Friday, August 05, 2005
The oddest thing about the strong economic growth that has taken place over the last several years is how stubbornly many people refuse to recognize it. Polls continue to suggest that most Americans are unaware of the economy's excellent performance. Can that really be true? No doubt inadequate news coverage is a factor, but I can't believe that a majority of Americans really have no idea how the economy is performing. I suspect that when asked about the economy in opinion surveys, many people focus on what they perceive to be negative at the time--budget deficits, the price of gasoline--either because that's what's in the news, or because they hope to influence the government by voicing dissatisfaction.True enough, looking at this Pew survey of economic perceptions. Remarking on the poll, they sound quite the same as John.
Having thought a good deal about this topic twenty years ago when I wrote my dissertation on political business cycles, I have some ideas for why this is happening.
No single factor explains this cautious outlook. Instead, the public's economic unease appears to reflect a variety of concerns, both personal and national in scope. There is a broad consensus that gas prices are a significant problem for the nation, and the federal budget deficit also looms as a major source of anxiety.
Yet the polling identifies several other sources of financial worry. Public perceptions of local job availability remain highly negative, despite recent improvements in the national employment picture. While people with low household incomes are most troubled by financial problems of all types, including job shortages, about half of those with annual incomes above $75,000 say that jobs are scarce in their community.
- An aging population probably matters a good bit for this. People in their twenties expect to change jobs, more so today than before. People in their late forties, like myself, are probably pretty secure in our jobs but have some serious concerns that, should we be laid off, we would have a very hard time finding new work. We have more to lose from job loss. So even if the risk of job loss now is the same as it was twenty years ago, the higher cost of the probability would lead to poorer perceptions. (cf. Manski and Straub, 1999.)
- Relatedly, it's worth noting that job turnover is still higher now than before. People are moving around faster. That can be upsetting; there's also some evidence that for many, the new job pays less than the old one. (Example.) The turnover need not happen to you, as I point out in the last bullet, for it to lead to weaker perceptions of the economy.
- I ran across during my requisite Googling this piece on Q&O from last year wondering why perceptions of the economy differed by party so dramatically. The answer, it seems to me, is that Democrats have as part of their party philosophy a belief that the government is responsible for the economy. Republicans believe that unemployment after a while is mostly due to flaws in the unemployed worker. This ethic of self-reliance has characterized US attitudes far more than in Europe.
- Voting tends to be more sociotropic than egotropic. Sociotropic voting means voting based on national perceptions of the economy, while egotropic voting means voting based on one's own "pocketbook experiences". Thus the media negativity towards economic good news, like "Job Growth Fuels Fed Fears" this morning -- which is actually a good thing, if you think about it -- has a real effect on these polls. That will probably not surprise John at all.