Introduction to Sociology Professor Robert Brym Lecture #8 Social Stratification 9 Nov 11 SOC101Y

Survivors of the Titanic Disaster by Class, 1912 (percent) First class Second class Third class Crew Children n.a. Women n.a. Men Total

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.

Attack of the Class-Specific Killer Virus CASE 1 CASE 2

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.

World Rank Surname $ US bil. Source 24Thomson13.0Publishing 98Weston5.0Retail food 146Irving3.9Oil refining, etc. 246Desmarais2.6Fin. serv., comm. 261Laliberté2.5Entertainment 261Sherman2.5Pharmaceuticals 318Azrieli2.1Real estate 318Miller2.1Electronics 318Pattison2.1Advertising, etc. 334McCain2.0Food processing 397Bronfman1.8Liquor 397Skoll1.8Internet 397Lazaridis1.8Electronics 430Balsillie1.7Electronics 468Katz1.5Pharmacies 559Saputo1.3Dairy 559Schnaider1.3Steel, etc. 601Jarislowsky1.2Finance 647Cheriton1.1Internet 701Lee-Chin1.0Finance Canada’s Billionaires, 2009 Substantial inheritance Advantages Rags to riches

Marx’s 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.

Job Growth and Loss, Canada and USA, Aug Nov 09  The animation shows year over year employment gains (in blue) and losses (in red) for the largest 20 Canadian and 100 US metropolitan areas.  General increase in employment until mid  Major exceptions: 1.New Orleans beginning 2005 due to Katrina; and 2.the industrial mid-west (including Ontario) throughout most of the period due to chronic deindustrialization.  In 2008 big job losses spread from the industrial mid- west, Florida and California (the latter states largely due to the mortgage crisis).

Critique of Marx’s 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.

Weber’s 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.

Weber’s Stratification Scheme High Low Large Small Large Number of people Value of rewards class 4 status group 4party 4 c3 sg3 p3 c2 sg2 p2 c1sg1p1 MARKET POSITION PRESTIGEPOWER  Three “pillars” of stratification based on market position, prestige and power.  More rewards for categories in which there are fewer people.

Implications  There is nothing inevitable about the level of social stratification. We are neither headed inexorably toward classlessness nor are we bound to endure high levels of inequality.  The level of social stratification depends on the complex interplay of class, status, and party and their effect on social mobility.  For example, in a democracy, citizens decide which party is in office, and the political party in office enacts policies that have implications for social mobility; we decide how much inequality there should be.

Introduction to Sociology Professor Robert Brym Lecture #9 Social Stratification 16 Nov 11 SOC101Y

Inflation and Real Dollars  Inflation is the increase over time in the cost of a standard basket of goods and services.  Real dollars are nominal dollars minus inflation (so cost in real dollars is the cost of a standard basket of goods and services minus inflation, and income in real dollars is nominal income minus inflation, or purchasing power).

Illustration  Year 1: a typical basket of goods and services costs $100.  Year 2: a typical basket of goods and services costs $105.  Therefore, the annual inflation rate = 5%; $105 nominal year 2 dollars = $100 real year 1 dollars  How much is $100 year 2 dollars worth in year 1 dollars (i.e., what is the real value of year 2 dollars using year 1 as a base)?  The real value of $100 year 2 is $95.24 year 1 (since ($100/$105) * 100 = $95.24).  Real value = (nominal dollars today/inflated base dollars today) * nominal dollars today.

The inflation rate between year 1 and year 2 is 3%. The inflation rate between year 2 and year 3 is 4%. What are $1,000 year 3 in year 1 dollars? 1. $ $1, $ $1, No clue

Answer  $1, % = $1,030  $1, % = $1,  ($1,000/$1,071.20) * 1,000 = $933.53

NB: Market income is income before taxes and transfers. Two main reasons for rising curve: 1.Increased productivity. 2.Entry of women into paid labour force.

What percentage of Canadians earned $100,000 or more in 2004? percent percent percent percent

Income of Income Tax Filers, Canada, 2004, by Income Class, (in percent)

Share of Total After-Tax Income, Families, Canada 1951, 1976 and 2007 (in 2007 dollars) % Change, Top 1/ nd 1/ Middle 1/ th 1/ Bottom 1/ Note: The diameter of the 2007 pie chart is 16.5 percent bigger than that of the 1976 pie chart, reflecting change in average real income.

Share of Income by Canada’s Top 1%,

Median Net Worth of Families, Canada, 1984, 1999, 2005 (1999$) $ ‘000s 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. -$1, % +26.0% +48.3% +64.2% +26.0%

How Taxes and Transfers Redistribute Family Income to the Bottom and Top Quintiles, Canada, (2002$) Year Percent Gain, bottom quintile, percent Loss, top quintile, percent Income before income tax and transfers, 2002 Top quintile $82,300 Bottom quintile $8,200 Ratio Income after income tax and transfers, 2002 Top quintile $65,400 Bottom quintile $13,600 Ratio 4.8

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.

Intergenerational Taxes, 2000, by Country (as a percent of GDP) (includes estate, inheritance and gift taxes) Percent of GDP Low transfers High transfers where taxes are highest where taxes are lowest

Tax rates vary by source of income and therefore by income class Source Percent taxed Who is taxed Salaries, wages100Employees Dividends83Owners of Canadian stock Capital gains*50Owners of capital * Capital losses from previous years are subtracted from current capital gains to arrive at taxable capital gains.

RRSP Benefits Increase with Income Income class lowmiddlehigh Taxable income $0$20K$100K Marginal tax rate 0%25%50% RRSP deposit $0$1K Reduction in taxable income $0$1K Tax saving* $0$250$500 * RRSP deposit times marginal tax rate

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 A’s and B’s tax savings, respectively? 1. $150 and $ $150 and $ $1500 and $ I haven’t a clue.

Answer  A’s $1,000 RRSP deposit results in a $150 tax saving ($1,000 x 15%)  B’s $1,000 deposit results in a $250 tax saving ($1,000 x 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.

Inequality and Development Type of Society Level of Inequality Foraging Hort./Pastoral Agrarian E. Industrial L. Industrial Postindustrial High Low USA France Private property Merit Gov’t 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.

The Association between Level of Inequality and Quality of Life Level of inequality (income, wealth) Quality of Life (income, health, education, crime) Low High High Low

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).

Common Beliefs about Poverty  Poverty is chronic.  Most poor people depend exclusively on welfare.  Welfare is generous.  Poverty is inevitable.

Persistence of After-tax Low Income, Canada, 2005 <1 yr, 80.0% 1<2 yrs, 7.7% 2+ yrs, 12.3% LICO = low income cutoff = 63 percent of gross income spent on food, shelter and clothing.

Poor Unattached Individuals Under 65 by Weeks Worked, Canada, 1995

Percent at or below the After-tax LICO and Unemployment Rate, Canada, 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.

The Minimum Wage, Quebec & Nfld/Labrador, (in 1992 dollars) Quebec Newfoundland/Labrador $5.97 $ dollars Historically, Quebec has had Canada’s 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.

Welfare Benefits for Couple with Two Children, as Percent of Poverty Line, Canada, by Province, 2001 Welfare as percent of poverty line Province

Before-tax LICO by Category, Canada, Poverty rate in % Year Total Elderly (65+) Single mothers with children

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 don’t get together to do something about it.  Most North Americans don’t want government to provide a basic income or create jobs.  These attitudes and perceptions vary by social class: lower = more radical.