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