Likewise, women are more conservative, risk-averse investors than men are. They are also much less likely to be involved in starting a new business than men are — and not just in the United States, but around the world. Consider this from Werner Bönte and Monika Jarosch at the University of Wuppertal, Germany:
In this study we empirically investigate the contribution of personality traits to the gender gap in entrepreneurship. Our empirical analyses, which are based on data obtained from a large-scale survey of individuals in 36 countries, suggest that a group of personality traits which we call Individual Entrepreneurial Aptitude (IEA) has a positive effect on latent and nascent entrepreneurship among women and men. Moreover, women’s considerably lower level of IEA contributes significantly to the gender gap in entrepreneurship. The lower level of IEA is mainly due to women’s lower levels of competitiveness and risk tolerance. Furthermore, these results are confirmed by the results of a country-level analysis which show that the within-country variation of entrepreneurial activities of women and men is significantly related to within-country variation of IEA.
Single women are more financially risk-averse than married women, and likewise more likely to vote Democratic. While people who work for the government have an economic interest in voting for the party of big government, it also is probably the case that highly risk-averse people are attracted to government jobs, and that this same risk aversion attracts them to policies favoring a large, activist government for reasons other than narrow self-interest.
While we should be careful about over-generalizing the relationship between financial preferences and political preferences, some connections seem obvious. Social Security is a popular program across the board, but more popular among women than among men. Women are more likely to support benefit increases, less likely to object to Social Security taxes, and more likely to cite stability and security as a reason for supporting the program. Democrats have shrewdly attacked Social Security reform proposals as hostile to women’s interests, or to African-American women’s interests, as the context necessitates.
Social Security plays much the same role in the lives of these risk-averse Americans as do government bonds, CDs, or other low-risk, low-yield assets: They think of it as the ultimate money-in-the-bank investment. It is true that most people would be far better off if they spent their working lives investing the money they and their employers pay in Social Security taxes in a responsible, diversified portfolio of stocks and bonds, but conservatives are not going to get very far trying to explain the miracle of compounded returns to people who feel financially insecure. If our fellow Americans have different levels of risk tolerance than we do, that does not make them financially illiterate — it just makes them people with different levels of risk tolerance. And as conservatives, we should not discount the power and value of memory: Blacks and women were systematically excluded from full participation in the formal economy for a very long time, and it is understandable that their faith in the transformative and creative power of capitalism is not unqualified.
Where Democratic-leaning Americans go wrong is that they miscalculate the welfare state’s value as a tool of risk mitigation. Americans support the relatively low returns on Social Security for the same reason that Britons and Canadians broadly support their relatively low-quality government health-care systems: because of the mistaken belief that these programs will always be there for them. Better a low-return retirement “investment” in Social Security than no retirement income at all, that line of thinking holds, or one that is subject to the inherent risks of the market. Similarly, many Americans understand that a government-run health-care system will be less innovative than a market-driven one, that it will be inefficient, and that quality will suffer — and they prefer it still, on grounds that access to health care will be guaranteed.
Conservatives’ challenge is to make voters see that the risk-mitigation calculation behind support for the welfare state is erroneous and to propose reforms that do not threaten the guaranteed benefits that can be sustained. Unless our public finances are reformed, Social Security and Medicare most assuredly will not always be there for Americans. Paul Ryan is on the right track when he argues that his entitlement-reform plans are there not to abolish Social Security and Medicare but to ensure that the programs do not collapse. While some immediate changes are going to have to be made in Social Security and Medicare in the near future, relatively painless reforms such as changing the formula for indexing benefits and slowly raising the eligibility age will do a great deal to shore up the finances of these entitlements.
Conservatives looking to make radical reforms would do well to consider the risk aversion of a great many American voters and offer policy proposals that supplement Social Security and Medicare rather than radically restructure them or (my own preference) eliminate them entirely. For instance, we might create an opt-out (rather than opt-in) supplemental private account in which 5 percent of a worker’s income is put into a simple index fund on the Roth IRA model, in which gains could accrue tax-free and which would be heritable. That second provision is critical: Unlike Social Security benefits, real savings can be passed along to children or other survivors, contributing to intergenerational wealth-building, which has the potential to greatly enhance the stalled socioeconomic mobility of persistently poor communities. The use of those funds probably would need to be limited to retirement, education, and some health-care expenses (such as paying insurance premiums), a paternalistic aspect that will offend libertarians but make reform on this model more politically palatable.