Inflation & Unemployment: Impact on Institutional Trust
The surprising findings of a GLO paper examining 1.9 million people across 156 countries
What's New: A GLO Discussion Paper (The societal costs of inflation and unemployment by Olga Popova, Sarah Grace See, Milena Nikolova, and Vladimir Otrachshenko) based on data from over 1.9 million individuals across 156 countries has found that, contrary to conventional wisdom, inflation isn't the primary factor eroding trust in political and financial institutions. It's unemployment.
Details: The study sheds new light on how inflation and unemployment play out in the real world regarding trust in institutions.
Inflation's limited impact: Overall, Inflation doesn't resonate as a significant concern regarding trust. It's a relative non-issue for faith in both politics and financial organizations.
Unemployment's toll: Conversely, there's a straightforward, robust negative correlation between unemployment rates and trust. This sentiment spans across various socio-demographic groups, underlining its universal impact.
Big Picture: This research aligns with previous work on the global consequences of inflation and unemployment for personal well-being. Notably, studies found that inflation has minor psychological effects compared to unemployment. However, prior literature didn't investigate why the general populace views unemployment as a grave concern.
Behind the numbers: A deeper dive into this study's findings shows that people connect unemployment with poor national economic performance and their own financial setbacks, pointing fingers at governments and financial bodies for these failings.
Not all fluctuations matter: While unemployment certainly dampens trust, its volatility doesn't appear to be a significant factor.
A broader problem: Unemployment doesn't just undermine trust; it fosters feelings of despair and anxiety, further eroding faith in institutions. Cumulatively, unemployment poses a much graver concern for individuals, economies, and political systems than inflation.
What They're Saying: Unemployment's effects are felt most acutely by specific vulnerable groups, such as middle-aged, less educated, unmarried individuals and those residing in rural areas. Recognizing these disparities is crucial for directing public information campaigns and debates, especially amid economic turmoil.
Voting implications: This distrust isn't just an abstract issue. Previous studies have linked dwindling institutional confidence with shifts in voting patterns, including the rise of populist and right-wing parties.
What's Next: The paper beckons further exploration. Potential future research could:
Dive deeper into the underlying mechanisms of these relationships, leveraging survey data.
Examine variations in these relationships and delve into context-specific nuances.
Investigate how recent events, such as post-COVID-19 inflation spikes and unemployment patterns related to the Ukraine conflict, influence these dynamics.
This comprehensive study underscores the need for global leaders to prioritize tackling unemployment, not just for economic reasons but for preserving the trust and well-being of their citizens.