The Policy Consequences of Elites' Tendency to Underestimate Financial Hardship

• In Event: Are Political Leaders Out of Touch with the Poor?

Abstract

In this paper, I test the hypothesis that political elites are out-of-touch with the financial hardships that many Americans experience in an era of rising inequality, causing them to oppose redistributive social policies. I draw on data from an original nationwide survey that I conducted of over 1,200 candidates for state legislature from 46 states during the 2018 primary elections. I use these data to provide several novel findings.

First, I show that political elites are isolated from the negative effects of inequality. This isolation stems from personal factors, like political elites’ own upper-class backgrounds, as well as political factors, like the necessity of cultivating donors to win elections. I also find that the degree of elites’ isolation varies by partisanship, with Republican elites being more likely to be isolated among the affluent than Democratic elites.

Second, I demonstrate in an experiment that this isolation leads political elites to underestimate the negative effects of inequality. While political elites are aware that those they interact with are more privileged than society as a whole, they underestimate the size of this gap. This leads Republican elites in particular to underestimate the scale of economic problems in the states they seek to govern. For example, I find that half of Republican elites underestimate the proportion of people in their state who are financially insecure by more than ten percentage points, and one third of Republican elites underestimate the proportion of people in their state who skip necessary medical care because they cannot afford it by more than ten percentage points (The equivalent figures for Democratic elites are one-third and one-tenth.). Republican elites become particularly likely to underestimate the proportion of state residents who are financially insecure or skip necessary medical care when I randomly assign them to first think about how few of their friends experience these problems.

Finally, I demonstrate the policy consequences of these misperceptions. I randomly assign half of the political elites to receive accurate information about financial hardship in the states where they are running for office. This allows me to compare the policy preferences of political elites who accurately perceive the level of financial hardship in their state with an otherwise identical group of elites whose misperceptions I allow to remain as is. This intervention has its largest effects on Republican elites, who are more likely than Democratic elites to underestimate financial hardship in the first place. Receiving accurate information causes Republican elites to become more supportive of policies that address the problems they are underexposed to in their daily lives, including increasing financial assistance to the poor to address financial insecurity and expanding the scope of Medicaid to address the unaffordability of healthcare. This suggests that Republican elites’ current efforts to roll back the social safety net are rooted in part in their failure to grasp how difficult life has become for many Americans in an era of rising inequality.

Author

• Adam Thal, Yale University