Social Limits to Spending: Subjective Perceptions of Low Economic Status and Support for Taxes Meant to Finance Social Welfare

What the paper says

How are subjective perceptions of economic status related to public support for social welfare? I argue that the negative psychological costs associated with perceived relative deprivation lead individuals to prioritize immediate over long-term income gains. Consequently, those who perceive themselves as having low status are less likely to sacrifice a part of their current income to fund welfare policies with long-delayed benefits. I test this argument using two waves of the Life in Transition Survey and two more recent waves of the British Election Survey. In line with my argument, I find that, although a lower sense of subjective economic status correlates with preferences for reducing inequality, the lower individuals place themselves in the economic hierarchy, the less likely they are to support a tax increase to finance spending on education, poverty assistance, and healthcare. While subjective perceptions of low economic status increase demand for equality, they may also limit the government’s ability to redistribute economic resources if citizens are unwilling to share the burden of social welfare. The findings suggest a subjective limit to the scope conditions of welfare state reform and the politics of fiscal solidarity and redistribution.