Lecture 5: Social Class & Socio-Economic Inequality

Economic Inequality

Disparity in the distribution of income between individuals, groups, populations, social classes, or countries 

Operationalizing

The process of turning abstract concepts into measurable observations (i.e. flight)

Dunning-Kruger Effect

A cognitive bias in which people wrongly overestimate their knowledge or ability in a specific area

Inflation

An increase in the level of prices of the goods and services that households buy; measured via the consumer price index

Consumer Price Index

Represents changes in prices as experienced by Canadian consumers by comparing the cost of a fixed basket of goods and services over time

Eight major components of consumer price index

Food, shelter, household operations, furnishings and equipment, clothing and footwear, transportation, health and personal care, recreation, education and reading, alcoholic beverages, tobacco products, recreational cannabis 

Average Income

Calculated by adding up all incomes and dividing by the total number of incomes. Flaw: influenced by outliers → less accurate 

Median Income

Calculated by ranking all scores from highest to lowest and reporting the middle number; eliminates outliers → more accurate  

Active Income

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

Passive Income

Income not tied to active labor (i.e. stock market, real estate market, etc)

Stocks

Shares of ownership in a company 

Bonds

Giving a loan to a company or business that agrees to pay interest over a set period of time 

Matthew Effect

Advantage accumulates in ways that allow the rich to get richer 

Achieved Statuses

Attributes (advantages and disadvantages) developed throughout life as a result of effort and skill 

Ascribed Statuses

Attributes (advantages and disadvantages) assigned at birth (i.e. gender, race, sexuality, etc)

Income Quintiles

Different levels of socioeconomic status 

Before Tax/Market Income

All of the income earned by a household or a person

After Tax Income

A measure of income after taxes and transfers are paid 

Gini Coefficient

A range between 0 (0%) and 1 (100%). 0% indicates income is perfectly distributed in the country; 100% indicates income is totally unequal and one person earns all the income 

Three reasons for rising wealth inequality

• The rich became much richer due to rising CEO pay

• Workers lost bargaining power due to loss of unions (an effect of globalization)

• Corporate consolidation → less small business owners

Labour Unions

Unions formed by workers to cooperatively fight for their rights (i.e pension, holidays) and for higher pay

Oligopoly

A market structure that a small number of firms control the market 

lack of recognition to rising inequality

• Most homes gained an extra income gainer → masked that individual hob incomes did not grow but the standard of living did 

• Access to loans and debt allowed access to goods we want or need despite not having money for it 

Assets

Anything you own that adds financial value (i.e. real estate value, vehicle value, investments, retirement funds, jewelry, etc)

Liabilities

Debts or obligations a person or company owes to someone else (i.e. mortgage, student loan, credit card debt, etc)

Invisible Inequality

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

Absolute Poverty

The lack of resources necessary for material well being: food, water, housing, land, and healthcare

Relative Poverty

A deficiency in material and economic resources compared with some other population

Extreme poverty

Living on less than $2.15 a day