SOC101Y

1
SOC101Y

• Introduction to Sociology
• Professor Robert Brym
• Lectures 9 10
• Social Stratification
• 12 - 19 Nov 08

2
The Functional Theory of Stratification

• Some jobs are more important than others.
• Jobs that are more important require more
  training and sacrifice.
• To motivate talented people to undergo training
  and sacrifice, high rewards must be offered.
• Therefore, stratification is necessary it
  performs a useful function.

3
Criticisms of the Functional Theory of
Stratification

• The question of which occupations are more
  important is far from clear.
• The functional theory ignores the pool of talent
  that lies unused because of inequality.
• The functional theory fails to examine how
  advantages and disadvantages are passed from
  generation to generation.

4
Canadas Wealthiest Families, 2006
5
Marxs Theory of Stratification

• The ability of capitalists to hire and fire wage
  workers at first encouraged rapid technological
  change and economic growth.
• The drive for profits also caused capitalists to
  concentrate many workers, keep wages low, and
  spend little on improving working conditions.
• The result class polarization, the growth of
  class consciousness and working-class
  organizations, and a growing demand on the part
  of workers to end capitalist exploitation.
• Because capitalism could produce more than
  workers could consume, ever-worsening crises of
  overproduction would result in the fall of
  capitalism.

6
Critique of Marxs Theory of Stratification

• Industrial societies did not polarize into two
  opposed classes engaged in bitter conflict.
• Capitalism persisted by stimulating demand.
• Investment in technology made it possible for
  workers to earn higher wages and work fewer hours
  in better conditions.
• Workers fought for, and won, state benefits.
• Communism took root in semi-industrialized
  countries and witnessed the emergence of
  totalitarianism and new forms of privilege.

7
Webers Theory of Stratification

• Class position is determined by market
  situation the possession of goods,
  opportunities for income, level of education, and
  level of technical skill.
• The four main classes large property owners,
  small property owners, propertyless but highly
  educated employees, and propertyless manual
  workers.
• Status groups (distinguished by differences in
  prestige) and parties (distinguished by
  differences in power) also stratify the social
  order, to some degree independently of class.
• Class conflict may occur but classlessness is
  unlikely.

8
Webers Stratification Scheme
high
c1
sg1
p1
sg2
p2
c2
value of rewards
c3
sg3
p3
class 4
status group 4
party 4
low
PRESTIGE
POWER
INCOME
small
large
large
number of people
9
Nominal and Real Dollars

• Year 1 a typical basket of goods and services
  costs 100
• Year 2 a typical basket of goods and services
  costs 105
• The annual inflation rate 5
• 105 nominal (in name) in year 2 100 real
  (in purchasing power terms) using year 1 as a
  base
• The real value of 100year 2 is 95.24year 1
  (since 100/105 95.24)

10
The inflation rate between year 1 and year 2 is
3. The inflation rate between year 2 and year 3
is 4. What are 1,000year 3 in year 1 dollars?

• 930
• 1,070
• 933.53
• 1,071.20
• No clue

11
Answer

• 1,000 3 1,030
• 1,030 4 1,071.20
• 1,000/1,071.20 933.53

12
(No Transcript)
13
Income of Income Tax Filers, Canada, 2004, by
Income Class, (in percent)
14
(No Transcript)
15
The Distribution of Total Market Income Among
Families, Canada 1951 and 2005
Change, 1951-2005 Bottom 1/5
0 Middle 1/5 -0.8 Top 1/5 0.9
1951
2005
16
Median Net Worth of Families, Canada, 1984, 1999,
2005 (1999)
000s
64.2
48.3
26.0
26.0
-11.3
-1,000
To make the three surveys comparable, the
following items are not included
employer-sponsored pension plans, contents of the
home, collectible and valuables, annuities, and
registered retirement income funds. If it were
possible to include these items, wealth
inequalities would be greater than shown.
17
After-tax and After-Transfer Family Income, Ratio
of Bottom to Top Quintile, Canada, 1980-2002 (in
2002 )
Ratio
More redistributive
E.G., in 1980, the average income of the bottom
quintile was 21 the average income of the top
quintile after taxes and transfers.
Less redistributive
80 85 90 95
00 Year
18
How Taxes and Transfers Redistribute Family
Income to the Bottom and Top Quintiles, Canada,
1980-2002 (2002)
Percent
Gain, bottom quintile
Income before income tax and transfers, 2002 Top
quintile 82,300 Bottom quintile 8,200 Ratio .10
Income after income tax and transfers, 2002 Top
quintile 65,400 Bottom quintile 13,600 Ratio .21
Loss, top quintile
80 85 90 95 00
80 85 90 95 00
Year
19
How Tax Laws Reinforce Inequality

• Half of Canadian taxes are progressive (based on
  the ability of the taxpayer to pay) and half are
  regressive, so only modest redistribution of
  income taxes place.
• There is no inheritance tax so the wealthy can
  pass advantages from generation to generation.
• Different income sources are taxed at different
  rates, with the income sources of the wealthy
  taxed at lower rates.
• Many tax benefits are more advantageous to the
  wealthy.

20
Intergenerational Taxes, 2000, by Country (as a
percent of GDP)(includes estate, inheritance and
gift taxes)
Low transfers
High transfers where taxes are highest
where taxes are lowest
Percent of GDP
21
Tax rates vary by source of income and therefore
by income class
Ontario rate Capital losses from previous
years are subtracted from current capital gains
to arrive at taxable capital gains.
22
RRSP Benefits Increase with Income
RRSP deposit times marginal tax rate
23
A has 10,000 taxable income and a marginal tax
rate of 15. B has 20,000 taxable income and a
marginal tax rate of 25. A and B put 1,000 in
their RRSPs. What are As and Bs tax savings,
respectively?

• 150 and 500
• 150 and 250
• 1500 and 2500
• I havent a clue.

24
Answer

• As 1,000 RRSP deposit results in a 150 tax
  saving (1,000 x 15)
• Bs 1,000 deposit results in a 250 tax saving
  (1,000 x 25).

25
Household Income Inequality, 30 Countries, circa
2000
Gini Index
If the Gini index 1, all income is earned by
one household. If the Gini index 0, all income
is shared equally by all households.
26
Inequality and Development
Level of Inequality
High
Merit
USA
Private property
Govt policy
As private property became an increasingly
important stratification principle, inequality
rose. After early industrialization, merit
became an important stratifying principle, and
inequality fell. Since the rise of the modern
welfare state, government policy has increasingly
influenced the level of inequality and accounts
for much of the divergence in inequality. Private
property and merit still exert a power influence
on inequality, but a new stratification principle
was added with the creation of the welfare state.
France
Low
Foraging Hort./Pastoral Agrarian E. Industrial
L. Industrial Postindustrial
Type of Society
27
Social Mobility

• Most mobility is upward, not downward (although
  downward has been increasing since the 1970s).
• Most mobility is intergenerational, not
  intragenerational.
• Most mobility is structural, (due to changes in
  occupational structure) not circulatory (due to
  merit).

28
Common Beliefs about Poverty

• Poverty is chronic.
• Most poor people depend exclusively on welfare.
• Welfare is generous.
• Poverty is inevitable.

29
Persistence of After-tax Low Income, Canada, 2005
2 yrs, 12.3
lt1 yr, 80.0
1lt2 yrs, 7.7
30
Poor Unattached Individuals Under 65 by Weeks
Worked, Canada, 1995
31
Percent at or below the After-tax LICO and
Unemployment Rate, Canada, 1996-2005
In general, the percentage of Canadians falling
at or below the LICO correlates positively with
the unemployment rate. An exception (not shown
here) occurred because of massive government
budget cuts between 1993 and 1996 in that
period, the correlation was negative.
32
The Minimum Wage, Quebec Nfld/Labrador,
1965-2006 (in 1992 dollars)
1992 dollars
Quebec
5.97
5.39
Newfoundland/Labrador
Historically, Quebec has had Canadas highest
minimum wage and Newfoundland and Labrador has
had the lowest. Until the early 70s, women
received a lower minimum wage than men. The data
reported here are for the male minimum wage. The
minimum wage declined from about 1973 until the
mid- to late 1980s because conflict in the Middle
East caused the price of oil to rise by an order
of magnitude, leading to rapid inflation, while,
for part of this period, the federal government
imposed wage controls. From the late 80s-early
90s to 2006, the real minimum wage recovered
about 20 percent.
33
Welfare Benefits for Couple with Two Children, as
Percent of Poverty Line, Canada, by Province, 2001
Welfare as percent of poverty line
Province
34
Before-tax LICO by Category, Canada, 1980-95
Poverty rate in
Single mothers with children
Elderly (65)
Total
Year
35
Perceptions of Class

• Few North Americans have trouble placing
  themselves in the class structure.
• A minority of North Americans believe that a
  high level of inequality is needed to motivate
  people.
• Most North Americans believe that inequality
  persists because it benefits the rich and the
  powerful and because ordinary people dont get
  together to do something about it.
• Most North Americans dont want government to
  provide a basic income or create jobs.
• These attitudes and perceptions vary by social
  class lower more radical.