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Chapter 2 : Wealth & Poverty

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William Cockrell

on 29 January 2018

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Transcript of Chapter 2 : Wealth & Poverty

Chapter 2 : Wealth & Poverty
Who Owns What?
Public opinion surveys report that people believe the conflict between the rich and poor is now more of a problem than race conflict.
Social Stratification :
very similar to last week's structural-functional approach. Social stratification means that all societies rank and organize people based on the society's values and worth.
Social Classes :
the outcome of social stratification is the creation of social classes. The most common groupings in America are working/lower, middle, and upper class.
Income :
the money you make. Income is the most common measurement of wealth in America, but this measurement does not show the "whole picture"
The median family income for 2013 was $53,891. Remember!! This is NOT an average. It is literally the middle # in the range of data.
The lowest earning 20% of the American population average 15K a year whereas the highest earning 1% of the American population earns 1.4 million a year.
Distribution of Income
Average per capita income in the US is 42K/YR
Average household income is 60K/YR
Top 20% of US population receives 50% of all income, bottom 20% only receive 3.3.% of income
Distribution of income has become more unequal since the 1970s; the stratification of wealth in America has become more similar to the 1930s (Henslin, 2013)
"Between 1980 and 2010, the annual income of the highest-paid 20% of U.S. families increased by 51%". Typically as the rich gain money, the lowest class stays the same or loses money.
Distribution of Wealth Continued
"The lowest-earning families today are actually living on less money than they were 30 years ago. Based on government data, income inequality is now greater than at any time in the past fifty years (U.S. Census Bureau, 2011)".
Maybe we should analyze the distribution from another measurement? How about Wealth?
Wealth :
the value of all assets (not just money which is measured for income), this includes property, stocks, automobiles, businesses, etc. With wealth we do subtract the amount of debt from their total assets.
The general American population's wealth is often equally balanced with debt (i.e., after paying our bills, most Americans have very little left).
This helps us understand that poverty is NOT a personal or moral weakness, many American families are ONE unexpected expense away from the poverty line.
Extreme examples
"In 2010, the average compensation of the 100 highest-paid chief executive officers (CEOs) in the United States exceeded $25 million (more than the annual income of all 454 people who work in the White House, including the President)".
"The very highest-paid people in the country--the twenty-five top-earning investment fund managers on Wall Street - averaged $882 million each in income, more than the state of Vermont pays all it's public school teachers and more than 2,000 times what the nation's president earns (Macionis, 2013, pg. 33)".
What about collective responsibility? If 5 companies pay their CEO $800 million, doesn't the 6th company HAVE to pay their CEO similar wages to stay competitive?
What about the CEOs involved in the government Auto Bailout? Should CEOs of companies that report bankruptcy still be given millions of dollars in executive bonuses? It is reported 1.2 Billion dollars of the government bailout in 2008 went to CEO bonuses.
"Half of the companies paying top salaries to CEOs actually lost money in their most recent year (Helman,2011; NORC, 2011, in Macionis, 2013, pg. 34)".
There are 3 reasons that taxes exist and benefit the government
provides money for the government to function (e.g., salaries, projects, government funding, etc)
taxes discourage undesirable behavior (e.g., tobacco tax, alcohol tax, etc.),
Taxes help reduce income inequality.
Progressive Tax :
"Robin-Hood" tax. Progressive tax is the typical American perspective on taxation which means that as you make more, you are required to pay more taxes.
People who earn above 344,000 a year pay around 24% of the countries taxes. These people only make up 1% of the population.
45% of Americans do not pay federal income tax (they still contribute via other forms of taxation).
Warren Buffet Tax Evasion (Scrooge-Like Behavior?)
If you make millions of dollars a year, you will have a team of accountants to help you keep your millions.
Deferring Payment :
Asking employers to split paychecks into separate years to reduce taxation. This only applies to very large amounts.
Charitable Contributions :
Celebrities love their charity projects because this money can be counted towards tax reductions.
Trust Funds :
a way to avoid inheritance tax, technically if you give them the money before you die, it cannot be considered inheritance.
Investment/Bonus funds :
As long as money is not labeled as salary or wages it is typically not taxed. For instance, if a celeb invests 1 million in a new company and earns 3 million....no taxation!
The Upper Class
"Rich People" :
People who average around $250,000 a year.
When we rank people by family income, rich people are the top 10% of the wealth distribution.
Super Elite :
there are around 7.3 million people in the world who have at least $1 billion dollars. This is when we only measure actual money.
When we measure wealth by more than just income the Super Elite becomes a much larger class.
The 10 most richest people in American hold a total worth of $291 billion dollars combined. It takes 2.3 million middle-class Americans to reach this worth.
Common characteristics of the super elite : older, white, men maintain the largest amount of money globally.
The Working & Underclass
The Poverty Line :
created in 1964 by the U.S. government to start collecting data on who is considered in poverty. People who live below the poverty line are typically eligible for government assistance.
Raw Data
45.3 million people were in poverty during 2013
Childhood poverty is at 20%
Both age groups 18-64 and 64+ saw a decrease in poverty
All racial minorities experience higher rates of poverty
While poverty has decreased the past 3 years, it is not a significant difference.
The poverty line is determined by the amount of money it takes to feed a household. This is often referred to as an
absolute poverty line
Relative poverty line :
you are considered below the poverty line if you make less than 60% of the median income. This is more common in European countries.
"If the United States were to use the European standard, the poverty line for a family of four would be about $36,000 and out poverty rate would be more than twice as high (Macionis, 2013, pg. 36"
The Poverty Gap :
the difference between the government poverty line and what the average poor household makes. If the poverty line is 20,000 and the average poor household makes 10,000; there is a poverty gap of 10,000 dollars.
Demographics of Underclass
When we examine the distrubition of people in poverty, we have to understand how the data is presented.
We normally hear percentages to rank the different races in poverty. 24% of Black people are in poverty (10.7 million people), 26.6% of Hispanic people (13.2 million people), and 9.9% of White people (
19.6 million people
It is still accurate to say that minorities are at greater risk of poverty.
Feminization of poverty :
58% of people in poverty are women whereas only 42% are men. Sociologists use this term to explain that it is easier for women to enter poverty than men.
Single mothers have a VERY high chance of entering poverty.
The South has the highest regional rate of poverty, Mississippi has a poverty rate of 22.7%
Get a job!! Does it help much?
During the 1950s-1980s, the government did a better job at adjusting income to reflect inflation.
The textbook provides this informative example. During 1958-1974 a person's wages increased 65% to account for inflation. On the other hand, from 1974-2010 the same salary decreased 7%!
Extended Adolescence :
a newer phenomena occurring since the late 1990s where young adults live longer with their parents. It is caused by economic instability and degree inflation. Older generations love to say it's because younger generations are "lazy", but it is primarily social factors causing it.
Research shows that working full time while in poverty does not pay your expenses (i.e., you are unable to save up in hopes of leaving poverty). People in poverty working full time can average around 15,000 a year.
Health and Poverty
Improved lifestyle (rich people have access to all newest health information, lower class people tend to follow unhealthy eating patterns, drug abuse, exercise less, and practice unprotected sex.)
The constant stress lower classes face is harmful to health
Mental health problems are also more prevalent in lower class populations, one primary cause is that the higher classes have opportunities for therapy and medical treatment.
Social class influences on life continued
Education :
children receive better quality education the higher they are on the social ladder, education rates increase overall with higher social classes. Upper class parents focus more on "free thinking" children where lower class parents want children to "follow the rules"
Politics :
Republicans dominate the upper classes and focus on "fiscal conservativsm" whereas lower class groups are focused on "social conservatism" and "government liberalism". The lower the class, the less likely one is to be politically involved.
Religion :
rates do not really differ between the classes; the choice of denomination is the strongest difference. Higher social class members are more likely to draw more traditional, subdued religious practices whereas lower social class members are drawn to Southern Baptist, elaborate services.
Crime :
Lower rates of convicted crime among upper class. Upper class are more likely to commit white collar crime whereas lower classes commit more street crime.
Additional Factors of Poverty
Culture of poverty
Time spent in poverty
Deferred Gratification
Horatio Alger myth
Blaming The Victim
Pick an issue that you see as a social problem
Decide how people suffer from the problem differ from everybody else.
Define these characteristics as the cause of the problem
Respond to the problem by trying to change the victims, not the larger society.
You can apply these harmful steps to almost every social problem. A very easy analysis of victim blaming is using the social problem of rape in America. You must understand that blaming the victim NEVER helps remove the social problem!
What is Social Class?
Like many sociological concepts, there is not one universal definition (Sosnaud et al., 2013).
Social Class :
From Weber's perspective, people who are grouped together by rank on power, prestige, and property. A person's place in social class drastically influences their life outcomes.
Property :
Tangible measure of wealth (livestock, buildings, resources, bank accounts). Property - debt = wealth.
Income :
money received; most common form of property studied
Power :
owning the necessary tools to get your way regardless if people agree with you or not. Can be exercised through money, authority, looks, charm, etc. Recall the previous power elite discussions.
Prestige :
Respect, admiration, and social acceptance. Usually associated with occupational status in the United States.
Status Consistency/Inconsistency:
When property, income, and power are all equal a person experiences status consistency. When their is variability between the three the person may feel status inconsistency.
Status :
overall "average" or aggregate of property, power, and income.
Updated Marxist view on class
Owning the means of production is no longer the primary measure of social class (Marxist perspective).
Updated Marxist perspective by Wright (1985):
Capitalists :
Business owners with a large amount of employed workers
Petty Bourgeoisie :
small business owners (example = family run businesses)
Managers :
Top of manual labor ladder, oversees the work of other laborers.
Workers :
bottom of the hierarchy, responsible for completing their assigned tasks. Lowest amount of authority.
Classification of each level is still somewhat confusing and hard to categorize
Updated Weber & Class System
Capitalist class :
1% of the population that is worth more than 90% of the whole bottom class. High in power (influence), tight social network consisting of politicians, CEOs, media conglomerates, etc. Divided into
new money

Upper Middle Class :
Highest rates of education, likely to be managers, "realistically achievable" unlike the capitalist class. 15% of the population.
Lower Middle Class :
34% of the population, constant focus on climbing or descending the class ladder, income and prestige slightly higher than working class.
Working Class :
30% of the population, primarily blue and white-collar workers, their work is largely supervised by upper and lower middle class, easiest way to improve chances is through work seniority
Working Poor :
15% of the population, many jobs are temporary or part time, many are functionally illiterate, likely to not participate in voting, depend of government assistance,
Underclass :
least likely to experience social mobility, primarily in urban areas, 5% of the population, harder to access welfare than working poor
Social Mobility
Intergenerational Mobility :
when the offspring of parents move to a different social class
Upward/Downward Social Mobility :
Upward social mobility is climbing the social ladder whereas downward social mobility is falling down the social ladder.
Structural Mobility :
Movement on the social ladder due to changes in society instead of personal reasons (e.g., when a car company lays off 500 workers due to the improvement of machinery completing production)
Exchange Mobility :
Rarer occurrence where large amounts of people move up or down the social ladder at the same time due to similar reasons (e.g., crash on the stock market makes hundred of traders loose their investments).
For a long time social mobility research focused on men only. Women have extra pressures such as children and marriage that influence social mobility.
Steps that reduce wealth inequality?
Social Empathy :
the ability for people from a certain class to imagine living in another social class. In studies when we request participants to do this they typically right higher rates of sympathy towards people in poverty.
We want upper class citizens to develop this.
Social Inclusion :
research shows that people in poverty tend to not participate in social movements or ask for resources that can reduce poverty. We want lower class citizens to become more involved and develop social inclusion.
Distributive Justice :
There IS a tax cap for people who make over $113,700. Anybody who makes over this pays only 7.65%. Essentially the sliding scale influences people who make below 113K than people above it.
Remember the argument that people who make over 250K a year pay 25% of income taxes?
The Social Welfare Action Alliance (SWAA)
"Ain't I A Person?" Documentary
2014 and beyond in the American Economy
All Americans lost money during 2012-2015. Unfortunately, people with less money were impacted more.
Using imaginary salaries as an example, what is the more realistic concern? Bill Gates going from $2 billion to $1.75 billion OR a person making $42K going down to $39K?
The income between different races in the United States has increased since 2013. The largest wealth gap is between African-Americans and Caucasians.
Remember, this is governmental data and people still think it isn't real.
In 2014, CEOs at the top 350 U.S. corporations received, in salaries and other compensation (such as bonuses and stocks), an average of 303 times the average compensation of U.S. workers
That means that a typical worker would have to work 303 years to earn what a CEO makes in one year!
Today, the net worth of each household in the wealthiest 1% is nearly 300 times higher than net worth of the median U.S. household (Federal Reserve Bulletin, 2014).
Typically we see wealthy people make money off investments (e.g., stocks, businesses, bonds, real estate, etc.) whereas "average" citizens makes money from working.
1) years of home ownership
2) household income
3) unemployment
4) college education
5) inheritance
Why Does This Happen??
Extreme Poverty:
Sociological measurement, not a governmental one. People who live on less than $1.22 a day.
Most measurements of poverty do not include people who are homeless.
Decades of research demonstrates that people with more money live longer than people in poverty.
Marriage rates are lower and divorce rates are higher in families of low income.
Somebody living in poverty is more likely to be diagnosed with diabetes, heart disease, or lung cancer compared to a person who makes more than $60K a year.
The more income a woman makes, her chances of being diagnosed with breast cancer significantly reduces.
Childhood risks that increase living in poverty: being born preterm and low birth weight (very reliable data), experiencing SIDS, higher amount of cavities, blindness, and being deaf.
1.6 million Americans spend at least one night in the previous six months in an emergency shelter.
The amount of people who are homeless has increased in the past decade.
Use people first language! We say "people who are homeless" instead of "homeless people"
There has been a 20% increase in families who are homeless between 2007-2010.
32% of people who are homeless are actually families who are homeless. The most common family makeup in this scenario is a single mother with children.
Chronic Homeless:
these people have been on the streets for a very long time. These people often have substance abuse issues or mental illness.
Economic Homeless:
people who have just lost their job or house. These people are more likely to live in cars than people who are classified as chronically homeless.
There are higher rates of homelessness in urban cities compared to rural and suburban areas.
It tends to be overlooked, but people who are homeless are at a high risk of violent hate crimes.
Unemployment and other less desirable options
Part-Time workers:
you have to work less than 35 hours a week. There are around 27 million part-time workers in the United States.
30% of part-time workers actually want to be full-time or have just recently been reduced from full-time.
A full-time worker going to part-time against their choice can have devastating effects on financial security.
Part-time work is most common in the service sector. Retail is largely part-time work. The professional sector (salary positions) are least likely to be part-time work.
The business tends to benefit from a financial perspective with part-time workers. No benefits, no contracts, and less vacation pay. The drawback is that part-time workers have a
high turnover rate
and less dedication to the job.
20% of part-time workers have two or three part-time jobs to receive similar funding to a full time job.
Post 2010 in the United States has reported extremely high unemployment rates compared to the past and other countries.
Mass layoffs:
the concept where a company or business fires at least 50 workers at one time. A measurement of the Bureau of Labor Statistics.
Jobs most influenced by mass layoffs: construction, retail, manufacturing, retail, and government jobs.
From a racial analysis, Hispanic Americans and African-Americans tend to have higher job loss rates.
Discouraged and Underemployed Workers
Discouraged workers:
people who have given up on searching for a job. The risk of this happening increases the longer a person is unemployed.
A person over 65 is more likely to retire if they cannot find a job by six months.
Underemployed Workers:
workers who want to be full-time or who believe they are overqualified for their job.
Underemployment is becoming more common as more students receive a Bachelors degree.
Underemployed people tend to experience similar frustrations as unemployed workers. It is not as severe though since they are receiving some money.
The United States unemployed rate does NOT include part-time, discouraged, or underemployed workers.
The unemployment rate is around 7.3% in the United States. If we were to include the previously mentioned categories, the unemployment rate would be 24%.
Culture of Poverty:
the argument that growing up in poverty "teaches" you how to be poor. Meaning you see your parent's bad financial decisions (e.g., payday loans) and do the same thing when you grow up. Sociologists tend to oppose this theory. It is placing the blame on the victim.
Horatio Alger Myth:
if you work hard enough, you will always succeed. This was a HUGE belief in the early 1900s.
Myths about Poverty (Victim Blaming)
"People who receive welfare are lazy"
Actually more than 75% of people receiving welfare benefits are children. If you expect children to work, you are reinforcing child labor!
The most common forms of welfare are food stamps and WIC.
The average income for people who receive food stamps is $838 a month. Nobody can survive on this amount in the United States.
"Most people who use welfare have too many children"
1) Controlling a person's reproductive rights is unethical 2) Actually, 50% of people who receive food stamps have 1 child (the average being 1.8 children). Less than 8% of people receiving welfare have more than 3 children.
Too many people abuse the system"
Yes, people do abuse the system BUT at least a quarter of people in the United States qualify for welfare and do not use it. Lack of access is a larger concern than fraudulent abuse.
"Illegal Immigrants use our welfare"
Undocumented immigrants are NOT eligible for any form of government assistance. Requesting assistance would notify the government they are illegally here....
Testing Welfare Recipients for Drugs
Around 12 states have now introduced bills to either randomly test or test all welfare recipients for drugs.
All research so far has acknowledged this is a major waste of money.
Florida spent millions of dollars in the welfare budget to test recipients. They found less than 5% actually tested positive.
That means money that should have been given to people was wasted on drug testing.
How does Colorado and Washington handle this?? Why would these states have unique circumstances?
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