Who cares about income inequality?

The provocative title to this post is taken from an article in Policy Quarterly (pdf) by Philip Morrison (Victoria University) earlier this year. On the surface, it seems like a straightforward question - most people care about inequality, right? However, once you dig into the data a little bit (as Phil has done), you find that it's actually a very reasonable question to ask, with somewhat surprising results.

In the article, Phil used data from the World Values Survey (1998, 2004, and 2011) and from the International Social Science Programme (1996 and 2006), and looks at the questions on attitudes to income inequality and redistribution.

The World Values Survey:

asks respondents to consider whether ‘Incomes should be made more equal’, a response of 1 denoting complete agreement. At the other end of the scale is the statement, ‘We need large income differences as incentives for individual effort’, with a 10 indicating complete agreement.

I'm not convinced that there is a true dichotomy between those responses - it might be possible to strongly believe that "incomes should be made more equal" and that "we need large income differences as incentives for individual effort", if one believed that the existing large income differences are too large, for example. That problem aside though, the results are interesting. Excluding the "don't know" responses, in 1998 a slightly higher proportion of New Zealanders favoured more equality (47.2% answering 1-4 vs. 46.5% answering 7-10 on this question). However, by 2004 this had switched to fewer favouring more equality (45.9% vs. 48.9%), before switching back in 2011 (50.9% vs. 42.3%). Given that these survey results span the period before and after the financial crisis, Phil suggests that these results support "the view that an increase in economic growth lessens pressure for government redistribution of income".

In the International Social Science Programme, the question asked was:

‘What is your opinion of the following statement: “It is the responsibility of the government to reduce the differences in income between people with high incomes and those with low incomes”.’

It used a five-point Likert scale in 1996, and a four-point Likert scale in 2006. On the results, Phil writes:

A comparison of the responses to the 1996 and 2006 ISSP surveys... suggests a reduction in support for redistribution over the intervening decade, a result which is consistent with the apparent decrease in preference for greater equality observed over the first two WVS surveys. In 1996 only 43.37% disagreed or strongly disagreed that it is government’s responsibility to reduce income differences between the rich and the poor in New Zealand. By 2006 this had risen to just over half, to 50.21%. The fact that both surveys were administered first in high and then in low unemployment periods likely accounts for at least some of the shift in attitudes towards income inequality.

International comparisons show that New Zealand (along with the U.S.) is somewhat of an outlier though:

In both survey years New Zealand respondents were among the most likely to hold the view that it was definitely not their government’s responsibility to reduce income differences, the 20.7% in 2006 being exceeded only by the US at 21.1%... the fact that we are now much less likely than most other countries to support income redistribution is a feature that surprises many older New Zealanders nurtured in the welfare state.

New Zealanders' shifts away from a belief in redistribution are also observed in the U.S. Alongside this shift in the U.S. has been a shift towards fewer people believing that health care is a right. Hopefully, we aren't following that track.

Overall, I find the results quite surprising - only about half of New Zealanders are in favour of lower inequality, and a smaller proportion of us (that those in other countries) are in favour of redistribution. My argument is that fewer people care about inequality than care about poverty. As an illustration of this, I often pose this thought experiment to my students: Would the problem be reduced by burning 10% of the wealth of all of the richest people? If the answer is yes, then the problem probably stems primarily from inequality. Otherwise it is more likely to be primarily a problem of poverty. Most of the time, the problems that people are concerned about are problems of poverty, not inequality (as illustrated in the Max Rashbrooke book "Inequality: A New Zealand Crisis"). Or often we care about global inequality, which is conflated with poverty (as this John Cochrane post illustrates).

So, who does care about domestic inequality? Phil concludes:

New Zealander’s do care about income distribution and the role their government should play. However, what they care about differs markedly. The survey results presented above indicate a fine balance between those who would like to see less and those who would like to see even greater income inequality.

The open question now is "Why?".