010 and 2012) I examined, there was only one instance of a poorer income bracket turning out at a higher rate than the bracket above them. (In the 2012 election, those making less than $10,000 were slightly more likely to vote than those making between $10,000 and $14,999.) On average, each bracket turned out to vote at a rate 3.7 percentage points higher than the bracket below it.

This class bias is a persistent feature of American voting: A study of 40 years of state-level data finds no instance in which there was not a class bias in the electorate favoring the rich—in other words, no instance in which poorer people in general turned out in higher rates than the rich. That being said, class bias has increased since 1988, just as wide gaps have opened up between the opinions of non-voters and those of voters.

Recent research tells us that this voting disparity—in class and in opinion—has tremendous impact on policy. State-level research suggests that higher voter turnout among the poor leads to higher welfare spending. A 2013 study found that turnout inequality directly predicts minimum wages, children’s health insurance spending and anti-predatory lending policies. And studies at the state level have found that a higher class bias in the electorate actually leads to higher levels of income inequality.

Interestingly, this doesn’t just play out on the national level. Vincent Mahler of Loyola University, who has studied international voter turnout extensively, determined that both voter turnout and inequality of turnout are strongly correlated with income redistribution (see charts).

His most recent study of voting in 14 countries, conducted with political scientists David K. Jesuit and Piotr Paradowski, found that increased turnout among the rich leads to less redistribution, while increased turnout among the poor increases redistribution. This confirms his previous two papers, which together draw on nearly four decades of data across more than a dozen countries. As both of his charts show, the United States is unique among developed countries in turnout inequality, and it has the second lowest voter turnout of all OECD countries. The chart below shows the turnout differences between the richest quintile and the poorest quintile in the United States. The average gap across the countries studied is 8.4 percentage points, while the gap in the United States is nearly three times that—23.6 percentage points.

In a fascinating paper, political scientist Henning Finseraas calculated the class bias and “anti-redistribution bias” of 13 countries. (A higher class bias indicates higher voting levels among high-income voters, while a higher anti-redistribution bias indicates that those who vote are more opposed to redistribution than those who don’t.) Finseraas found that, among the countries he studied, the United States tops the charts in both measures and that, across all countries studied, those who prefer redistribution are less likely to vote than those who do not.

Why does the United States have such depressed voter turnout among the poor? For one, the United States has numerous barriers to voting that don’t exist elsewhere. Nearly 3.5 million felons were barred from voting in 2014 due to felony disenfranchisement, which exists in no other country Mahler studied and which has influenced the result of Senate and presidential elections (including possibly the 2014 election). A number of countrieshave compulsory voting laws which boost turnout. Most European countries that require IDs to be shown at the polls have national ID cards that are provided for free to all citizens. The United States is also an outlier in that it doesn’t have automatic voting registration. In most countries voter registration is compulsory and therefore either universal or almost universal. The United States is also rare among developed countries in the level of politicization that occurs around voting rights.

Exit data from the 2014 midterms indicate that the class bias of the electorate remains strong. Those making under $50,000, who account for 48 percent of the population, made up only 36 percent of voters, while those making over $100,000 made up 30 percent of voters, but only 22 percent of the population. Given the almost unprecedentedvoter suppression in the wake of Shelby County v. Holder, this is not entirely surprising. Voter suppression measures disproportionately affect the poor and people of color, who do not have voter ID, struggle to get time off work and are less likely to be registered in the first place. At the same time new barriers were created, measures that are proven to decrease the class bias of the electorate, like Same-Day Registration were rolled back.

Numerous factors have been shown to contribute to the recent rise in economic inequality. For one, there’s the increasing influence of money over our political system. In 1980, the top contributor gave $1.72 million (inflation adjusted) in campaign contributions, while in 2012 Sheldon Adelson gave $58.8 million and his wife $46.6 million—more than the residents of 12 states combined. There’s also the fact that the U.S. has a majoritariansystem rather than a parliamentary one. But the evidence also suggests that wide gaps in turnout also have a significant effect on inequality, and we shouldn’t ignore it. Reducing these voting gaps and increasing democratic participation in the economy will force policymakers to consider the interests of the working-class.

This article originally appeared on Politico

Inequality benefits the rich and hurts the poor

For a long time, the right has argued that we shouldn’t worry about inequality because the true concern is the reduction of poverty. Conservatives also maintained that higher levels of inequality were unimportant because “a rising tide would lift all boats,” and high levels of inequality propelled the economy forward. New research by Roy van der Weide and Branko Milanovic decimates these myths. They find that inequality doesn’t fuel growth for the whole economy, but rather, just the rich.

Before we get to the research of van der Weide and Milanovic, it’s important to understand how mainstream thought on inequality and growth has changed recently. For a long time, mainstream economists didn’t spend much time worrying about distribution. Nobel laureate Robert Lucas declared, “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution.”

Once rampant inequality did become an increasingly mainstream concern, Martin Feldstein insisted that the question is “not inequality but poverty.” Economists believed that redistribution slowed down economic growth, and that attempts to reduce inequality would, as a result, only worsen poverty. The reasoning had at least two strands of thought: First, since the poor tend to consume most of their income, it was good for the rich to have more wealth to invest in the future — inequality would increase savings. Second, inequality provided incentives for individuals to work harder to take home more of the pie.

There is now a burgeoning literature showing that these assumptions aren’t true, and that inequality actually reduces growth. That’s because the reasons for accepting inequality were actually backwards. Instead of motivating the rich to invest, higher inequality meant that the poor took on more and more debt, destabilizing the economy. Without enough poor and middle-class families consuming their products, businesses had fewer customers, and less revenue. Further, instead of providing the poor and middle class an incentive to better their lives, higher inequality gave the rich a reason to pull up the ladder, leaving the poor behind. Instead of working harder, the rich sit back on their wealth. The poor and middle class, disenchanted by lack of opportunity, have less money to invest in their own education (and are therefore are increasingly burdened by debt). Inequality thereby reduces growth by reducing both demand and upward mobility.

So Milanovic and van der Weide decided to investigate how inequality affects growth across the income spectrum. They used a state-level survey conducted once every decade to estimate annualized income growth at different income percentiles. What the researchers find is that the old story of “trickle down” economics have no support in the data – instead, inequality boosts growth only for the rich.

The charts below show income growth across different percentiles. Each line shows annualized growth over a decade with the horizontal axis defining growth by quintile. The first chart shows that during the relatively equal period of the 1960 to 1970 (red), when inequality was lower, growth was strong and equally distributed (it actually slightly favored the poor). During the 1980-to-2000 period (blue and green) growth favored the rich; however, their gains weren’t enough to make up for the massive losses to the poor and middle class. Finally, in the period between 2000-to-2010, growth for everyone was abysmal in the wake of a massive financial crisis (see the purple line of the final chart). 

As Milanovic tells Salon, “You know it used to be that the U.S. growth was pro-poor, in the sense, that the growth rates among the poor were higher than amongst the rich. Now it’s the opposite.”

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When the authors dug deeper and looked at individual states, they find that, “inequality is negatively associated… with subsequent real growth for the population located below the 25th percentile, and positively with growth for the population belonging to the top decile.” In simple language: Inequality benefits the rich and harms the poor. A rising tide doesn’t lift all boats — just the luxury yachts.

Using the data the authors have developed, we can discover what growth would look like in a more equitable society. The chart below shows annual income growth between 1960 and 2010 by percentile in red. The chart is sloped upward, meaning that the income of the richest grew by 1.8 percent each year, while the growth of the poorest grew by .7 percent each year. However, if inequality was reduced by one standard deviation (the difference between Connecticut and South Carolina) across the country, income growth for the poor would more than double, to 1.6 percent each year (blue line).

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This has important political implications. First, we should not assume that the mere fact that inequality reduces economic growth will be enough to convince the rich to reduce it. Inequality benefits the rich immensely. Second, the idea that a rising tide lifts all boats has been so utterly disproved it should be embarrassing to state in public. Yet reformicons like Michael Strain continue to repeat the mantra, “ Growth Beats Inequality.” That is false, Between 1960 and 2010, GDP increased by an annualized rate of 3.2 percent (a total of  378 percent) but incomes for the poorest 5 percent increased by only .7 percent a year. However, if we had reduced our gini coefficient (the standard measure of inequality) by only 9 percent, to the level of Japan, we could have doubled income growth for the poorest Americans.

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There is also hope, however. The growth rate of the 1960-to-70s was rapid and equitable. Compared with growth rates from the massively unequal 1990-to-2010 period, everyone was better off. So there is some reason to believe the rich could support more equitable policies. But the rich won’t be so easy to persuade – in a massively unequal society, even modest economic growth still benefits economic elites. Don’t worry about growth, worry about inequality.

A version of this article originally appeared on Salon.