Do Cutbacks Make Citizens Conservative?

53 Pages·2016·0.96 MB·English

Do Cutbacks Make Citizens Conservative?
Jane Gingrich∗
April 26, 2016
Thepaperexaminestheattitudesofyoungercohortsandnon-youth
workingagecohortsovertime,askingwhetherbeingsocialisedinade-
clining versus expanding welfare state leads to systematic differences
in attitudes. Building on a simple model of preferences for state activ-
ity based on expected lifetime gains, the paper hypothesises that cut-
backsleadtomoreattitudinalpolarisationamongcohortsthanwelfare
growth. The paper finds that there is little systematic evidence of a
generic cross-cohort attitudinal shift based on the policy environment,
but,inlinewithexpectations,thathigh-incomeyoungpeoplearemore
pro-redistribution in growing welfare states than in declining welfare
states and the experience of growth leads to less attitudinal polariza-
tionacrossincomegroups.
Paper presented at Workshop on Preferences over Redistribution, Duke University, April
2016
∗MagdalenCollege&DepartmentofPoliticsandInternationalRelations,UniversityofOxford
1
1 Introduction
Do changes in the state reshape public attitudes? This question is heavily debated
inacademicandpolicycircles. Overthelastdecades,policymakersinsomeOECD
countries have retrenched a number of core state benefits, such as pensions and
unemployment (Ha¨usermann 2010; Hemerijck 2012; Stephens and Huber 2015).
Muchworktheorizesthatbothreceivingpublicbenefitsandthebroaderstructure
of the state can shape what citizens demand from it.1 This literature raises the
question of whether - and how - these cutbacks to state benefits have fedback into
massattitudestowardsit.
Answering these questions has proven difficult, both empirically and theoret-
ically. There is little high quality cross-time panel data allowing systematic com-
parisons of individual changes in preferences across contexts. Empirical work ex-
amining the relationship between policy structures and preferences has yielded
inconsistent findings, with many null results (Lynch and Myrskyla¨ 2009; Soss and
Schram 2007). Positive findings often suffer from serious identification problems
in disentangling the causes of policy change from the consequences of policies on
attitudes (see Svallfors (2011) for a review). Moreover, when it comes to questions
of redistribution, work looking to map the determinants of public preferences at a
moretheoreticallevelhaspointedtoanumberofdistinct,andoftencontradictory
mechanisms through which the existing context might matter, leading to varying
dynamicclaimsabouttheimpactofpolicyshiftsonpreferences.
In this paper I argue that cutbacks do indeed affect attitudes towards redistri-
bution and the state more generally. First, I argue that changes in the structure of
the state matter for citizens’ attitudes towards redistribution and voting behavior
byreshapingtheircalculationsaboutthefuture. Astheliteratureontheinsurance-
function of the state points out, many social programs engage in economic redis-
tribution by reducing life-cycle risks. Few citizens are permanently either benefi-
ciaries or payers of the welfare state, even in more limited welfare states like that
in the UK (Hills 2014). As such, an individual’s attitude towards redistribution
reliesinpartonhis/herprospectivecalculationabouttheprobabilityofbenefiting
from it over the life-cycle. This prospective calculation depends on both his/her
anticipated lifetime income (Ansell 2014) and the anticipated structure of benefits
(BeramendiandRehm2015).
Second,changesinthestatealterthisprospectivecalculation. Historically,pol-
icymakers have rarely extended or cutback benefits uniformly across groups in
1Mostofthisworkfocusesonpreferencestowardssocialprograms, notredistributionperse,
nonetheless,Iwillarguebelowthattherearestrongparallelsforattitudestowardsredistribution.
Forworkonexperiencesofprograms,see(Campbell2003;Kumlin2004;Mettler2002;Soss1999).
On broader mass attitudes there are more ambiguous findings, with some work suggesting that
contextscanconditionbothmeanlevelsofsupportforthestateand/orincomeredistributionand
the relative importance of individual level factors (e.g. see Campbell (2012) for a review of this
debate).
2
society. Instead, benefits are often rolled out in stages, with progressively more
generousincome-ceilingsorreplacementsratesfortransfersduringtheexpansion
phase, while in the era of retrenchment, policymakers delay cuts into the future,
trim benefit ceilings, or limit benefit indexing to inflation. 2 This process means
thatpresentcutbacksnotonlyalterwhatcitizensreceiverightnow,butwhatthey
expect to receive in the future. Higher-income citizens, in a growing welfare state,
expect to receive more benefits in the future as replacement rates increase, reduc-
ing their incentives to plan privately. By contrast, in a declining welfare state,
cutbacks exacerbate already lower levels of income-replacement at the top of the
income spectrum, giving higher income citizens more incentives to plan privately
for the future. For lower-income citizens, cutbacks also increase vulnerability, but
this group has less scope to self-insure. Building on recent work on the politics
of ‘opting out’ (Busemeyer and Iversen 2014) and the progressivity in the benefit
structure (Beramendi and Rehm 2015), as well as Korpi and Palme’s (1998) clas-
sic argument about the ‘paradox of redistribution’, I argue that cutbacks push the
rich and the poor in the opposite direction, enhancing distributive conflict over
redistribution.
Inordertotestthesehypotheses,Iinvestigatetwomechanismsthroughwhich
cutbacksaffectattitudes-viacitizens’experienceofachangingstateandviacohort
socialisation. To do so, I examine the evolution of redistributive attitudes across
multiplewavesoftheInternationalSocialSurveyProgramme(ISSP)andEuropean
Social Surveys (ESS), and then turn to six country cases, examining attitudes over
time in Sweden, Denmark, Norway, Canada, Australia and the UK. I find that
both adults’ experiences of growth and youth socialisation in a growing welfare
state tend to depolarise material (i.e. income based) conflict over redistribution,
while both the experience of cuts and cohort socialisation in a declining welfare
state enhance income polarisation over redistribution. These effects are relatively
pronounced and replicable across multiple datasets. The direct effect of cutbacks
on mean attitudes towards redistribution is less clear. Whereas cutbacks are not
systematicallyrelatedtoadeclineorgrowthinshort-rundemandsonthestate,in
the longer-run, they appear to be corrosive of support for the state among higher
incomecitizensandtoexpanditamonglowerincomecitizens.
Thepaperfirstreviewsthedebateonpolicychangeandpublicopinion. Itthen
presentsatheorisationoftheeffectsofcutbacksintransferprogramsonredistribu-
tive attitudes. The paper then turns to the measurement strategy, followed by the
resultsandabriefdiscussion.
2See Huber and Stephens (2015) for a discussion of these shifts, and the overtime decline in
replacementratesviathepublicsystem,particularforpensions.
3
2 Policy Feedbacks?
What impact do shifts in social policy have on public preferences for redistribu-
tion? Themoststraightforwardinterpretationisthatpolicychangeshavenoeffect
on public preferences: the public leads and policy follows. Most contemporary
models of demand for both social spending and income redistribution theorise
individual level demand for social policy largely as a function of individual-level
incomeandrisk(IversenandSoskice2001;Rehm2011). Citizenswithhigherlevels
of risk tend to demand more social insurance and redistribution, as do those with
lowerincomeorotherneeds(e.g. ageetc)(Busemeyer,GoerresandWeschle2009).
This demand side interpretation of social policy is both intuitive and, for many,
normatively desirable, suggesting that policy does and should reflect the prefer-
ences of democratic publics (Brooks and Manza 2006). Where massive changes in
thestatedooccur,publicopinionprecedespolicychanges(Prasad2006).
However, there are several reasons, to question this logic. First, there is little
consensusastowhetherreformstothewelfarestateare‘demand-led’bytheentire
electorate (Gilens 2012). While evaluating the degree of policy responsiveness is
outside the remit of this paper, when it comes to changes in the state, there is both
quantitativeandqualitativeevidencethatpolicymakershaveoftentrimmedbene-
fitsandcutspendingonincomesecurityinresponsetopressuresotherthanpurely
electoraldemand,suchasfiscalduressandEuropeanization(Beckfield2006;Kers-
bergen, Vis and Hemerijck 2014; Scha¨fer and Streeck 2013). At any given moment
intime,partsofthepublicare‘policytakers’.
Second, work examining direct policy feedbacks on benefit recipients has been
abletoidentifyovertimechangesinpreferencesduetomajorshiftsinpolicystruc-
tures such as the Civil Rights Act in the United States (Mettler 2002) or German
unification (Alesina and Schuendeln 2005; Svallfors 2010) suggesting policies can,
under some circumstances, feedback onto mass preferences (see also Campbell
(2012) for a review of the feedback literature). Next to these studies explicitly ex-
amining large-scale policy feedbacks, work on cross-sectional differences among
states has found strong correlations between the structure of the welfare state and
massattitudes(Jordan2010;LinosandWest2003).
What, then, does this literature tell us about changes in benefits? An emerging
body of work suggests a theoretical link between the demand for income redistri-
bution-aswellassocialprograms-andpoliticalcontexts. Scholarshipprobingthe
material micro-foundations of welfare and redistributive preferences has argued
that the way individuals both experience risks and income shocks, and the rela-
tionship between income and risk are partially context dependent. This literature
suggeststhatboththe‘levels’ofsupportand‘slopes’ofindividuallevelcharacter-
istics can vary across contexts. For instance, work by Lupu and Pontusson (2011)
and Rehm, Hacker and Schlesinger (2012) shows that mean levels of support and
the relationship between individual risk and income and broader demands for
4
income redistribution or social spending are partially conditioned by the overall
distributionofincomeandcoincidenceofincomeandriskinsociety. Thesefactors
are hardly pre-political, but in part, the result of policy. Elsewhere, I show that
both health and labor market systems that dampen the link between individual
characteristics and health/unemployment benefits, also dampen the causal con-
nection between these factors and preferences towards health and labor market
policy(GingrichandAnsell2012).
This work make a number of contrasting claims, but it suggests that policy,
whether by directly altering individual income/risk, or by indirectly shaping the
overall distribution of income and risk, may have something like a thermostatic
effectondemandsonthestate(SorokaandWlezien2010). Policychangesthaten-
hance individual risk should increase overall support for the state (by increasing
overall risk) and possibly enhance the role of material (risk/income) calculations
inshapingpreferences. Increasesinspendingwillsheltercitizensfromrisk,damp-
ening their demand for further social insurance. What these dynamics imply for
redistributionislessclear,somethingIdiscussmorebelow.
By contrast, work directly on policy feedbacks in the welfare state offers an
alternative dynamic. A long-standing saying in social policy research is that ‘pro-
gramsforthepoorarepoorprograms’,suggestingthatprogramdesignfeedsback
into program popularity in ways that shape its growth trajectory. This work fo-
cuses less on the micro-level distribution of risk or income, than on the distribu-
tion of political ‘opt in’ to the system. Here, the argument goes, more extensive
welfarestatescreatetheirownconstituents,particularlyamongthemiddleclasses
(Esping-Andersen 1990). This process may have both a material and a normative
dimension, as programs breed broader support for the state (Larsen 2007). This
support essentially becomes a bulwark against cutbacks (Korpi and Palme 1998),
an example of positive feedback (Pierson 1996). Where citizens expect the state to
provide for them, and make life choices around those expectations, they become
more vested in its structures. In the positive feedback framework we expect that
aspoliciesbecomelessgenerous,thischangeshouldreducesupportforthestate.
Earlytheoristsofsuchpositivefeedbackspeculatedthatthegrowthofthewel-
fare state would both enhance overall support for the state and reduce differences
amongclassgroups(Esping-Andersen2013). Thereissomeevidenceoftheformer
effect,althoughthecausaldirectionoftherelationshipbetweenpolicychangeand
preferences is unclear, but little evidence of the latter effect (see Svallfors (2010)
for a review). If anything, class and income matter more in shaping preferences
in larger welfare states than in more residual ones. Scholars debate the reason for
this outcome, but many point to generous (Edlund 2007) or fiscally progressive
programsasheighteningdistributiveconflict(BeramendiandRehm2015).
Despite these differences, what both logics point to is the key role of expecta-
tions about both future income streams and benefit use in shaping contemporary
attitudes. While some groups, like the unemployed or pensioners, are actively us-
5
ing a benefit at a given point in time, much of the effect of both the ‘negative’ (i.e.
thermostatic) and ‘positive’ (i.e. ratchet) logics outlined above work though antic-
ipations about the likelihood of future need. Theorizing the relationship between
cutbacks and preferences then, requires thinking about how cutbacks change an-
ticipated benefits for groups of individuals and what this might imply about their
redistributivepreferences.
3 What are cutbacks? Why do they matter?
While scholars of the welfare state debate whether to view social policy as largely
produced by the politics of insurance provision or redistribution, in practice, the
insurance and redistributive functions of the state blur. At any moment in time,
muchstateredistributionfromrichertopoorercitizensoccursthroughthemitiga-
tion of life-cycle risks. For instance, in 2005, Wang and Caminada (2011) use the
LuxembourgIncomeStudytoestimatethattheSwedishstatereducedtheGiniCo-
efficientby46%. Taxesaccountedfor16%ofthis46%drop,cashassistancefor8%,
child and family benefits for 4%, with social insurance programs (sickness, injury,
disability,pensionsandsurvivorsbenefits,unemployment,maternitybenefitsand
other forms of social insurance) accounting for 72% of the total reduction in in-
equality. This proportion is on the higher side, and indeed, following the Korpi
andPalme’slogic,largermoreredistributivewelfarestatestendtousemoresocial
insurance programs. Nonetheless, even in the more residual American welfare
state,in2004,43%ofitsreductionintheGinicoeffientcamefromsocialinsurance
programs (compared to 18% from cash assistance and 38% from taxes). Redistri-
bution is deeply intertwined with the insurance function of the state in mitigating
life-cycleincomeshocks.
In making a material calculation about the desirability of redistribution then,
individualsneedtoconsiderwhetheranexpansionofthestatewouldbenefitthem
not only in the present but in the future. This calculation will partly draw on
expected life-time income (Benabou and Ok 1998), but also partly on expectations
aboutthelikelihoodofbenefitingfromtheprogramstructure.
Ifcutbacksandgrowthoccurreda)completelyuniformlyacrossincomegroups
andb)instantaneouslyasoutlinedinpanelAofFigure1,theywouldlikelyleave
future calculations largely unchanged. In the present, individual savings in taxes
from cutbacks would cancel out reduced spending, leaving the basic structure of
demand in place. However, if cutbacks are not uniform across income-groups or
not instantaneous, then they have the potential to reshape future calculations in
waysthataffectsupportforredistribution.
First,BeramendiandRehm(2015)arguethattheprogressivityofspendingwill
shapetheintensityofpreferencesforredistributionacrossincomegroups. Intheir
logic, where spending is progressive, benefits are targeted towards the poor, and
wealthier citizens’ exclusion from benefits is not fully offset by a tax reduction.
This structure reduces support for redistribution among the rich and increases it
6
Figure1: ModelsofBenefitCutbacks
Scenario A Scenario B Scenario C
8 8 8
. . .
6 6
. . 6
.
s s s
e e e
at at at
R R R
nt nt nt
ceme.4 ceme.4 ceme.4
a a a
pl pl pl
e e e
R R R
2 2
. .
2
.
0 0
0 20 40 60 80 100 0 20 40 60 80 100 0 10 20 30
Income Quinitles Income Quinitles Years in the Future
amongthepoor.
Inpractice,cutbacksoftendonotoccurlinearlyacrossincomegroups. Instead,
cuts to universal benefits are often - although not always - income preserving at
the bottom, meaning that they can enhance progressivity even as they decrease
generosity, as outlined in panel B of Figure 1. While many early changes to un-
employment benefits cut more for lower income individuals than middle income
individuals (OECD 2009), and cuts to means-tested programs only affect the poor,
more recent changes in unemployment and pensions have often disproportion-
ately affected top earners’ replacement rates (OECD 2013). Following the logic of
BeramendiandRehm(2015),thisdualshiftcouldincreaseincome-basedpolarisa-
tion; however, a dynamic application of this argument is not entirely straightfor-
ward. Wealthier citizens who have seen cutbacks may respond by wanting more
‘redistribution’ - returning to the previous status quo - or may see the new dis-
tributivestructureasmorefixedandthusbecomemoreopposed.
Second, more fundamentally, both growth and cutbacks do not occur instan-
taneously. As Figure 2 demonstrates, in both Sweden and the UK, benefits grew
over the course of many decades, extending upwards in the income-distribution,
particularly for Swedish pensions and unemployment benefits. Equally, cutbacks
are also introduced over a period of many years. For instance, one of most dra-
maticcutstounemploymentbenefitsintheOECDoccurredintheUKintheearly
1980s, with a 40% drop in unemployment benefit replacement rates between 1980
and 1985 (Korpi and Palme 2007). Yet, over the course of the next decade, benefits
fell by a further 50%, moreover, successive governments cut other aspects of the
benefitsystem(e.g. duration,coverage)overthistime.
This drawn out process of growing and cutting benefits means that a forward
looking citizen may develop quite different expectations about the future during
periodsofgrowthanddecline,eveninsimilarlygenerouswelfarestates. Take,for
instance, a middle-income Swede in 1975 compared to a similar citizen in 1995.
Both individuals had current unemployment replacement rates of 75% of average
wages,butin1975,asFigure2shows,benefitswereextendingupwardswhereasin
1995theywerebeginningtomovedownwards. ThemiddleincomeSwedein1975
mightreasonablyexpectthatbenefitsinthefuturewouldcoverapotentialincome
loss at a high level, whereas in 1995 a similar individual might expect, given the
direction of change, less future coverage. These expectations are schematised in
Panel C of Figure 1. At any moment in time, individuals facing cutbacks may be
uncertain about how much further benefits will be cut in the future, but they are
morearelikelytoanticipatefuturecutbacks.
Theseexpectationswillaltercurrentbehavior. Citizensexpectinglessstatemit-
igation of life-cycle risks, are more likely to invest in private insurance (broadly
defined to include private savings), which in turn, could reduce their demand for
state redistribution. Where private insurance requires an upfront payment (e.g.
purchasing an insurance policy or assets like housing), then even if future spend-
8
Figure2: GrowthofIncomeReplacement: PensionandUnemployment
Sweden − Pensions Sweden − Unemployment
1 1
8 8
. .
6 6
. .
4 4
. .
2 2
. .
0 0
1920 1940 1960 1980 2000 1920 1940 1960 1980 2000
year year
UK − Pensions UK − Unemployment
1 1
8 8
. .
6 6
. .
4 4
. .
2 2
. .
0 0
1920 1940 1960 1980 2000 1920 1940 1960 1980 2000
year year
Maximum Benefits Miniumum Benefits
Average Benefit
Figure2showsthegrowthtrajectoriesofpensionsandunemployment
replacementratesasapercentageofthewagesofan‘AverageProduction
Worker’(KorpiandPalme2007).
ing is regressive, wealthier individuals may resist it as they have already insured
against life-cycle risks and raising taxes to pay for (unneeded) future benefits will
threaten their current consumption. Work by Busemeyer and Iversen (2014) on
the politics of education, and private insurance more generally (2015) argues that
the presence of private alternatives reduces support among the wealthy for social
spending when it works through a targeted opt-out (rather than improvement of
the core service). Wealthier citizens who anticipate future retrenchment have the
incentive and capacity to make alternative arrangements, reducing demand for
future redistribution. As Stephens and Huber (2015) show with respect to pen-
sions, many countries that have cut public replacement rates for pensions have
preserved overall income replacement through private schemes. Others countries
without mandatory private schemes have nonetheless seen an increase in volun-
taryprivatespendingfollowinthefaceofcutbacks.
Figure 3: Estimated Effects of Generosity Change on Combined Mandatory and
VolunaryPrivateWelfareSpending
Change in Private Spending
Welfare Generosity
Change In Generosity
Social Spending
Change in Social Spending
GDP Growth
Change GDP Growth
Post Tax Gini
Change in Post−Tax Gini
Cabinet Composition
Change Cabinet Composition
−.06 −.04 −.02 0 .02
Figure 3 shows the results of a simple error correction model of voluntary pri-
10