SOC100 - Lecture 5 Social class and socio economic inequality

economic inequality

* who is rich and who is poor and how we measure the inequality or difference between these two categories

operationalizing

* turning abstract concepts into measurable observations

Dunning-Kruger Effect

* cognitive bias whereby people with limited knowledge or competence in a given intellectual or social domain greatly overestimate their own knowledge or competence in that domain

consumer price index

• measures inflation each month

• sets inflation based on the price of a typical basket of goods

what does the basket of goods include?

• food and shelter

• household operations

• furnishings and equipment

• clothing and footwear

• transportation

• health and personal care

• recreation/education/reading

why is adjusting for inflation important?

* because incomes have to rise just to keep pace with inflation

How is average household income adjusted for inflation?

* by using the consumer price index

what are the two types of typical income measures?

• average income

• median income

average income

* add up all scores and divide by the total number of scores

what is the issue with using average income?

• it is highly influenced by high scores

• not a good measure of income

median income

* ranking all the scores from highest to lowest and reporting the middle number

what are the different types of income?

• active income

• passive income

active income

* income gained by exchanging time for money usually through a paid job or self-employment

passive income

• income that is not tied to active labour, income you do not exchange time for and may not actually require no time at all

• in the form of investing money in the stock market or real estate market

how do companies raise money ?

* selling parts or shares of the company

bonds

• fancy way of saying a loan

• buying one is basically giving a loan to a company or business that agrees to pay you interest

how do the rich stay rich?

* through passive income

The Matthew Effect

• advantage accumulates in ways that allow the rich to get richer

• when one comes from advantage they don’t need to take loans or pay interest but instead invest to earn more

ascribed status

* attributes, advantages and disadvantages assigned at birth

achieved status

* attributes, advantages and disadvantages developed throughout life as a result of effort and skill

Income quintiles

divides population into 5 groups

• top 20% of earners

• above average earners 20%

• middle or average 20%

• Below average 20%

• bottom 20% of earners

Before tax or market income

* all of the income earned by a household or person

after tax income

• measure of income after taxes and transfers are paid

• better measure of the changes in inequality

progressive tax system

* the more someone earns, the more tax they pay

GINI coefficient

• a way to measure inequality

• indicates that income is perfectly distributed in the country

• every citizen of the country has an equal income and overall income is perfectly shared equally between everyone

• scores closer to zero: indicate the country is equal

• scores closer to 1 or 100: the country is quite unequal

why did inequality grow so much in Canada?

• the very rich became much much richer

• workers lost bargaining power

• corporate consolidation means less small business owners

corporate consolidation

* big companies forcing smaller companies to sell to them or go out of business

why have workers lost bargaining power over their employers?

• due to the loss of unions as a product of globalization

• results in lower wages

Why have the rich gotten richer?

• due to rising CEO pay

• top income earners have gained a greater share of income

• workers have less leverage due to greater competition with workers in other countries because of globalization

• increases corporate profit and decreases worker shares of profit

how is the decline of unions tied to globalization?

* you lose leverage over your employer when they can move to another country quite easily

what is the reason that some unions still exist despite globalization?

• because they are essential services

• ex: teachers, fire fighters, nurses, etc

why has cooperate consolidation caused a decline in small business owners?

• corporations have grown more powerful due to globalization

• they can put smaller businesses out of business or threaten to so they are forced to sell to them because they have more ressources

oligopoly

• when a market is dominated by a small number of large sellers/producers and it often results in competitors price-matching in mutually beneficial ways

• leads to higher prices goods for the average person and less money for them to spend on other things

main takeaways

• inequality has grown so much that Canada is one of the more unequal developed countries

• children of the very rich stay rich because of the Matthew effect and passive income

• inequality has grown because of globalization

what are the three main components of wealth?

• assets

• liabilities

• net worth

what are the 2 main reasons for inequality growing with little response?

• most homes gained gained an extra income earner and this was not seen as unfair but rather progress towards women’s rights

• access to loans and debt has grown a lot allowing access to goods we want/need despite not having the money

  increases Matthew Effect

net worth

total assets minus liabilities

assets

* real estate value, vehicle value, cash on and or in bank account, investments, retirement funds, value of other possessions

liabilities

* typically just different kinds of debt such as mortgage, auto mobile, student loan, credit card debt

invisible inequality

• rising debt is a form of it

• an inequality that exists but is impossible to see unless someone tells you what their debt load is

how do we measure poverty?

• absolute poverty

• relative poverty

• extreme poverty

absolute poverty

• lack of resources necessary for material well being

• food, water, land and health care

relative poverty

* a deficiency in material and economic resources compared with some other population

extreme poverty

living on less than 1.25 a day

* 15% of the world