European Sociological Review | 2019
Varieties of Affluence: How Political Attitudes of the Rich Are Shaped by Income or Wealth
Abstract
Sociological research often uses income as the only indicator to describe or proxy the group of the rich. This article develops an alternative framework in order to describe varieties of affluence as three-dimensional: depending on income, wealth, and origin of wealth. The relevance of such a multidimensional perspective for social outcomes is demonstrated by analysing the heterogeneity in political attitudes between different varieties of affluence. For this purpose, ordinary least squares regressions are applied to a sample from 2005, 2009, and 2014 German Socio-Economic Panel (GSOEP). The main results are, first, that the perspective of varieties of affluence reveals significant differences in social outcomes as demonstrated by political attitudes. Especially wealth possession is related to significantly more right political attitudes. Second, there is strong explorative evidence that the rich in Germany should be regarded as a heterogeneous group. These findings are robust to influential data, multiple imputations of wealth data, and endogeneity due to pooled data. The article concludes, among other things, that more data are required to make more certain assertions. Who Are ‘the Rich’ and Why Does It Matter? In recent years, there has been a shift in research on economic inequality from a primary interest in income to a focus on wealth. French economist Thomas Piketty famously predicted that wealth and its concentration might generally become increasingly important because the forecasted low economic growth might lead to decreasing chances of significant wealth accumulation through labour (Piketty, 2014; Piketty and Saez, 2014). His claim also adds relevance to the multigenerational persistence of wealth. For Germany, a recent study projected a yearly inheritance volume of up to EUR 400 billion per year until 2024—equivalent to 12.7 per cent of the GDP in 2016 (Tiefensee and Grabka, 2017). The share of pre-tax income received by the top 10 per cent has grown since the 1970s and in 2008 was at its highest level since 1917 (WID.world, 2017). In 2010, the share of wealth owned by the top 10 per cent of the wealth distribution in Germany was the highest in the Eurozone (Bundesbank, 2013: p. 30). These numbers are a reason to devote attention to the top income and wealth holders. The purpose of this article is to demonstrate to what extent social phenomena can be explained by variation among three forms of affluence: position in the income distribution, position in the wealth distribution, and origin of wealth—self-earned versus not self-earned. Reasons to make such distinctions are numerous: possible social-structural differences between these groups include ambition, family background, ability, migration background, social class, saving behaviour, and age. VC The Author(s) 2019. Published by Oxford University Press. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited. European Sociological Review, 2020, Vol. 36, No. 1, 136–158 doi: 10.1093/esr/jcz051 Advance Access Publication Date: 11 October 2019 Original Article D ow naded rom http/academ ic.p.com /esr/article-at/36/1/136/5585947 by M ax-Pck-Institut fer G esellsctsforschung user on 21 Feruary 2020 The question in how far varieties of affluence only signal such group differences or exert independent direct effects needs to be answered empirically. Political attitudes are chosen here as one example for differing outcomes because, first, they can be expected to be related in many ways to individual economic circumstances. Second, insights into political attitudes among those with different varieties of affluence might add to existing research from other disciplines, such as a democratic responsiveness bias as an indicator of political inequality (Gilens, 2012: pp. 70–96; Grimes and Esaiasson, 2014; Bartels, 2016: pp. 233–268; Elsässer, Hense and Schäfer, 2016, 2017). The increased interest in wealth and the traditional conceptualization of the affluent as those with high incomes raise the question whether ‘the affluent’ can be seen as a homogenous group in terms of their political attitudes. Is it sufficient to define them as only those with high incomes? To shed light on this question, heterogeneity among the affluent is analysed by asking two related questions: Do varieties of affluence matter? Are the rich in Germany a homogenous group in terms of their political attitudes? The analysis is based on survey data from the German Socio-Economic Panel (GSOEP), mainly for the years 2005, 2009, and 2014. While the available data are not the ideal source with which to answer the questions posed, it is the best available so far, providing initial explorative insights into social outcomes among varieties of affluence in Germany. The article is structured as follows. Varieties of Affluence section reviews previous research on the affluent in Germany, including how they are defined and assessed and develops a differentiated framework to account for varieties of affluence as a foundation for the empirical examination. Affluence and political attitudes section again consults existing literature in order to derive hypotheses regarding political attitudes among different types of affluence. Methodology section presents the data and methodology used to test the framework, the results of which are given in Results section. Finally, Discussion section discusses the results, followed by a brief conclusion. Varieties of Affluence The affluent has been analysed in sociology at least seminal since the works of Veblen (1899) and Simmel (1900). Nevertheless, a general lack of research is constantly noted and criticized (e.g. Imbusch, 2003; Lauterbach and Ströing, 2008; Page, Bartels and Seawright, 2013). In German sociology, relevant results mainly come from the intersection of two streams of literature: the traditional sociology of elites (e.g. Hradil and Imbusch, 2003; Hartmann, 2013) and a new sociology of wealth (e.g. Druyen, Lauterbach and Grundmann, 2008; Böwing-Schmalenbrock, 2012; Spannagel, 2013; Waitkus and Groh-Samberg, 2018). Lauterbach and Ströing (2008) provide a systematic definition of the affluent as a synthesis of the heterogeneous existing international literature (Figure 1). The concept starts off with the assumption of a diversified stratification of income affluence and, in the next step, differentiates it further by including wealth. According to this definition, being wealthy in terms of income starts at an income level of at least twice the mean or median. The relevance of a combined perspective of income and wealth—and sometimes other dimensions—is suggested in several recent studies (e.g. Becker, 2003; Grabka et al., 2007; Druyen, Lauterbach and Grundmann, 2008; Lauterbach, Druyen and Grundmann, 2011; Peichl and Pestel, 2011; BöwingSchmalenbrock, 2012; Rowlingson and McKay, 2012; Spannagel, 2013; Skopek, 2015; Keister and Lee, 2017; Killewald, Pfeffer and Schachner, 2017). To add to these contributions, a framework is developed in the following that includes the origin of wealth in order to analyse how individuals with different varieties of affluence vary in terms of social outcomes. Being ‘rich’ can more accurately be understood as heterogeneous combinations of different forms of affluence. Being rich shall be defined as based on three dimensions of economic resources: income, wealth, and the origin of wealth. Income can be defined as a flow of economic resources that may be received from various sources such as labour, return on capital, or government transfers. Another less-studied and rarer type of income is windfall income obtained through exogenous sources such as inheritances or lottery wins. Both of these processes are not random. There is a good reason to believe that those who are better off are more likely to receive inheritances (e.g. Hansen, 2014; Bönke, Corneo and Westermeier, 2015: pp. 11–13). On the other hand, there is evidence that lottery participation is skewed towards lower-income groups and the working class (Beckert and Lutter, 2009, 2012). The reason windfall income and inheritances are discussed combined is that they are not distinguishable in the GSOEP over time. The amount that can be spent or saved regularly grows with increasing income. Therefore, one could expect high correlations between income and wealth, but, especially in (East) Germany, they are far from perfect (Peichl and Pestel, 2011). Killewald, Pfeffer and Schachner (2017: pp. 388–390) also show this for the European Sociological Review, 2020, Vol. 36, No. 1 137 D ow naded rom http/academ ic.p.com /esr/article-at/36/1/136/5585947 by M ax-Pck-Institut fer G esellsctsforschung user on 21 Feruary 2020 United States and find that wealth is also not completely related to income in the longer run. The amount of disposable income is highly dependent on household constellation. Therefore, income is usually measured as the household equivalent income: the overall household income standardized in relation to the number of adults and children living in it according to the new OECD equivalence scale (Hagenaars, Vos and Zaidi, 1996). The second dimension of affluence is wealth that can be defined as an accumulated stock of different assets such as real estate, valuable objects, or financial assets. Wealth is built up from the different sources of income—depending on individual behaviour such as consumption and saving. Analyses of income and wealth distributions show that wealth is significantly less equally distributed than income (Frick, Grabka and Hauser, 2010: pp. 122–124). Depending on the way it is used, wealth can generate various kinds of income, e.g. dividends from stocks, rent from properties, or increasing values of valuable objects such as art.