Rising Inequality Meets Labor Market Fragmentation: Explaining Declining Redistribution Support

This paper examines declining public support for redistribution despite rising inequality in advanced industrial countries.

The Puzzle: Rising inequality should increase demand for social transfers, yet polling shows decreasing preferences for redistribution.

We formalize two explanations:

• Social Distance Model: Increasing disparities between majority/minority populations and economic classes may reduce empathy (altruism) or connection (homophily).
• Labor Market Segmentation Model: Immigrant labor entering low-skill job markets reduces competition for natives in high-paying jobs but intensifies struggle for basic positions.

What We Found: Using multiple ISSP survey waves, we find the labor market model explains redistribution trends more consistently than social distance alone.

This suggests policy debates about inequality are incomplete without considering how these disparities interact with economic structures.