1. ECONOMIC PROBLEMS POVERTY AND WEALTH Chapter 7

2. Overview  Comparing economic systems: Capitalism and Socialism  Economic problems facing the U.S.  Economic Inequality  Functional analysis; Conflict theory; Symbolic Interactionism  Poverty  The Future

3. Economic Systems  Economy: Entire social institution that produces and distributes goods and services  Sociologists use the term social class to measure the economic differences among groups or individuals within a society.  On the next slide is a model that breaks down economic differences into 6 social classes

4. *Based on Gilbert and Kahl’s social class model

5. Economic Systems We practice capitalism in the United States. A capitalist economy is based on: private ownership of property pursuit of personal profit competition and consumer choice Socialist economies work differently in that: the government controls the economy in a socialist society, the point is to meet everyone’s needs, not to compete to gain the most wealth there is a collective ownership of property there is a pursuit of collective goals Socialism is not communism- communism is a political system, socialism is an economic system

6. Economic Systems  Capitalist nations make consumption a key element of social identity and personal identity. Consider that in the U.S there are twice as many shopping malls as high schools!  No nation is completely capitalist or socialist. For example, the United States’ is considered a capitalist nation, but there are some aspects of socialism in the U.S.- such as programs to met the needs of the poor (welfare, head start, etc.).  Most European nations provide more social benefits to their citizens (i.e. free child care, free health care, paid time off for new mothers and fathers, etc.) which is why they are considered more “socialist” than the U.S. They pay higher taxes to support these programs  China is a socialist (and communist) nation that only recently began adopting some capitalist practices. In general, capitalism is more productive and socialism generates more social equality.

7. Economic Systems and Changes  Cold War (1945 to 1989): tensions between the “West” and “East” (predominantly the US and the former Soviet Union) the Soviet Union was a socialist and communist nation; the U.S was/is capitalist There was a struggle for power between these two economic systems—and capitalism prevailed. Capitalism has now spread to most parts of the globe.  While capitalism offers both individual freedoms and the opportunity for economic success, it does not come without costs (and since this class is about social problems, we focus on the costs). Some social and economic analysts say that morality is missing in a capitalist/ market economy. Since profit is the main objective, people suffer. As you will soon see, we live in a society marked by incredible social inequality. Social inequality—the unequal distribution of wealth, income, power, and poverty

8. Economic Problem Facing the United States 1. Stagnant incomes  Real income: income adjusted for inflation  Incomes have gone up but they have not kept pace with inflation-this means that while incomes have increased, the price of virtually everything has increased MORE than incomes.  More woman have entered the workforce which has helped families deal with the problem of stagnant incomes. How many families do you know today that can make it with only one income?  The diagram on the next slide illustrates this point- note that “constant income” refers to real income. 2. Taxes We are a nation in debt. Many people don’t want taxes to increase, yet we are so far in debt as a nation that it seems unlikely that they won’t.

9.  People make more money today than in the past, but rising incomes have not kept pace with inflation. This means that the cost of goods has gone up more than peoples’ paychecks. Just look at how far your dollar went in 1970. While you may have made only $3.23 and hour, the buying power of that wage was much higher, at $8.03. Today, you may earn $18 an hour, but that $18 will buy you much less.

10. Economic Problems Facing the United States 3. The savings rate  Americans are saving less than they used too (see the next slide). This means we have less to draw on in times of need, such as a medical emergency or a mortgage crisis.  We also have less to invest in capital- i.e. new factories, equipment etc. This can make it harder to compete in a global economy. 4. A debtor nation  National debt: the total amount the U.S. government owes The national debt is the total amount of money the U.S. government owes to lenders We are the largest debtor nation in the world We buy more from other nations than we sell We end up about 600 billion dollars short each year We spend more on taxes than we collect Every year these debts pile higher We have a national debt of 13 trillion dollars and pay 150 billion dollars a year in interest. This is $ that we don’t have to build schools and hire teachers. It also means less funding for social programs, such as head start and job training programs.

11.  Americans are saving much less today than in the past.

12. Social Inequality  Structural inequality: the inequality built into our economic and social institutions  It is easy to blame the poor for their plight when in fact social inequality is built into our social structure.  It is statistically IMPOSSIBLE for everyone to be “successful” in the U.S. (despite the cultural ideology that tells us that if you just work hard enough you can succeed) because some jobs pay much more than others.  In a capitalist system there has to be “exploitable workers” This means that there has to be a steady supply of people willing to work for low wages. You might ask, how much of a pay difference should there be? Are people paid fairly for their work? Are those at the top earning too much at the expense of others?  There is nothing “natural” about our economic system. People created it and people can change it.

13. Social and Economic Inequality  Distribution of income and wealth  Inequality of income  Inequality of wealth Income refers to your paycheck- how much money you make. Wealth refers to the value of your land or property, assets (like jewelry, cars etc.) and the money you have in savings or investments. Much of the wealth in the U.S. stays within a family and is passed on from generation to generation.  The next 2 slides illustrate the distribution of income and wealth in the U.S

14.  The top 1/5 of the nation earns half of all income  The bottom 1/5 earns 3%

15. 1% of the U.S. population owns 33% of the wealth; and the next 9% owns 37% of the wealth—that means that the top 10% own 70% of the nation’s wealth—and the bottom 90% own the remaining 30% of the wealth

16. Functionalism and Inequality  How can we understand income and wealth inequality by using the 3 theoretical perspectives?  Functionalist say that Income inequality helps society.  Perhaps you haven’t thought of inequality as necessary, however the functionalists are looking at the functions and dysfunctions, and how this works to stabilize or destabilize society. They claim that some jobs are more important than others and we need to provide an incentive for people, so they work hard to claim those jobs. The incentive is money and high status.  Too much inequality, however, can be dysfunctional—as we are beginning to realize. Increasingly the rich are indeed getting richer and the poor, poorer. This is causing tension, hardship, and overall discontent for many, which is “destabilizing” to society as a whole.  Poverty is functional for society.  We need the poor because their poverty contributes to society’s well-being. How can this be?  See the box on page 201 of your text for numerous examples for how poverty is functional

17. Definitions of Poverty  Biological poverty: starvation and malnutrition Many of the homeless in our society experience biological poverty. Many of the poor in third world, aka “developing” nations, suffer from biological poverty.  Relative poverty: people living below the standard of living for their society Someone is poor, only when compared to someone else. For example, we are exposed to many examples of the middle or upper class lifestyle through the media. We may then feel deprived because we can’t afford what we see others enjoying-thus, we are “relatively poor.”  Official poverty: income level at which people are eligible for welfare Individuals or families that fall below the set income level that defines poverty are considered poor. For example a family of four that earns below $23,050 is living below the poverty line

18. Subjective Concerns and Objective Conditions  Objective conditions alone are not enough to make poverty a social problem Approximately 20% of the US population is poor (although only 14% are “officially” poor)  Subjective concerns are essential and more important  Changes in concerns and conditions  People once assumed that poverty was a natural part of life. As the U.S. became more industrialized there were more jobs, and subsequently, more wealth. As a result, poverty declined, but many poor people migrated to cities. Thus poverty became more visible and people became concerned about it.  Launching the war on poverty  1960, President Kennedy’s war on poverty- rates dropped significantly-see the next slide

20. The Situation Today  Progress has been limited since the 1960s  Controversy over numbers The poverty line is arbitrary. It was chosen by a government agency, however when it comes to helping people in need, some agencies today look at income before taxes, others after taxes. Also anti-poverty programs that provide things such as food stamps are not counted into one’s income, which further complicates matters.  The significance of poverty  No matter how we compute poverty, millions of Americans are poor.  How we define poverty has serious consequences for people’s lives.  Poverty lies at the root of many other social problems. Poverty is connected to alcoholism, drug addiction, prostitution, domestic abuse, and crime. If we could successfully reduce poverty, we would reduce these other problems as well!

21. The Difference Money Makes  The impact of poverty  People’s economic circumstances envelop them, affecting profoundly every aspect of their lives  Housing and mortgages  Education  Jobs  Criminal justice  In short: quality of life  Wealth and power  Vast wealth brings vast power  Because the rich can hire top financial advisors, attorneys, and lobbyists, they perpetuate their advantages

22. Who Rules America?  Conflict theorists stress that to understand social life we must understand who has power.  The power elite: this small group makes decisions that direct the country—and the world  Culture of wealth: set of institutions, customs, values, worldviews, family ties, and connections—allow the rich and powerful to perpetuate their privileges

23. Symbolic Interactionism  The relativity of poverty  To fully understand poverty we must focus on what poverty means to people. what does poverty mean to you? Are people who collect welfare the result of a flawed system or are they lazy? Are these two perspectives mutually exclusive? What would poverty mean to you if you were among the poorest in society? The richest? Social location greatly influences our perspectives Poverty is relative: what poverty means differs from group to group.  Symbolic interactionism helps us understand that the meanings of poverty change as social conditions change

24. Research Findings  Permanence and poverty  Most people who fall below the poverty line do not stay there permanently. most people are poor for only a year or less. However, the percentage of Americans in poverty remains quite stable (people just move in and out of poverty)  Region  Poor are concentrated in the inner city and rural areas.  Race–ethnicity  Poverty trends can also be predicted using race–ethnicity.  Minorities are much more likely to be poor. A history of discrimination has meant that many minorities have simply not had the opportunity to accumulate wealth.

27. As a demographic, the elderly have been very successful in lowering their poverty rates (remember chapter 2 and the elderly lobbying for their rights) Today, there are more poor children in the U.S than there are elderly. Notice that both categories will likely experience an increase in poverty over the next few years

28. Social Policy  How do we address the issue of poverty?  Perceived causes of poverty influence policy The policies people favor depend on how they view the poor. Those who see poverty as the result of individual choices (i.e. they don’t want to work) tend to favor policies that offer less assistance. Those who view poverty as a result of social forces and structural inequality tend to favor programs that assist the poor. This is a consistent battle in the political realm (i.e. conservatives tend to focus on the individual, democrats on structural inequality). Many people’s beliefs tend to fall somewhere in the middle.  Progressive taxation Assistance to the poor comes from tax dollars. Those who earn more pay more in taxes—but this is likely a smaller percentage of their overall income when compared to someone who earns less (which is why this is such a controversial issue)

29. Social Policy: Public Assistance  Public Assistance Programs  Social insurance This refers to unemployment insurance and social security  Teaching job skills This is intended to help the poor support themselves  Welfare Perhaps the most controversial. Welfare refers to the money, medical benefits, and housing that is given to people with incomes low enough to qualify. Some believe that this encourages people to “live off the system.” Thus workfare (see below) was created.  Workfare Workfare pushes welfare recipients to look for work, and to take any available job. It also helped to pass legislation that puts a maximum on the amount of time a person can collect welfare- 5 years.

30. Social Policy: Providing Jobs  Providing Jobs that pay a livable wage is the most direct way to deal with poverty  Consider that a person working 40 hours a week, 52 weeks a year, earning the minimum wage in WA state ($9.19/hour) earns $17,644.80 before taxes. This is not a livable wage, especially if there is a family to support.  This is why Wal-Mart- the subject of this week’s film- is so controversial  Education accounts  How would you feel about having $50,000 for college available to you once you graduated from high school? My guess is that you wouldn’t complain! Indeed, education accounts, which would be set up by the government, have been proposed as a way to address poverty. This program would cost little or nothing, since the need for welfare would decline and people would be earning more (more education=higher earnings) and thus able to pay the government more in taxes. Why hasn’t this been given serious consideration?

31. Social Policy: the future  Giving the poor more money  The Income Maintenance Experiments Of course, we could also reduce poverty by giving the poor more money. The income maintenance experiments, outlined in your book, did just that and the results were mixed.  So what is the future of the problem? Unless there is a major social movement opposing wealth and income disparity and demanding social reform (i.e. Occupy Wall Street) it is likely to be more of the same