Home » Week 12: Economic Stratification

Week 12: Economic Stratification

Introduction

Welcome to our tenth online lecture in the Spring 2015 Introduction to Sociology course at the University of Maine at Augusta!  Up to this point in the semester, we’ve looked at two varieties of social structure that sociologists make visible: social networks and population pyramids.  This week, we’ll discuss a third kind of visible social structure: inequalities of income and wealth across quintiles of a population.

When Studying Social Inequality, Dollars are Never Enough

When we talk about economic stratification in sociology, it is often helpful to discuss people’s circumstances in units of money.  In the United States, we might consider the number of dollars a person receives per week or month or year — what’s known as income.  Of course, we don’t keep all the money we receive, spending a great deal of it on necessities, luxuries, debts and fees.  For that reason, we might also consider the number of dollars that a person has managed to accumulate and keep — what’s known as wealth.

Sociologists are interested in studying money (or more broadly, things of value) not for its own sake, but as a way of studying the relationships between people, groups, and societies.  Which people, groups or societies hold greater amounts of money, and which less?  How has the way that money has been spread out across people, groups and societies (in other words, the distribution of money) changed over time?  These are comparisons, and comparisons are useful, but we have to be careful when we make such comparisons.

If you have a dollar bill to spare, pull it out and take a look at it.  What is a dollar good for?  Blowing your nose, maybe.  Other than that, it is only as good as the value that a dollar bill is assigned: what else you can obtain with it.  Unfortunately, the value of a dollar changes over time.  Fortunately, there’s a way to account for that.  Watch this video to find out how:

For another example of the hazards involved in ignoring inflation and sticking to the nominal value of a dollar bill, let’s turn to the funny pages. On October 18 2014, the comic strip Hi and Lois comic strip looked back with fondness on a time when gas prices were just 35.9 cents a gallon.  In a panel set in the present day, the middle-class character Hi grimaces as he pumps gas costing $3.99 cents a gallon.  In a meta-analysis of existing research, social scientist Michael R. Hagerty found that people tend to view their own lives as getting better but at the same time tend to look backward in time and conclude that the lot of the average person is getting worse.  In other words, we use rose-colored glasses to view our own lives, but gray-tinted glasses to view trends in the world in general.

Hi’s view of the world is certainly tinted gray in the strip you see below, but is this pessimist funk merited?  I don’t think so; the way out of the trap of our psychological biases is to check for sociological context.  Doing that, I’d alter the Hi and Lois strip from the original into a more realistic new version:

Put Hi and Lois in Context -- are gas prices in 2014 really that bad?

Correction 1: Gas hasn’t had a price of $3.99 per gallon in the United States since July of 2008. The average price per gallon of gas in the United States was down to about $3.10 in the middle of October 2014, and they’re getting even better a month later. Source: St. Louis Federal Reserve Bank Economic Research Database.

Correction 2: The last time gas cost 35.9 cents a gallon in the United States was the year 1969, but that literal price doesn’t tell the whole story; those 35.9 cents were worth a whole lot more in 1969 than they are worth today. If we adjust for inflation, paying 35.9 cents in 1969 had the same punch to our wallets as paying $2.32 today. Sources: Bureau of Labor Statistics and InflationData.com.

Correction 3: Why do we put gasoline in cars? To go somewhere. Chance Brown forgets that the fuel efficiency of cars was far different in 1969 from the fuel efficiency we experience nowadays. In 1969, passenger cars traveled 13.6 miles on a gallon of gas, on average. In 2013, the last full year for which data is available, passenger cars traveled 36.0 miles on a gallon of gas, on average. Sources: U.S. Department of Transportation and Federal Highway Administration.

If we put all these pieces of information together, it turns out that on average and adjusting for inflation, it took 17 cents to travel a mile in a car in 1969. In contrast, it only takes 8.6 cents to travel a mile in a car today.  The depiction of gas prices as a rising social problem doesn’t match the cheaper cost of transportation today.  There may be other social problems associated with fossil fuel transportation, but economy is not one of them.  Unless Hi is driving an extra-large SUV and driving his fuel efficiency far below average, he should be smiling, not frowning.  Even and especially when trends seem obvious, it’s important to put them in context.

 

Absolute Poverty in Maine

In the above video, I describe how wages that would be shockingly low today in nominal terms (a federal minimum wage of $0.75 per hour in 1950) were higher in terms of real value than the federal minimum wage today ($7.25 per hour in 2015).  A person who works full-time, year-round without vacation at minimum wage will earn $15,080 in a year.  Is that a poverty-level wage?  To answer that question, you need to decide what you mean by “poverty.”  Absolute poverty is one kind of poverty, and it is defined by setting some income threshold below which people are not able to purchase the necessities for living: food, shelter, clothing, transportation and medical care.  Because the cost of such necessities varies from place to place, the Massachusetts Institute of Technology has created a Living Wage Calculator to help people identify how much they would need to earn in order to pay for life’s necessities.  The following map uses Living Wage Calculator data to identify the annual income below which people in different counties of Maine would not be able to pay for their own needs.  These are the standards for a living wage below which a single person with no children falls into absolute poverty in the counties of Maine:

Living Wages in the counties of Maine, according to the MIT Living Wage Calculator

 

As you can see, all of these thresholds are higher than the year-round, full-time, no-vacation income of $15,080 earned by a minimum wage worker.

 

 

Relative Poverty, Relative Wealth: Thinking about Quintiles

A second way of thinking about poverty is relative poverty: having an income that is unusually low compared to others in the place one lives.  Someone who is in relative poverty might be defined as being in the bottom 20% of the income scale for the place she lives in, for instance.  We would call such a person a denizen of the lowest income quintile.  We might also think of a relatively high income person as someone who is in the top 20% of the income scale for her community — the top income quintile.

What is a quintile, and how are people assigned to them?  What can the arrangement of people into quintiles tell us?  This video explains it all, using the example of a fictional desert island on which only ten people live:

If we measure our societies through quintiles, the notion of “relative poverty” can be generalized out to encompass “relative wealth.” What are the relatively wealthy?  Those in the top income quintile (the “relative superwealthy” might be in the top 1%, a figure harnessed by this decade’s Occupy movement).  And in relative terms, what is the middle class but those in the three middle quintiles?

You might be objecting at this point that the middle class is perhaps something more than simply those in the three middle quintiles of income, or of wealth.  Perhaps middle class refers to something more concrete such as the ability to maintain a certain lifestyle but the inability to reach a truly luxurious state.  Perhaps, in a very poor country, even those in the three middle quintiles have a miserable condition.  This objection, which is legitimate, stems from the perspective insisting that the definition of classes should be based in some absolute state defined by some concrete standard, not by comparison to others.  An absolute middle class would be different from a relative middle class, just as absolute poverty is different from relative poverty.

 

References

Glasmeier, Amy K. 2013. “Poverty in America: Living wage calculator.” Accessed April 3, 2015 at http://livingwage.mit.edu/.

Hagerty, Michael, 2003. “Was Life Better in the “Good Old Days”? Intertemporal Judgments of Life Satisfaction.” Journal of Happiness Studies 4(2): 115-139.


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