1004.Chap6 - Chapter six, Social Stratification Income -...

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Unformatted text preview: Chapter six, Social Stratification Income - important to status Division of the Economic Pie 23% 50% 15% 9% 3% Income share of each quintile 50 45 40 35 30 25 20 15 10 5 0 Income Top 2nd Middle 4th Bottom Income Changes From 1980 to 1999 Top 20% Middle 20% Bottom 20% Up 30% Up 2% Down 21% Incomes shares of Top 20% and Middle 20% 60 50 40 30 20 10 0 Top 20% Mid 20% '80 '85 '90 '95 '00 '05 Income share received by Top 5% 25 20 15 10 5 0 Top 5% 1980 1985 1990 1995 2000 2005 Income Share received by {Top 20% - Top 5%} 50 40 30 20 10 0 1980 1985 1990 1995 2000 2005 20%-5% Family Income, 1980-2005 Median for All, Lower limit for Top 5% (constant dollars) 180000 160000 140000 120000 100000 80000 60000 40000 20000 0 1980 1985 1990 1995 2000 2005 All Families Top 5% CEO compensation (top 500 corporations), compared to the average worker Year Ratio 1980 42X 2004 431X Income Income refers to the amount of new money people receive within a given time interval. Examples: Wages and salaries Interest income from savings acct or bonds Dividends from stocks Capital gains from selling stock for more than you paid for it Capital gains from selling investment property for more than you paid for it Wealth (assets minus debts) Wealth is the net value of everything that a person owns at a point in time. House: Value of house minus what owner owes the bank. Cars – value of car Stocks, bonds Investment property Rare art, coins, sailboat Second home Wealth inequality Wealth quintile Percent of total personal wealth this quintile has 83% 12% 4% 1% 0% [Actually -.12] Top 20% Second 20% Middle 20% Fourth 20% Bottom 20% Franklin Delano Roosevelt “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.” Meritocracy The rewards a person gets are based solely on ability and effort. The Meritocracy Myth Book by Stephen McNamee and Robert Miller Do they mean that ability and effort don’t matter? No! they mean that ability and effort are not the only things that matter. If a meritocracy, inequality is fair. CEO compensation in 2007 Corporation Fannie Mae Freddie Mac Lehman Brothers AIG Compensation in MILLIONS $11.6 $18.3 $34.4 $14.4 Stratification and inequality found in every society How does the parents’ income affect where children end up in the stratification hierarchy? Types of Stratification Systems Caste - rigid closed stratification system • no movement between casts ascribed status • Lawyers, farmers, untouchables (below caste system) Class – open open stratification system • Movement between class based on economic standing achieved status How much movement is there in the U.S. system of stratification? 1. Income difference between 2 sons is about 1/2 the difference between fathers. 2. If 100 fathers are in top 20%, then 40% of their sons are in top 20%. How does the parents’ income affect where children end up in the stratification hierarchy? Parents know people to help get better jobs If parents have money then they would send to better colleges Davis and Moore Theory of Stratification- necessary for society In a society with a complex division of labor, some positions are more important. High rewards are offered to these positions in order to attract the most qualified individuals to these positions “Functional interpretation of stratification” Criticisms of Davis and Moore 1. Lacks precision 2. Incomplete 3. Inconsistent with reality Conflict Theory Social classes are in conflict Inequality benefits the rich Stratification serves the interest of an elite However, it’s good if doctors get paid more because we need them CEO compensation in 2007 Corporation Fannie Mae Freddie Mac Lehman Brothers AIG Compensation in MILLIONS $11.6 $18.3 $34.4 $14.4 Class warfare? Wall Street excesses Wall Street drove the world economy to the brink of disaster in 2008. Wall Street executives give themselves enormous bonuses. Citigroup $27.68 billion in losses in 2008 Paid $5.33 billion in bonuses in 2008 738 employees each got $1 million+ Wall street excesses, II JP Morgan Earned $5.6 billion in 2008 Paid $8.60 billion in bonuses 1148 employees received $1 million + Goldman Sachs Earned $2.3 billion in 2008 Paid $4.8 billion in bonuses 212 employees got $3 million + Wall Street excesses, III Merrill Lynch lost $27 billion (!) in 2008 Paid $3.6 billion in bonuses 700 employees got $1 million + Merrill Lynch merged with Bank of America, with US taxpayers pitching in $20 billion Wall Street excesses, IV At least 2500 people at major investment banks make more than $2.5 million per year. Share of all personal income going to to 0.1% 2006:11.6% (minimum: $1.9 million) 1978: 2.7% Consequences of Stratification Life Expectancy – faced with hazards, access to medical care Family Life Household chores Child discipline Communication Divorce Leisure-time activities – working class spend more time with family Education Poverty 13.2 % (9/11/09) 40 Million Americans 1960: ≈22% 1973: ≈11% How is the Poverty Line Defined? (a) Cost of the “economy food plan” (min number of calories and protein) (b) Low-income families spend 1/3 of income on food Poverty line = (a) times three Established in 1964; updated using CPI (consumer price index) (“inflation”) Poverty Level (2008) ≈ $17,600 ≈ $21,200 Family of 3 Family of 4 Median family income (2006) ≈ $61,000 Family of 3 ≈ $69,500 Family of 4 Criticisms of the Poverty Line 1. Economy Food Plan is temporary 2. Ratio of food to nonfood expenses has changed (normal family spends 1/5 of income on food) 3. The use of pretax income Who are the poor? Immigrants Minorities Rural people. Central city people. Elderly? Women (more likely to live in poverty) Children (more likely to live in poverty) Reasons for the “feminization” of poverty Women’s wages are lower than men’s High divorce rate After divorce, women usually get custody of children Females are head of 18% of all families; 53% of poor families Reasons for Poverty: Situational factors Situational factors Illness, disability Few marketable skills Lay offs A majority of Americans use the welfare system at some point in their lifetime. Reasons for poverty: Structural factors Rise in part-time work Smaller percent in unions - at peak 30% of labor force was in unions. Now 9% are. “Outsourcing” Shift of economy to low-paid service work Welfare programs 1932: Social security (not part of welfare program), AFDC (Aid to families with dependent children) 1964: “The War on Poverty” Job training, Head Start, higher payments 1996: TANF (temporary assistant to needy families – replaced AFDC)(2 years) Must work after two years Lifetime limit: five years No “entitlement” How can poverty be reduced? Strengthen unions (declined recently) Raise wages (minimum wage increased) Provide equal opportunity in education The minimum wage A minimum wage worker does not earn very much $7.25/hour * 40 hours/wk * 52 wks = $15,080 In 2006, purchasing power of min wage was lowest since 1957 Min wage in 1967 = $7.85 (corrected for inflation) In 2006, 83% of Americans favored raising min wage The minimum wage Minimum wage had not raised been since 1997; Congress raised its own salary $30,000+ since then. The minimum wage When the minimum wage was raised to $7.25, (a) 6.6 million directly affected (b) 8.3 million indirectly affected • Education key to income Per pupil expenditures, 2006-2007 King George Poquoson Warren Henrico Bedford City & County Charlottesville Sussex Falls Church Alexandria Arlington $8103 $8161 $8244 $8349 $8355 $14,362 $14,551 $18,372 $19,448 $20,269 ...
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This note was uploaded on 10/10/2010 for the course SOC 1004 taught by Professor Mdhughes during the Fall '07 term at Virginia Tech.

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1004.Chap6 - Chapter six, Social Stratification Income -...

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