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Chapter 6

Economic Inequality, Wealth, and Poverty

Mooney/Knox/Schacht, Understanding Social Problems, 10th Edition. © 2017 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Chapter 6: Economic Inequality, Wealth, and Poverty

“Overcoming poverty is not a gesture of charity. It is an act of justice.”

—Nelson Mandela

Learning Objectives (1 of 2)

Describe the extent of economic inequality, wealth, and poverty around the world.

Summarize different ways of defining and measuring poverty, and discuss criticisms of the U.S. poverty line.

Analyze how the structural-functionalist, conflict, and symbolic-interactionist perspectives view the nature, causes, and consequences of economic inequality, wealth, and/or poverty.

Describe the extent of economic inequality and poverty in the United States, and discuss patterns that characterize the wealthy “1 percent” as well as patterns of poverty.

Learning Objectives (2 of 2)

Explain how economic inequality and poverty affect health and hunger, housing and homelessness, legal and political inequality, war and social conflict, vulnerability to natural disasters, education, marriage opportunity and family problems, and intergenerational poverty.

Discuss international and U.S. strategies aimed at reducing poverty and economic inequality.

Identify and describe various U.S. public assistance and welfare programs, and discuss at least four myths about welfare in the United States.

Understand the implications of blaming poverty on the poor, and explain why alleviating poverty and reducing economic inequality are worthy goals.

Chapter Outline

The Global Context: Economic Inequality, Wealth, and Poverty around the World

Defining and Measuring Poverty

Sociological Theories of Economic Inequality, Wealth and Poverty

Economic Inequality, Wealth, and Poverty in the United States

Consequences of Economic Inequality and Poverty

Strategies for Action: Reducing Poverty and Economic Inequality

The Safety Net: Public Assistance and Welfare Programs in the United States

Understanding Economic Inequality, Wealth, and Poverty

The Global Context: Economic Inequality, Wealth, and Poverty Around the World

Wealth refers to the total assets of an individual or household minus liabilities (mortgages, loans, and debts).

The richest one percent of adults (ages 20 and older) in the world own nearly half (48 percent) of global household wealth; the richest 10 percent of adults own 87 percent of total global wealth.

The poorest half of the world adult population owns barely one percent of global wealth.

Defining and Measuring Poverty (1 of 3)

Absolute Poverty is the lack of resources necessary for material well-being: food, water, housing, land, and health care.

Relative poverty refers to a deficiency in material and economic resources compared with some other population.

Extreme poverty: Living on less than $1.25 a day.

Defining and Measuring Poverty (2 of 3)

People in this tented village in New Delhi, India, live in extreme poverty.

Defining and Measuring Poverty (3 of 3)

Low income is only one indicator of impoverishment.

The Multidimensional Poverty Index is a measure of serious deprivation in the dimensions of health, education, and living standards that combines the number of deprived and the intensity of their deprivation.

About 1.5 billion people in the world are multidimensionally poor.

What Do You Think? 1

Before reading about how poverty is measured in the U.S., answer these questions:

How much annual income do you think a household with 1 adult needs to earn to avoid living in poverty?

What about a household with 2 adults? 1 adult and 1 child? 2 adults and 1 child?

Defining and Measuring Poverty

U.S. Measures of Poverty

In 19 64, the Social Security Administration devised a poverty index based on data that indicated that families spent about one-third of their income on food.

The official poverty level was set by multiplying food costs by three.

Since then, the poverty level has been updated annually for inflation, and differs by the number of adults and children in a household and by the age of the head of household, but is the same across the continental United States

Sociological Theories of Economic Inequality, Wealth, and Poverty

Americans are taught that we live in a meritocracy—a social system in which individuals get ahead and earn rewards based on their individual efforts and abilities.

In a meritocracy, everyone has an equal chance to succeed

Those who are “Successful” are smart and talented and have worked hard and deserve their success

Those who fail to “make it” have only themselves to blame.

Sociological Theories

Structural-Functionalist Perspective (1 of 2)

According to the structural-functionalist perspective, poverty results from institutional breakdown:

economic institutions that fail to provide sufficient jobs and pay

educational institutions that fail to equip members of society with the skills they need for employment

family institutions that do not provide two parents

government institutions that do not provide sufficient public support

Structural-Functionalist Perspective (2 of 2)

From a structural-functionalist perspective, economic inequality within a society can be beneficial for society, as a system of unequal pay motivates people to achieve higher levels of training and education and to take on jobs that are more important and difficult by offering higher rewards for higher achievements.

Conflict Perspective (1 of 2)

Karl Marx (1818–1883) proposed that economic inequality results from the domination of the bourgeoisie (owners of the factories, or “means of production”) over the proletariat (workers).

The bourgeoisie accumulate wealth as they profit from the labor of the proletariat, who earn wages far below the earnings of the bourgeoisie.

Modern conflict theorists recognize that the power to influence economic outcomes comes not only from ownership of the means of production but also from management positions, interlocking board memberships, control of media, and financial contributions to politicians.

Conflict Perspective (2 of 2)

Corporations and the wealthy buy political influence.

Laws and policies that benefit corporations, such as low-interest government loans to failing businesses and special subsidies and tax breaks to corporations, are known as corporate welfare.

Free-market reform policies benefit wealthy corporations and investors, but increase poverty.

Wealthfare - Laws and policies that benefit corporations and the wealthy.

Symbolic Interactionist Perspective (1 of 2)

Persons who are labeled “poor” are stigmatized as lazy; irresponsible; lacking in motivation, ability, and morals.

Wealthy persons are viewed as capable, hard working, motivated, deserving of wealth.

Symbolic Interactionist Perspective (2 of 2)

The symbolic interactionist perspective also focuses on the meanings of being poor.

The publication of French economist Thomas Piketty’s (2014) book Capital in the Twenty-first Century has further increased public awareness of economic inequality as a social problem.

argues that economic inequality will continue to increase to levels that threaten social stability unless governments take such actions as enforcing a global wealth tax

Economic Inequality, Wealth, and Poverty in the United States (1 of 2)

The United States has the greatest degree of income inequality and the highest rate of poverty of any industrialized nation.

In 2012, the wealthiest one percent of U.S. households earned more than 22.5 percent of the nation’s income;

The top ten percent of income earners took home more than half of the nation’s total income

Economic Inequality, Wealth, and Poverty in the United States (2 of 2)

In 2014, C E Os at the top 350 U.S. corporations received, in salaries and other compensation (such as bonuses and stocks), an average of 303 times the average compensation of U.S. workers

That means that a typical worker would have to work 303 years to earn what a C E O makes in one year!

Patterns of Poverty in the United States (1 of 3)

Age and Poverty

In 2014, 46.7 million Americans—14.8 percent of the U.S. population—lived below the poverty line

About a third of U.S. children experience poverty for at least part of their childhood, and 10 percent of children are persistently poor, spending at least half their childhood living in poverty

Compared with other industrialized countries, the United States has the highest child poverty rate.

Patterns of Poverty in the United States (2 of 3)

Children are more likely than adults to live in poverty.

Patterns of Poverty in the United States (3 of 3)

Figure 6.3 U.S. Poverty Rates by Age,2014

Source: DeNavas-walt and proctor 2015.

What Do You Think? 2

In our sociology classes, we introduce the topic of U.S. poverty by asking students to think of an image of a person who represents poverty in the U.S. and to draw that imaginary person. Most draw a picture of a middle-aged man. Why do you think the most common image of a U.S. poor person is a middle-aged man?

Sex and Poverty

Women are more likely than men to live below the poverty line—a phenomenon referred to as the feminization of poverty.

In 2014, 16.1 percent of women and 13.4 percent of men were living below the poverty line.

Education and Poverty

Education is one of the best insurance policies for protecting an individual against living in poverty.

In general, the higher a person’s level of educational attainment, the less likely that person is to be poor.

Family Structure and Poverty (1 of 2)

Poverty is much more prevalent among female-headed single-parent households than among other types of family structures

In other industrialized countries, poverty rates of female-headed families are lower than those in the United States.

Family Structure and Poverty (2 of 2)

Figure 6.5 U.S. Poverty Rates by Family Structure, 2014

Source: DeNavas-Walt and Proctor 2015.

Race or Ethnicity and Poverty (1 of 2)

Poverty rates are higher among blacks, Hispanics, and Asians than among non-Hispanic whites.

Past and present discrimination has contributed to the persistence of poverty among minorities.

Other contributing factors include the loss of manufacturing jobs from the inner city, the movement of whites and middle-class blacks out of the inner city, and the resulting concentration of poverty in predominantly minority inner-city neighborhoods.

Race or Ethnicity and Poverty (2 of 2)

Figure 6.6 U.S. Poverty Rates by Race and Hispanic Origin, 2013

Source: U.S. Census Bureau 2014.

Labor Force Participation and Poverty

A common image of the poor is that they are jobless and unable or unwilling to work.

Although the poor in the United States are primarily children and adults who are not in the labor force, many U.S. poor are classified as working poor—individuals who spend at least 27 weeks per year in the labor force (working or looking for work), but whose income falls below the official poverty level.

Consequences of Economic Inequality and Poverty

Health Problems, Hunger, and Poverty

In the United States, low socioeconomic status is associated with higher incidence and prevalence of health problems, disease, and death.

Hunger in the United States is measured by the percentage of households that are “food insecure,” which means that the household had difficulty providing enough food for all its members due to a lack of resources.

In 2013, nearly 14 percent of U.S. households were food insecure at some time during the year.

Substandard Housing and Homelessness (1 of 2)

Substandard Housing:

Many times the poor live in homes that have a list of problems:

Roof may be literally caving in

Leaky roofs

Holes in the floor and open cracks in the walls or ceiling

Lack central heating and air conditioning

Lack of adequate sewer, septic systems, or electric outlets

Often located in areas with high crime rates and high levels of pollution

Substandard Housing and Homelessness (2 of 2)

Homelessness:

Due to the recent rise in unemployment and foreclosures, more women, men, and children have been pushed into homelessness.

The number of homeless nationwide is estimated to be more than one million.

Over the course of a lifetime, an estimated 9 percent to 15 percent of the U.S. population becomes homeless.

Couch Homeless: Individuals who do not have a home of their own and who stay at the home of family or friends.

Legal Inequality

In 19 63, the Supreme Court ruled in Gideon v. Wainwright that criminal defendants who cannot afford to hire an attorney have the constitutional right to a public defense.

Without the resources for effective legal representation, poor defendants often accept unfair plea bargains, and “the systemic result is harsher outcomes for defendants and more people tangled in our costly criminal justice system”

Political Inequality and Alienation

The wealthy have greater access to politicians and to media, and can communicate their point of view and interests—often masquerading as “national interest”—much more effectively than the rest of us.

The 2010 Supreme Court ruling in Citizens United v. Federal Election Commission that allows corporations to spend unlimited amounts of money to support or oppose political candidates has contributed to political inequality.

Crime, Social Conflict, and War

Poverty and economic inequality are linked to crime and violence

Economic inequality and poverty are often root causes of conflict and war within and between nations.

Poorer countries are more likely than wealthier countries to be involved in civil war, and countries that experience civil war tend to become and/or remain poor.

Natural Disasters, Economic Inequality, and Poverty

Although natural disasters such as hurricanes, tsunamis, floods, and earthquakes strike indiscriminately—rich and poor alike—poverty increases vulnerability to devastation from such disasters.

But even in wealthy countries, the poor are more vulnerable to natural disasters, while the more affluent have resources that enable them to cope with natural disasters.

Educational Problems and Poverty (1 of 2)

In many countries, children from the poorest households have little or no schooling, and enter their adult lives without basic literacy skills.

In the United States, children living in poverty are more likely to suffer academically than are children who are not poor.

Educational Problems and Poverty (2 of 2)

The poor often attend schools that are characterized by lower-quality facilities, overcrowded classrooms, and a higher teacher turnover rate.

Children who grow up in poverty suffer more health problems that contribute to their lower academic achievement.

With the skyrocketing costs of tuition and other fees, many poor parents cannot afford to send their children to college.

Marriage Opportunity Gap and Family Problems Associated with Poverty and Economic Inequality

Poverty and economic inequality creates a marriage opportunity gap

In lower-income households, marriage rates are low, divorce/non-martial childbearing rates are high

The stresses associated with low income contribute to substance abuse, domestic violence, child abuse and neglect, divorce, and questionable parenting practices.

Poor adolescent teenagers are at higher risk of having babies than their non-poor peers.

Intergenerational Poverty

Problems associated with poverty, such as health and educational problems, create a cycle of poverty from one generation to the next.

Poverty that is transmitted from one generation to the next is called intergenerational poverty.

Intergenerational poverty creates a persistently poor and socially disadvantaged population, referred to as the underclass.

What Do You Think? 3

Under hate crime laws, violators are subject to harsher legal penalties if their crime is motivated by the victim’s race, religion, national origin, or sexual orientation. Proposed legislation to add homelessness to the federal hate crime law has not passed. Do you think violent acts toward homeless individuals should be categorized as hate crimes and be subject to harsher penalties? Why or why not?

Strategies for Action

International Responses to Poverty and Economic Inequality (1 of 5)

In 2000, leaders from 191 United Nations member countries pledged to achieve eight Millennium Development Goals—an international agenda for reducing poverty and improving lives.

One of the Millennium Development Goals (M D Gs) was to halve, between 19 90 and 2015, the proportion of people who live in severe poverty and who suffer from hunger.

International Responses to Poverty and Economic Inequality (2 of 5)

Taxes on the Wealthy

Oxfam (2014) calculated that adding a 1.5 percent tax on the world’s billionaires could raise $74 billion in tax revenue—enough to fill the annual gaps in funding needed to provide education to every child and deliver health care services in the poorest 49 countries.

In 2013, the world lost an estimated $156 billion in tax revenue due to wealthy individuals hiding their money in offshore tax havens.

International Responses to Poverty and Economic Inequality (3 of 5)

Economic Development

Policies that involve cutting government spending, privatizing basic services, liberalizing trade, and producing goods primarily for export may increase economic growth at the national level, but the wealth ends up in the hands of the political and corporate elite at the expense of the poor.

Another problem with economic development is that the environment and natural resources are often destroyed and depleted in the process of economic growth.

International Responses to Poverty and Economic Inequality (4 of 5)

Human Development

Unlike the economic development approach to poverty alleviation, the human development approach views people—not money—as the real wealth of a nation.

Investments in human development involve programs and policies that provide adequate nutrition, sanitation, housing, health care (including reproductive health care and family planning), and educational and job training.

International Responses to Poverty and Economic Inequality (5 of 5)

Microcredit Programs

Microcredit programs refer to the provision of loans to people who are generally excluded from traditional credit services because of their low socioeconomic status.

The Grameen Bank in Bangladesh, started in 19 76, has become a model for the more than 3,000 microcredit programs that have served millions of poor clients.

Reducing U.S. Poverty and Economic Inequality (1 of 2)

An important area for reducing economic inequality involves improving the quality and equality of health care and education.

A number of tax reforms could also help reduce economic inequality.

Progressive taxes are those in which the tax rate increases as income increases, so that those who have higher incomes are taxed at higher rates.

Reducing U.S. Poverty and Economic Inequality (2 of 2)

Minimum Wage Increase and “Living Wage” Laws

In 2015, the federal minimum wage was $7.25 an hour. Some states have established a minimum wage that is higher than the federal minimum wage.

Senator Tom Harkin and Congressman George Miller proposed the Fair Minimum Wage Act of 2013, which, if passed, would raise the minimum wage from $7.25 to $10.10 over a period of three years, and would then be raised automatically each year based on inflation.

The Safety Net: Public Assistance and Welfare Programs in the United States (1 of 2)

Various public assistance, or “welfare” programs in the United States are aimed at providing a safety net for adults and children who are deemed eligible to receive such assistance.

A means-tested program is one that has eligibility requirements based on income and/or assets.

The Safety Net: Public Assistance and Welfare Programs in the United States (2 of 2)

Public assistance programs designed to help the poor include:

Supplemental Security Income

Temporary Assistance for Needy Families (T A N F)

food programs (S N A P)

housing assistance

medical care (Medicaid)

educational assistance (Head Start)

child care

and the earned income tax credit (E I T C).

The Safety Net

Welfare in the U.S.: Myths and Realities (1 of 5)

Myth:

People receiving welfare are lazy.

Realities:

Most recipients of T A N F and S N A P benefits are children and therefore are not expected to work.

More than 1 in 10 T A N F families have earned income from employment, but with average monthly earnings of only $838 (in 2011), they could not survive on the income from their jobs.

Welfare in the U.S.: Myths and Realities (2 of 5)

Myth:

Most welfare mothers have many children.

Reality:

In 2011, the average number of children in families that receive T A N F was only 1.8; half of families receiving T A N F had only one child, and less than 8 percent of families had more than three children.

Welfare in the U.S.: Myths and Realities (3 of 5)

Myth:

Welfare benefits are granted to many people who are not really poor or eligible to receive them.

Reality:

Although some people obtain welfare benefits through fraudulent means, it is much more common for people who are eligible to receive welfare not to receive benefits.

A main reason for not receiving benefits is lack of information; people do not know they are eligible.

Welfare in the U.S.: Myths and Realities (4 of 5)

Myth:

There is widespread abuse and fraud in S N A P by beneficiaries, who use their food stamp benefits to purchase beer, wine, liquor, cigarettes, and/or tobacco, or who sell their food stamp benefits for cash.

Reality:

The Government Accountability Office found that “trafficking”—selling S N A P benefits for cash—decreased from 3.8 cents per dollar of benefits in 19 93 to about 1 cent per dollar of benefits in 2010

Welfare in the U.S.: Myths and Realities (5 of 5)

Myth:

Immigrants place a huge burden on our welfare system.

Reality:

Low-income noncitizen immigrants, including adults and children, are less likely to receive public benefits than those who are native born.

Understanding Economic Inequality, Wealth, and Poverty

Blaming poverty on the individual rather than on structural and cultural factors implies not only that poor individuals are responsible for their plight but also that they are responsible for improving their condition.

Ending or reducing poverty begins with the recognition that doing so is a worthy ideal and an attainable goal.

Efforts to alleviate poverty are often motivated by a sense of moral responsibility.

Quick Quiz 1

According to conflict theorists, who are the exploited workers?

A. bourgeoisie

B. proletariat

C. underclass

D. nacrimas

Answer for Quick Quiz 1: B

According to conflict theorists, the proletariat are the exploited workers.

Quick Quiz 2

The major cause of homelessness is:

A. mental illness among the homeless.

B. substance abuse among the homeless.

C. unemployment.

D. lack of affordable housing.

Answer for Quick Quiz 2: D

The major cause of homelessness is a lack of affordable housing.

Quick Quiz 3

Government programs that have eligibility requirements based on income are called what?

A. merit-based programs

B. requirement oriented programs

C. means-tested programs

D. none of these choices

Answer for Quick Quiz 3: C

Government programs that have eligibility requirements based on income are called means-tested programs.

Quick Quiz 4

Children are more likely than adults to live in poverty.

A. True

B. False

Answer for Quick Quiz 4: A. True

Children are more likely than adults to live in poverty.

Quick Quiz 5

Gene's corporation is failing yet he receives low-interest government loans, tax reductions, and lower fines when it breaks federal regulations. Gene's corporation is not unique; in fact it is one of many who receive what conflict theorists call:

A. hegemony.

B. wealthfare.

C. welfare.

D. interest giving.

Answer for Quick Quiz 5: B

Gene's corporation is not unique; in fact it is one of many who receive what conflict theorists call wealthfare.

Psychology SOCASsignment6

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