Chapter Summary

Chapter 2: WEALTH AND POVERTY: U.S. AND GLOBAL ECONOMIC INEQUALITIES

Inequality and poverty are social problem affecting millions of people in the United States and well over a billion people worldwide. In the United States a class system is utilized to differentiate the extent people control resources and the type of work they do. In the global perspective nations are classified as being high-income, middle-income, or low-income nations based on each nation’s gross domestic product.

One of the key variables that determines an individual’s position in the class system is their life chances. Life chances are the extent to which individuals have access to important societal resources such as food, clothing, shelter, education, and health care. Without adequate opportunities an economic condition referred to as absolute poverty develops. Individuals in absolute poverty do not have the means to secure the most basic necessities of life. Worldwide, there are over 1.3 billion people in absolute poverty.

In the United States, one of the most persistent social problems facing Americans is social stratification. Social stratification is the hierarchical arrangement of large social groups on the basis of their control over basic resources. Determining social class in the United States has been significantly influenced by models proposed by Karl Marx and Max Weber. Marx’s model cites one’s relationship to the means of production as the primary variable in determining social class. Marx believed there were only two primary classes, the bourgeoisie or capitalist class and the proletariat or working class. Weber’s model is multidimensional, basing social class on wealth, power, and prestige. Recent theorists have modified the models proposed by Marx and Weber to include four positions in the class structure. These include ownership of the means of production (capitalists), those who purchase the labor of others (employers), those who control the labor of others (supervisors), and the sale of one’s own labor (laborers).

The most significant variable in determining one’s position in social stratification is their wealth and income. Wealth refers to one’s command over financial resources that have been accumulated over a lifetime, along with resources that have been inherited across generation. Income is the economic gain derived from wages, salaries, income transfers, or ownership of property. Class divisions in the United States are characterized by widely diverse lifestyles and life chances. The upper, or capitalist, class is the wealthiest and most powerful class made up of investors, heirs, and executives. The upper-middle class is composed of professionals, business analysts, owners of small businesses, stock brokers, and corporate managers. The middle class includes white-collar office workers, middle-management personnel, people in support positions, semi-professionals, and nonretail sales workers. The working class is composed of people who work as semi-skilled machine operators and in nonmanual semi-skilled positions. The working poor are those who work full-time in unskilled positions such as seasonal and migrant farm work, but remain at the edge of poverty. The chronically poor include people of working age who are unemployed or outside the labor force and children who live in poor families caught in long-term deprivation.

The United States has the highest poverty rate of any advanced industrial nation. The poverty rate is the proportion of the population whose income falls below the government’s official poverty line. In the United States the formula for determining the poverty line was calculated by the Social Security Administration. It is based on the minimum family market basket, a low-cost food budget that contains a minimum level of nutrition for a specific sized family multiplied by three. The vast majority of poor people in the United States are women and children. Children under the age of 18 account for 40 percent of the poor and two-thirds of all adults living in poverty are women. African Americans, Latinos, and Native Americans are also over represented among people living in poverty.

The consequences of poverty include fewer life chances, poor health care, malnutrition, and chronic medical conditions such as rickets, scurvy, parasitic worms, and mental retardation. Substandard housing and fewer educational opportunities add to the social problems faced by the poor which perpetuates their position in the class system. In the United States welfare programs were first established in the 1930s to aid the poor during the Great Depression. This aid included services and benefits such as employment, housing, health, education, or a guaranteed income. A second wave of welfare programs were established in 1964 as a part of the War on Poverty. The most recent changes in welfare were enacted by President Clinton in 1996 with the enactment of a welfare reform plan that required recipients to work in exchange for time-limited assistance.

Explanations for poverty focus on individualistic, cultural, and structural reasons. Individual explanations view poverty as the result of either attitudinal or motivational problems that cause individuals to be poor or the amount of human capital that a person possesses. Cultural explanations of poverty focus on how cultural backgrounds affect people’s values and behavior. Structural explanations of poverty point to changes in the economy that have dramatically altered employment opportunities for people, particularly those who have the least wealth, power, and prestige. The structural explanation of poverty is based on both the functionalist and conflict perspective, based on one’s point of view. From the functionalist perspective, social inequality serves an important function in society because it motivates people to work hard to acquire scarce resources. The conflict perspective suggests poverty is a side effect of the capitalist system, subjecting workers to a wage squeeze and the threat of unemployment.

Solutions to class-based inequality is dependent upon the perspective of its cause that is most accepted. Analysts who advocate individual causes of poverty believe “the only dependable route from poverty is always work…the poor must not only work, they must work harder…” Sociologists who embrace the cultural explanations of poverty suggest that poverty can be reduced by enhancing people’s cultural capital. Structural solutions to inequality advocate the abolishment of capitalism and the establishment of a new means of distributing valued goods and services. Structural solutions also include the creation of “a truly open society” in which the life chances of those at the bottom of the social class ladder are not radically different from those at the top.