6.1: Economic Inequality

Economic Inequality

  • Economic inequality includes wealth and income.
  • Over the last 30 years, global poverty has dramatically decreased while wealth inequality has increased.
    • 10% of world’s population is poor.
    • Majority of impoverished people live in sub-Saharan Africa and South Asia.
    • In 2019, there were 2,153 billionaires (0.0000003% of the world) who held 60% of global wealth.
    • The majority of billionaires live in the United States, China, and Western Europe.
    • If you saved $10K a day since the building of the pyramids, you would have 20% of the average fortune of the world’s 5 richest billionaires.

Defining and Measuring Poverty

Global Measures
  • Absolute poverty: the lack of resources necessary for material well-being: food, water, housing, land, and health care
  • Relative poverty: a deficiency in material and economic resources compared with some other population
  • Extreme poverty: a daily income of less than $1.90 a day USD
Domestic Measures
  • 1964 metric based on families spending one-third of their income on food.
    • This metric is criticized as no longer being a realistic scenario due to multiple reasons, including other monthly costs being higher than food.

Sociological Theories of Economic Inequality

  • Meritocracy: an individualistic cultural view that people in a social system get ahead and earn rewards based on their individual efforts and abilities
Structural-Functionalist Perspective
  • Poverty is a consequence of institutional breakdown. This can result from things like:
    • An economic institution fails to provide sufficient jobs and pay.
    • An educational institution fails to provide employment skills.
    • A family institution fails to provide two parents.
    • A government institution fails to provide sufficient public support.
  • Economic inequality motivates people to achieve higher levels of training and education and to take on jobs that are more important and difficult since these offer higher rewards for higher achievements. (Davis/Moore)
  • Poverty has many societal functions. (Gans)
Conflict Perspective
  • Capitalism system creates economic inequality in which the bourgeoisie accumulate wealth as they profit from the labor of the proletariat, who earn wages far below the profits of the bourgeoisie. (Marx)
  • Welfare: government programs that provide financial or other aid to individuals or groups who cannot support themselves
  • Wealthfare: laws and policies that benefit the rich
  • Corporate welfare: laws and policies that benefit corporations
Symbolic Interactionist Perspective
  • Meanings, labels, and definitions affect and are affected by social life.
  • People labeled as “poor” are labeled and poverty is heavily negatively stigmatized.
  • Culture shapes how people interpret what it means to “deserve” public assistance, thereby shaping attitudes about welfare policy.

Economic Inequality in the United States

  • The United States has the highest degree of income inequality and rate of poverty of any industrialized nation.
  • From 1979 to 2018, income of the top 1% grew by 157.8% compared to the bottom 99% that rose by 23.9%. CEO compensations rose by 940%.
  • Median wealth of white households is nearly eight times the median wealth of black households and more than five times the wealth of hispanic households.
  • Social mobility: the likelihood and the extent to which people will change their socioeconomic status over the course of their lives and across generations
    • Social mobility in the United States is relatively low compared to other wealthy, industrialized nations.
Patterns of Poverty
  • Age
    • At approximately 20%, the United States has one of the highest childhood poverty rates in the world.
  • Feminization of poverty
    • Due to gender inequality, women have higher rates of poverty.
  • Education
    • High cost of college is a barrier for people living in poverty.
  • Working poor
    • People in the workforce employed in jobs that do not provide an adequate standard of living representing about 4.5% of the labor force.
  • Family structure
    • Female-headed single-parent households have the highest rate of poverty.
  • Race and ethnicity
    • Social factors contributing to poverty include discrimination, loss of manufacturing jobs, white-flight from urban city centers, and female-headed single-parent households.
  • Region
    • Poverty rates are highest in the South and West, and lowest in the Northeast.

Wealth and Poverty

Consequences of Economic Inequality
  • Health, hunger, and poverty
    • Absolute poverty is associated with maternal and infant deaths, indoor air pollution from heating and cooking fumes, and unsafe water and sanitation.
    • Inequality is associated with death rates, maternal mortality, heart disease, suicide rates, domestic violence, literacy, mental illness, drug and alcohol addiction, incarceration rates, and the erosion of social trust.
  • Substandard housing and homelessness
    • Nearly 5% of White people, 17% of Black people, and 8% of Hispanic people experience homelessness at some point in their lives
  • Legal inequalities
    • Without resources for effective legal representation, poor defendants often accept unfair plea bargains and harsher outcomes.
  • Political inequality and alienation
    • The United States can be described as a plutocracy.
    • Plutocracy: a country governed by the wealthy resulting in political alienation
    • Political alienation: separation between the political system and the poor
  • Crime, social conflict, and war
    • Inequality predicts murder rates better than any other variable.
    • Poverty breeds conflict and war and contributes to poverty.
  • Natural disasters
    • In all countries, poor are more vulnerable to natural disasters while the more affluent have resources that enable them to cope.
  • Educational problems
    • Children who grow up in poverty tend to receive lower grades, receive lower scores on standardized tests, are less likely to finish high school and attend or graduate from college than their more affluent peers.
    • Poor often attend schools that are characterized by lower-quality facilities, overcrowded classrooms, and a higher teacher turnover rate.
  • The marriage opportunity gap and familial issues
    • Among lower- and middle-income households, marriage rates are low, divorce rates are high, and non-marital childbearing rates are high.
    • Poverty is linked to teenage pregnancy and unintended childbearing.
  • Intergenerational poverty
    • Poverty that is transmitted from generation to next.
    • Problems associated with poverty, such as health and educational issues, create a cycle of poverty from one generation to the next.
    • Nearly half of U.S. children born to low-income parents will become low-income adults.

Strategies for Action

Global Strategies
  • Taxes on the wealthy
  • Economic development by embracing the green growth economy
  • Human development
    • Programs and policies that provide adequate nutrition, sanitation, housing, health care, reproductive health care and family planning, education, and job training
  • Microcredit programs to provide loans to people who are excluded from traditional credit services.
Domestic Strategies
  • Tax and political reforms to reduce unfair influence of wealthy
  • Minimum wage increase and living wage laws
  • Reduce wage theft to prevent employers from stealing from workers
  • Safety net — public assistance and welfare programs
    • Earned Income Tax Credit (EITC)
    • Supplemental Security Income and Medicaid
    • Temporary Assistance for Needy Families (TANF)
    • Food, Housing, Childcare, and Educational Assistance
    • Alleviating and preventing homelessness

Welfare

Common Myths and Misconceptions
  • Myth 1: People who receive welfare are lazy, have no work ethic, and prefer to have a “free ride” on welfare rather than work.
  • Myth 2: Fraud and abuse are rampant in the welfare system.
  • Myth 3: Welfare benefits are granted to many people who are not really poor or eligible to receive them.
  • Myth 4: Welfare makes people dependent on the government and prevents them from becoming contributing citizens.
  • Myth 5: Immigrants place a huge burden on our welfare system.

Understanding Economic Inequality

  • Significant global gains have been made in improving the standard of living for populations living in absolute poverty.
  • We have unprecedented levels in the world and in the United States, as the rich become richer.
  • Blaming poverty on the individual rather than on structural and cultural factors implies not only that poor individuals are responsible for their plight but also that they are solely responsible for improving their condition.
  • Instead of asking if we can afford to eradicate poverty, we might consider asking whether we can afford not to.