Introduction to Sociology

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SOC101Y

• Introduction to Sociology
• Professor Robert Brym
• Lecture 8
• Social Stratification
• 17 Nov 10

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Survivors of the Titanic Disaster by Class, 1912
(percent)
First class Second class Third class Crew
Children 100 100 34.2 n.a.
Women 97.2 86.0 46.1 n.a.
Men 32.6 8.3 16.2 21.7
Total 62.5 41.4 25.2 21.7
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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.

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

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World Rank Surname US bil. Source
24 Thomson 13.0 Publishing
98 Weston 5.0 Retail food
146 Irving 3.9 Oil refining, etc.
246 Desmarais 2.6 Fin. serv., comm.
261 Laliberté 2.5 Entertainment
261 Sherman 2.5 Pharmaceuticals
318 Azrieli 2.1 Real estate
318 Miller 2.1 Electronics
318 Pattison 2.1 Advertising, etc.
334 McCain 2.0 Food processing
397 Bronfman 1.8 Liquor
397 Skoll 1.8 Internet
397 Lazaridis 1.8 Electronics
430 Balsillie 1.7 Electronics
468 Katz 1.5 Pharmacies
559 Saputo 1.3 Dairy
559 Schnaider 1.3 Steel, etc.
601 Jarislowsky 1.2 Finance
647 Cheriton 1.1 Internet
701 Lee-Chin 1.0 Finance
Substantial inheritance Advantages Rags to
riches
Canadas Billionaires, 2009
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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.

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Job Growth and Loss, Canada and USA, Aug 2001-
Nov 09
http//www.mitacstrends.com/

• 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-2008.
• Major exceptions
• New Orleans beginning 2005 due to Katrina and
• 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).

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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.

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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.

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Webers Stratification Scheme

• Three pillars of stratification based on
  market position, prestige and power.
• More rewards for categories in which there are
  fewer people.

High
c1
sg1
p1
sg2
p2
c2
Value of rewards
c3
sg3
p3
class 4
status group 4
party 4
Low
PRESTIGE
POWER
MARKET POSITION
Small
Large
Large
Number of people
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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.

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SOC101Y

• Introduction to Sociology
• Professor Robert Brym
• Lecture 9
• Social Stratification
• 24 Nov 10

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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).

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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 100year 2 is 95.24year 1
  (since (100/105) 100 95.24).
• Real value (dollars today/inflated base dollars
  today) dollars today.

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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?

1. 930
2. 1,070
3. 933.53
4. 1,071.20
5. No clue

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Answer

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

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NB Market income is income before taxes and
transfers.
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Income of Income Tax Filers, Canada, 2004, by
Income Class, (in percent)
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(No Transcript)
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The Share of Total After-Tax Income, Families,
Canada 1951, 1976 and 2007 (in 2007 dollars)
Change, 1976-2007 Top 1/5 3.1 2nd 1/5
1.5 Middle 1/5 -1.0 4th 1/5 -2.2 Bottom
1/5 -1.3
1951 1976
2007
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.
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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.
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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
10.00 Income after income tax and transfers,
2002 Top quintile 65,400 Bottom quintile
13,600 Ratio 4.8
Loss, top quintile
80 85 90 95 00
80 85 90 95 00
Year
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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.

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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
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Tax rates vary by source of income and therefore
by income class
Source Percent taxed Who is taxed
Salaries, wages 100 Employees
Dividends 83 Owners of Canadian stock
Capital gains 50 Owners of capital
Capital losses from previous years are
subtracted from current capital gains to arrive
at taxable capital gains.
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RRSP Benefits Increase with Income
Income class low middle high
Taxable income 0 20K 100K
Marginal tax rate 0 25 50
RRSP deposit 0 1K 1K
Reduction in taxable income 0 1K 1K
Tax saving 0 250 500
RRSP deposit times marginal tax rate
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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?

1. 150 and 500
2. 150 and 250
3. 1500 and 2500
4. I havent a clue.

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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).

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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.
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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
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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).

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Common Beliefs about Poverty

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

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Persistence of After-tax Low Income, Canada, 2005
2 yrs, 12.3
lt1 yr, 80.0
1lt2 yrs, 7.7
LICO low income cutoff 63 percent of gross
income spent on food, shelter and clothing.
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Poor Unattached Individuals Under 65 by Weeks
Worked, Canada, 1995
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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.
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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.
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Welfare Benefits for Couple with Two Children, as
Percent of Poverty Line, Canada, by Province, 2001
Welfare as percent of poverty line
Province
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Before-tax LICO by Category, Canada, 1980-95
Poverty rate in
Single mothers with children
Elderly (65)
Total
Year
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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.