Whose GDP? The Working Poor, the Economy, and the Perception Gap

Sandwiches provided from 12pm

Economic inequality has increased drastically across advanced industrial democracies and, with it, the range of economic experiences. These changes present a challenge for political economy which gauges the health of the economy with aggregate economic statistics like growth and jobs. Motivated by this challenge, we ask how new economic realities in advanced capitalism matters for how citizens evaluate the national economy. We argue that individuals seek out and apply information on those indicators of economic heath that affect their own lives while discounting those that do not. Applying our reasoning to the case of poverty and poverty risk, we assert that among the working poor, poverty rates provide a more meaningful signal of economic conditions than do conventional macroeconomic indicators. We show that poverty risk exerts a strong effect on economic evaluations. Individuals at high risk of poverty are less informed about standard macroeconomic indicators but better informed about national poverty rates. When evaluating macroeconomic performance, they are more likely to discount conventional economic indicators and base assessments on national poverty rates instead. Results indicate that political economy must depart from familiar but partial indicators and account for the layered economies structuring political behavior.