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How equal or unequal is the distribution of income in the United States?

How equal or unequal is the distribution of income in the United States?

POVERTY AND PROSPERITY IN THE UNITED STATES

Melanie Stetson Freeman / Contributor/Getty Images

An article in a recent issue of Bloomberg Markets that reported on a growing demand among investors for trailer park properties in the United States profiled one such investor:

When Dan Weissman worked at Goldman Sachs Group Inc. and, later, at a hedge fund, he didn’t have to worry about methamphetamine addicts chasing his employees with metal pipes. Or SWAT teams barging into his workplace looking for arsonists.

Both things have happened since he left Wall Street and bought five mobile home parks: four in Texas and one in Indiana. Yet he says he’s never been so relaxed in his life….

[He] attributes his newfound calm to the supply-demand equation in the trailer park industry. With more of the U.S. middle class sliding into poverty and many towns banning new trailer parks, enterprising owners are getting rich renting the concrete pads and surrounding dirt on which residents park their homes.

“The greatest part of the business is that we go to sleep at night not ever worrying about demand for our product…. It’s the best decision I’ve ever made.” (Effinger & Burton, 2014)

The decline of the U.S. middle class has wrought substantial consequences for millions of families. It has also, as the Bloomberg article suggests, opened new opportunities for others, including members of the upper class. The economic position of the middle class, particularly its less educated fraction, has been slowly declining since the 1970s, a process accelerated by the economic recession of 2007–2010, the effects of which are still felt in many families and communities. At the top of the economic ladder, however, incomes have risen and fortunes expanded. These important changes in the U.S. class structure are of great interest to sociologists. Helping you to understand them is a key goal of this chapter.

Inequality and the Economic Crisis CLICK TO SHOW

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AP Photo/Ben Margot

In a protest against affirmative action in college admissions, a “diversity bake sale” held at a California college by the College Republicans set pastry prices by racial and gender group. The action provoked anger among those who argue that affirmative action is a means of ensuring equal access to educational opportunities. Interest has grown recently in focusing affirmative action policies on class rather than on race or gender. Is this likely to provoke controversy as well?

We begin this chapter with an examination of forms of stratification in traditional and modern societies, followed by a discussion of the characteristics of caste, social class, and stratification. Next, we look at important quantitative and qualitative dimensions of inequality and both household and neighborhood poverty in the United States. Finally, we discuss theoretical perspectives that consider the analytical question of why these economic phenomena exist and persist.

STRATIFICATION IN TRADITIONAL AND MODERN SOCIETIES

In the United States today, there is substantial social inequality—a high degree of disparity in income, wealth, power, prestige, and other resources. Sociologists capture the disparities between social groups conceptually with an image from geology: They suggest that society, like the earth’s surface, is made up of different layers. Social stratification is thus the systematic ranking of different groups of people in a hierarchy of inequality. Sociologists seek to outline the quantitative dimensions and the qualitative manifestations of social stratification in the United States and around the globe, but—even more important—they endeavor to identify the social roots of stratification.

Stratification systems are considered “closed” or “open,” depending on how much mobility between layers is available to groups and individuals within a society. Caste societies (closed) and class societies (open) represent two important examples of systems of stratification.

CASTE SOCIETIES

In a caste society the social levels are closed, so that all individuals remain at the social level of their birth throughout life. Social status is based on personal characteristics—such as race or ethnicity, parental religion, or parental caste—that are present at birth, and social mobility is virtually impossible. Social status, then, is the outcome of ascribed rather than achieved characteristics.

Historically, castes have been present in some agricultural societies, such as rural India and South Africa prior to the end of White rule in 1992. In the United States before the end of the Civil War in 1865, slavery imposed a racial caste system because enslavement was usually a permanent condition (except for those slaves who escaped or were freed by their owners). In the eyes of the law, the slave was a form of property without personal rights. Some argue that institutionalized racial inequality and limits on social mobility for African Americans remained fixtures of the U.S. landscape even after the end of slavery (Alexander, 2010; Dollard, 1957; Immerwahr, 2007). Indeed, enforced separation of Blacks and Whites was supported by federal, state, and local laws on education, family formation, public spaces, and housing as late as the 1960s.

Caste systems are far less common in countries and communities today than they were in centuries past. For example, India is now home to a rising middle class (see Chapter 8 for a fuller discussion of caste and class in India), but it has long been described as a caste-based society because of its historical categorization of the population into four basic castes (or varnas): priests, warriors, traders, and workmen. These categories, which can be further divided, are based on the country’s majority religion, Hinduism. At the bottom of this caste hierarchy one finds the Dalits or “untouchables,” the lowest caste.

Hollywood’s American Dream CLICK TO SHOW

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© Bettmann/CORBIS

In Loving v. Virginia (1967), the U.S. Supreme Court ruled unanimously that a law forbidding interracial marriage was unconstitutional. Richard and Mildred Loving, shown here, were married in the District of Columbia in 1958. Their arrest in Virginia, where they resided, prompted the case.

Since the 1950s, India has passed laws to integrate the lowest caste members into positions of greater economic and political power. Some norms have also changed, permitting members of different castes to intermarry. While members of the lowest castes still lag in educational attainment compared to higher-caste groups, India today is moving closer to a class system.

CLASS SOCIETIES

In a class society social mobility allows an individual to change his or her socioeconomic position. Class societies exist in modern economic systems and are defined by several characteristics. First, they are economically based, at least in theory—that is, class position is determined largely by economic status (whether earned or inherited) rather than by religion or tradition. Second, class systems are relatively fluid: Boundaries between classes are violable and can be crossed. In fact, in contrast to caste systems, in class systems social mobility is looked at favorably. Finally, class status is understood to be achieved rather than ascribed: Status is, ideally, not related to a person’s position at birth or religion or race or other inherited categories, but to the individual’s merit or achievement in areas like education and occupation.

As we will see in this chapter, these ideal-typical characteristics of class societies do not necessarily describe historical or contemporary reality, and class status can be profoundly affected by factors like race, gender, and class of birth.

SOCIOLOGICAL BUILDING BLOCKS OF STRATIFICATION AND SOCIAL CLASS

Nearly all socially stratified systems share three characteristics. First, rankings apply to social categories of people—that is, to people who share common characteristics without necessarily interacting or identifying with one another. In many societies, women may be ranked differently than men, wealthy people differently than the poor, and highly educated people differently than those with little schooling. Individuals may be able to change their rank (through education, for instance), but the categories themselves continue to exist as part of the social hierarchy.

Second, people’s life experiences and opportunities are powerfully influenced by how their social categories are ranked. Ranking may be linked to achieved status, which is social position linked to a person’s acquisition of socially valued credentials or skills, or ascribed status, which is social position linked to characteristics that are socially significant but cannot generally be altered (such as race or gender). While anyone can exercise individual agency, membership in a social category may influence whether an individual’s path forward (and upward) is characterized by obstacles or opportunities.

The third characteristic of a socially stratified system is that the hierarchical positions of social categories tend to change slowly over time. Members of those groups that enjoy prestigious and preferential rankings in the social order tend to remain at the top, though the expansion of opportunities may change the composition of groups over time.

Societal stratification has evolved through different stages. The earliest human societies, based on hunting and gathering, had little social stratification; there were few resources to divide, so differences within communities were not very pronounced, at least materially. The development of agriculture produced considerably more wealth and a consequent rise in social stratification. The hierarchy in agricultural societies increasingly came to resemble a pyramid, with a large number of poor people at the bottom and successively smaller numbers in the upper tiers of more economically advantaged members.

Racial Stratification and Inequality CLICK TO SHOW

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FIGURE 7.1 Class in the United States (Gilbert-Kahl Model)

SOURCE: Gilbert, D. L. (2011). The American class structure in an age of growing inequality. Thousand Oaks, CA: Pine Forge.

Modern capitalist societies are, predictably, even more complex: Some sociologists suggest that the shape of class stratification resembles a teardrop (Figure 7.1), with a large number of people in the middle ranks, a slightly smaller number of people at the bottom, and very few people at the top.

© Bob Rowan/Progressive Image/Corbis

How would you define the U.S. middle class? Is the definition used by the White House Task Force on the Middle Class too broad or not broad enough? Should aspirations or achievements be the foundation of a definition of a socioeconomic class?

Before we continue, let’s look at what sociologists mean when they use the term class.Class refers to a person’s economic position in society, which is associated with income, wealth, and occupation. Class position at birth strongly influences a person’s life chances, the opportunities and obstacles the person encounters in education, social life, work, and other areas critical to social mobility. Social mobility is the upward or downward status movement of individuals or groups over time. Many middle-class Americans have experienced downward mobility in recent decades. Upward social mobility may be experienced by those who earn educational credentials or have social networks they can tap. A college degree is one important step toward upward mobility for many people.

The class system in the United States is complex, as class is composed of multiple variables. We may, however, identify some general descriptive categories. Our descriptions follow the class categories used by Gilbert and Kahl, as shown in Figure 7.1 (Gilbert, 2011). At the bottom of the economic ladder, one finds what economist Gunnar Myrdal (1963), writing in the 1960s, called the underclass: “a class of unemployed, unemployables, and underemployed who are more and more hopelessly set apart from the nation at large” (p. 10). The term has also been used by sociologists like Erik Olin Wright (1994) and William Julius Wilson (1978), whose work on the “black underclass” described that group as “a massive population at the very bottom of the social ladder plagued by poor education and low-paying, unstable jobs” (p. 1).

People who perform manual labor or work in low-wage sectors like food service and retail jobs are generally understood to be working class, though some sociologists distinguish those in the working class from the working poor. Households in both categories cluster below the median household income in the United States and are characterized by breadwinners whose education beyond high school is limited or nonexistent. People in both categories depend largely on hourly wages, though the working poor have lower incomes and little or no wealth; while they are employed, their wages fail to lift them above the poverty line, and many struggle to meet even basic needs. Author David Shipler (2005) suggests that they are “invisible,” as U.S. mainstream culture does not equate work with poverty.

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Those who provide skilled services of some kind (whether legal advice, electrical wiring, nursing, or accounting services) and work for someone else are considered—and usually consider themselves—middle-class. Lawyers, teachers, social workers, plumbers, auto sales representatives, and store managers are all widely considered to be middle class, though there may be significant income, wealth, and educational differences among them, leading some observers to distinguish between the (middle) middle class and the upper-middle class. As most Americans describe themselves in surveys as “middle class,” establishing quantitative categories is challenging. In fact, in 2010, the White House Task Force on the Middle Class, led by Vice President Joe Biden, opted for a descriptive rather than statistical definition of the middle class, suggesting that its members are “defined by their aspirations more than their income. [It is assumed that] middle class families aspire to homeownership, a car, college education for their children, health and retirement security and occasional family vacations” (U.S. Department of Commerce, Economics and Statistics Administration, 2010).

FIGURE 7.2 U.S. Real Median Household Income by Racial and Ethnic Group, 1967–2013

SOURCE: U.S. DeNavas-Walt, C., & Proctor, B. D. (2014). Income and poverty in the United States: 2013 (Current Population Reports P60-249). Washington, DC: U.S. Census Bureau.

Those who own or exercise substantial financial control over large businesses, financial institutions, or factories are generally considered to be part of the upper class, a category Gilbert and Kahl term the capitalist class (Gilbert, 2011). This is the smallest of the categories and consists of those whose wealth and income, whether gained through work, investment, or inheritance, are dramatically greater than those of the rest of the population.

Below we look more closely at some key components of social class position: income, wealth, occupation, and political voice.

INCOME

Income is the amount of money a person or household earns in a given period of time. Income is earned most commonly at a job and less commonly through investments. Household income also includes government transfers such as Social Security payments or disability checks. Income typically goes to pay for food, clothing, shelter, health care, and other costs of daily living. It has a fluid quality in that it flows into a household in the form of pay-period checks and then flows out again as the mortgage or rent is paid, groceries are purchased, and other daily expenses are met.

U.S. household incomes have largely stagnated over the past decades, a topic we cover in detail later in the chapter. Effects of the recent economic crisis have not been felt evenly, but they have been experienced by all U.S. ethnic and racial groups (Figure 7.2). Income gains in the United States, however, have been disproportionately concentrated among top earners. In May 2014, the Associated Press reported that the median pay of chief executive officers (CEOs) in the United States had passed the $10 million mark the previous year, noting, “A chief executive now makes about 257 times the average worker’s salary, up sharply from 181 times in 2009” (Sweet, 2014).

WEALTH

Wealth (or net worth) differs from income in that it is the value of everything a person owns minus the value of everything he or she owes. Wealth becomes a more important source of status as people rise on the income ladder.

For most people in the United States who possess any measurable wealth, the key source of wealth is home equity, which is essentially the difference between the market value of a home and what is owed on the mortgage. This form of wealth is illiquid (as opposed to liquid); illiquid assets are those that are logistically difficult to transform into cash because the process is lengthy and complicated. So a family needing money to finance car repairs, meet educational expenses, or even ride out a period of unemployment cannot readily transform its illiquid wealth into cash.

Structural inequality and parental income CLICK TO SHOW

John Oliver on Income Inequality & Wealth CLICK TO SHOW

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Economists and sociologists treat net financial assets as a measure of wealth that excludes illiquid personal assets such as home and car. Examples of net financial assets are stocks, bonds, cash, and other forms of investment assets. These are the principal sources of wealth used by the rich to secure their position in the economic hierarchy and, through reinvestment and other financial vehicles, to accumulate still more wealth.

Wealth, unlike income, is built up over a lifetime and passed down to the next generation. It is used to create new opportunities rather than merely to cover routine expenditures. Income buys shoes, coffee, and car repairs; wealth buys a high-quality education, business ventures, and access to travel and leisure that are out of reach of most, as well as financial security and the creation of new wealth. Those who possess wealth have a decided edge at getting ahead in the stratification system. In the United States, wealth is largely concentrated at the very top of the economic ladder.

OCCUPATION

An occupation is a person’s main vocation. In the modern world, this generally refers to paid employment. Occupation is an important determinant of social class because it is the main source of income in modern societies. The U.S. Bureau of Labor Statistics tracks 840 detailed occupational categories in the United States. Sociologists have used various classifications to reduce these to a far smaller number of categories. For example, jobs are described as blue-collar if they are based primarily on manual labor (factory workers, agricultural laborers, truck drivers, and miners) and white-collar if they require mainly analytical skills or formal education (doctors, lawyers, and business managers). The term pink-collar is sometimes used to describe semiskilled, low-paid service jobs that are primarily held by women (waitresses, salesclerks, and receptionists).

In the 1990s, some writers adopted the term gold-collar to categorize the jobs of young professionals who commanded huge salaries and high occupational positions very early in their professional careers thanks to the technology bubble and economic boom of the 1990s (Wonacott, 2002). After the bubble burst, gold-collar workers were more often found in the financial sector, earning very substantial salaries and benefits. The economic recession that commenced in 2007 put a damper on growth in salaries and benefits of gold-collar workers, but they have risen again in recent years.

STATUS

Status refers to the prestige associated with social position. It varies based on factors such as family background and occupation. A considerable amount of social science research has gone into classifying occupations according to the degrees of status or prestige they hold in public opinion.

We might expect white-collar jobs to rank more highly in prestige than blue-collar jobs, but do they? Doctors and scientists are indeed at the top of the prestige scale—but so are less highly paid professionals such as nurses and firefighters (who top the poll results discussed in this section, with 62% of respondents indicating that firefighters have “very great prestige”). Also in the top ranks are teachers and military officers (both with 51% conferring “very great prestige” on them). At the bottom are actors, stockbrokers, accountants, and real estate agents (just 5% of respondents indicated “very great prestige” for real estate agents). It seems occupations that require working with ideas (scientist, engineer) or providing professional services that contribute to the public welfare (teacher, doctor, firefighter) have the highest prestige, and, perhaps surprisingly, the U.S. public does not always relate prestige to income (Harris Interactive, 2009).

Prestige rankings of specific occupations have been relatively stable over time, though changes do occur. For instance, since 1977 both scientists and lawyers have lost ground, falling 9 points to 57% and 10 points to 26%, respectively. What factors might explain these drops? Have societal changes taken place that might contribute to our understanding of why occupations like these rise and fall on the prestige scale?

POLITICAL VOICE

Political power is the ability to exercise influence on political institutions and/or actors in order to realize personal or group interests. It involves the mobilization of resources (such as money or technology or political support of a desired constituency) and the successful achievement of political goals (such as the passage of legislation favorable to a particular group).

Perceptions of Wealth Inequality CLICK TO SHOW

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Sociological analyses of power have revealed a pyramid-shaped stratification system in the United States—as well as in most advanced industrial societies, including those of Western Europe. At the top are a handful of political figures, businesspeople, and other leaders with substantial power over political decision making and the national economy. Moving down the pyramid, we encounter more people—and less power (Domhoff, 2009).

Sociologist C. Wright Mills began to write as early as the 1950s about the existence of a “power elite,” which he defined as a group comprising elites from the executive branch of government, the military, and the corporate community who share social ties, a common “worldview” born of socialization in prestigious schools and clubs, and professional links that create revolving doors between positions in these three areas (Mills, 1956/2000a).

In contrast to the pluralist perspective on U.S. democracy, which suggests that political power is fluid and passes, over time, among a spectrum of groups and interests who compete in the political arena, Mills offered a critical perspective. He described a concentration of political power in the hands of a small elite. According to Mills, while some power over local issues remains in the hands of elected legislatures and interest groups, decision-making power over issues of war and peace, global economic interests, and other matters of international and national consequence remain with the power elite. The power of the masses is little more than an illusion in Mills’s view; the masses are composed of “entirely private” individuals wrapped up in personal concerns and largely disconnected from the political process. (We discuss the power elite and pluralism more fully in Chapter 14.)

Today, the middle class is at the center of electoral discourse, but are decision makers addressing the fundamental economic concerns, including stagnating wages, of the middle class? Or do the interests of the wealthy guide policy making? Are the voices of the poor present in politics? What do you think? In the following we look more closely at trends in inequality in the United States.

CLASS AND INEQUALITY IN THE UNITED STATES: DIMENSIONS AND TRENDS

The United States prides itself on being a nation of equals. Indeed, except for the period of the Great Depression of the 1930s, inequality declined throughout much of the 20th century, reaching its lowest levels during the 1960s and early 1970s. But during the past three decades, inequality has been on the rise again. The rich have gotten much richer, middle-class incomes have stagnated, and a growing number of poor are struggling to make ends meet.

INCOME INEQUALITY

Sociologist Richard Sennett (1998) writes that “Europeans from [Alexis de] Tocqueville on have tended to take the face value for reality; some have deduced we Americans are indeed a classless society, at least in our manners and beliefs—a democracy of consumers; others, like Simone de Beauvoir, have maintained we are hopelessly confused about our real differences” (p. 64). Was Tocqueville right, or Beauvoir? Are we classless or confused? What are the dimensions of our differences? Let us look at what statistics tell us.

Every year the U.S. Census Bureau calculates how income is distributed across the population of earners. All households are ranked by annual income and then categorized into quintiles, or fifths. The Census Bureau calculates how much of the aggregate income, or total income, generated in the United States each quintile gets. In other words, imagine all legally earned and reported income thrown into a big pot—that is the aggregate income. The Census Bureau wants to know (and we do too!) how much of this income goes to each quintile of earners. In a society with equal distribution across quintiles, each fifth of earners would get about one-fifth of the income in the pot. Conversely, in a society with complete inequality across quintiles, the top would get everything, and the bottom quintiles would be left empty-handed. The United States, like all other countries, falls between these two hypothetical extremes.

In Figure 7.3, we see how aggregate income in the United States is divided among quintiles of earners. When we look at the pie, we see that income earners at different levels take in disparate proportions of the income total. Those in the bottom quintile take in just over 3% of the aggregate income, while those in the top quintile get more than half; that means the top 20% of earners bring in as much as all in the bottom 80% combined. No less significant is the fact that the top 5% take in more than 22% of the total income—more than the bottom 40% combined (DeNavas-Walt & Proctor, 2014).

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