Confronting Economic Inequality - CH7

What Is Economic Inequality?

• Economic inequality: Unequal distribution of economic resources like income and wealth.
• Lifestyles that people in a society can afford differ based on their economic position.
• Possible reasons for economic inequality:
  • Varying degrees of talent, hard work, or luck.
  • Influence of gender, race, and sexual orientation.

Measuring Inequality

• Income: Money received in exchange for services or investments.
• Wealth: Worth of your assets minus your debts.

Income Inequality

• Those with good educations and special, in-demand skills earn more.
• People with great responsibilities also should earn more than others.
• Income varies during economic cycles.

Wealth Inequality

• One cannot accumulate substantial wealth without a good income.
• Individuals and families have assets that they inherit or that their parents can share with them.
• The wealth gap in the United States is even more significant than the income gap.
• Gini coefficient: A measure of economic inequality.
  • Measures how much income would need to be distributed to have a completely equal society.
  • The higher the coefficient, the more economic inequality.

Meritocracy and the Functions of Inequality

• Recognize and reward the talented.
• Meritocracy: Positions most important get the greatest rewards in terms of income and prestige.
  • Reward excellence rather than family relations or other influences.
  • Income reflects the contribution to society.
  • Those with the ability to become key contributors should be guided and given training.

Marx and Weber on Inequality

• Marx: Rewards were based on social class, not merit.
  • Only two classes: bourgeoisie and proletariat.
  • Economic inequality: The consequence of incompatible interests between two classes.
    • Bourgeoisie: To make a profit by lowering costs and keeping wages low.
    • Proletariat: To make a good living.
  • The wealthy control the media; they fool the proletariat into accepting economic inequality.
    • How the economy creates goods and services for consumption and trade is key to wealth.
    • The proletariat would eventually rise up against the bourgeoisie in a revolution.
  • When members of a class embrace values that work against their own interests, they have developed a false consciousness.
• Weber: Class position is not only based on owning capital but also on skill sets and social status.
  • Skilled workers can demand more money.
  • Three traits determine socioeconomic status: Class, Status, and Party.
    • In some cases, all these elements align.

Understanding Social Stratification

• Social stratification: The way valuable goods and desired intangibles are distributed.
• Every society has social stratification created and maintained through structured inequalities, advantages, and disadvantages built into the social institutions of a society like education, religion, and family.

Systems of Stratification

• Slavery: The most rigid form of stratification.
• Estate system: Very limited social mobility.
  • Laws distribute power and rights based on social standing.
• Caste systems: Rigid systems that confine individuals to a social group for their lifetimes, assigning them specific roles in a society with tight rules over the relationships among castes.
• Class-based systems: Members of a social class share a common status and lifestyle.
  • Class systems offer more mobility than other forms of stratification, and individuals may move up or down the economic ladder.

Examining the Class System

• Social class: Distinctions among groups of people based on income, occupation, and education.
• Five distinct social classes: the upper, upper middle, middle, lower/working, and lowest.
• The sharp increase in the concentration of wealth has created a small number of extremely wealthy families who can pass on their riches to succeeding generations, creating an American aristocracy.

The Upper Class

• Tools to maintain social status:
  • Residential enclaves, exclusive private schools, and clubs with invitation-only admission policies.
  • Children are not exposed to other social classes.
• Social class reproduction: A process through which members of the upper class ensure that their children maintain their status.
• Power elite: Corporate community; have power and influence over government decisions.

The Middle Class

• Serves as the center of the nation’s economic power and prestige.
• Opportunities for class mobility and enough wealth to fuel consumption, savings, and investments in housing and education.

The Working Class, the Poor, and Covid-19

• People at the bottom half of the income structure face challenges in meeting living expenses.
• The Covid-19 pandemic disproportionately affected poor and working-class families.
  • Housing and food insecurity.
  • Mental health issues, like depression.
  • Inability to continue with college and education.

Culture of Poverty Theory and Policies toward the Poor

• Oscar Lewis: Culture of poverty to describe those in poverty and distinguish them from more productive members of society.
• Poverty and deprivation create cultural responses geared to survival.
  • The poor could move out of poverty if they changed their attitudes and worked harder.
• Government policies rely on the culture of poverty.

Mobility Within and Across Generations

• Mobility: Movement between social classes in a society.
  • Upward mobility: When they climb up the economic ladder.
  • Downward mobility: When their class position falls.
  • Intergenerational mobility: Change in social class from one generation to the next.

Changes in the Economy

• Structural mobility: When changes in a society’s institutions lead to upward or downward mobility for whole classes or groups of people.
• Reasons for economic inequality:
  • Changes in technology (allowing for easier transportation of goods around the world, companies to hire low wage workers in other parts of the world, and machines doing work employees once did).
  • The declining power of unions (and, thus, jobs that pay union wages).
  • Tax policies favoring the wealthy.
  • The erosion of social safety nets (e.g., access to welfare, public housing, food assistance).
  • The increasing costs of college and healthcare.

Consequences of Inequality

Education

• Economic inequality relates to other forms of social inequality.
• Achievement gap between wealthy students and those at the bottom of the economy.
• Reasons why many college students fail to earn their degree:
  • High costs of tuition.
  • The stresses of managing work, family obligations, and academic demands.
  • Poor advising.
  • Lack of adequate preparation for college-level academic work.
• Students who enroll in community colleges are least likely to graduate, and those who do graduate usually do not finish their associate’s degree within 2 years.

Housing

• Reasons for high housing costs:
  • Increasing rental and home prices.
  • Decreases in tax-supported housing assistance programs.
  • Policies that favor homeowners over renters.
  • Concentration of ownership among landlords.
  • A decline in public housing.
• The Covid-19 pandemic has made the housing situation worse for both homebuyers and renters.
• High rent leads to eviction, which leads to deeper poverty.
• Children in better neighborhoods are much better off as adults with higher incomes and lower rates of imprisonment.

Life Expectancy

• Social class impacts health and life spans.
  • Quality of neighborhoods, rather than geography, is key.
  • More money, the safer and healthier your environment tends to be, and the more likely to live a long, healthy life.

Global Inequality

• Stratification exists among and within nations.
• High-income, upper middle-income, lower middle-income, and lower income countries.
• Inequality is a global phenomenon.
• Policies impact structural mobility in various nations.
• The pandemic caused global poverty to increase.

Addressing Inequality

• National and global policies can mitigate or increase inequality.
• During increasing inequality, leaders face political pressure to enact policies to decrease inequality and help those suffering from it.
  • Those who cannot respond effectively risk the public’s wrath and demands for a change in leadership.

President Trump’s Economic Policies

• Enacted a $2.3$ trillion-dollar tax cut.
• Imposed tariffs on goods from other nations, changed long-standing treaties on trade, and weakened regulations on business, the environment, and consumer protection.
• Most of the benefits went to corporations and the wealthy.

United States versus EU’s Policies

• Policies that influence structural mobility make real differences in economic inequality rates.
• EU countries have higher tax rates and more broad programs for social support.
• U.S. policies: Global income inequality will rise.
• EU’s policies: Income inequality to decline. Better outcomes in education, health, public safety, and mobility.
• An individual’s success depends on government policies: Evidence of the impact of government policies on economic inequality throughout the history of the United States.
• Social scientists play a major role in policymaking efforts to reduce inequality.