Social Inequalities

• A critical component of any democracy is the notion of political equality.

• The major question to address in this section is to what degree the democratic ideal of political equality requires a measure of social and economic equality?

Sources of Inequality in U.S.• Wealth and Income: End of American Dream?• Between 1977 and 1990 the richest fifth of

Americans increased income by 15% while poorest fifth decreased by 7%.

• 60% of income growth in 1980’s went to richest one percent of families and trend has continued through 2000’s (See next slide).

• In 1960s average CEO earned 26 times that of an average worker. In 2000, this jumped to 310 times- today it is 500 times greater!

• Equality in wealth distribution is greater in Europe than in US- reverse of trends during early 1900’s.

Inequalities in Income Growth Have Grown Over Time

• In 1997 the elite 5% of Americans owned 66% of all the wealth in the country.

• The assets of Bill Gates are equal to the combined assets of least affluent 40% of US population (100 million people)! Reflective of Super Rich trends as of 2007- see next slide.

• Due to changing labor market, the gap in income based on education has grown.– On average a college graduate will make 66%

more than an average HS graduate.– Wider gap for those with advanced educations,

as new economy rewards those with advanced skill sets.

Income Gap is Extreme

• A huge share of the nation's economic growth over the past 30 years has gone to the top one-hundredth of one percent, who now make an average of $27 million per household. The average income for the bottom 90 percent of us? $31,244.

Wealth Gap Is Huge

• Note: The 2007 data (the most current) doesn't reflect the impact of the housing market crash. In 2007, the bottom 60% of Americans had 65% of their net worth tied up in their homes. The top 1%, in contrast, had just 10%. The housing crisis has no doubt further swelled the share of total net worth held by the superrich.

I-Clicker Question

• What is your view of the current reality of the American Dream?– A) The American Dream is alive and well in

the US, as I expect to achieve upward mobility.

– B) The American Dream is just that, a dream that no longer is the reality for people living in the United States.  

Social Mobility-Myth or Reality?• Hudson notes that rising inequalities is undermining

“rags to riches” mobility in US.– Statistical models suggest that most affluent children

can expect to acquire similar SES levels to their parents (.65 correlation among affluent families).

– Those born into bottom quintile have 50% chance of staying in that level as adults, and only 10% chance of reaching top quintile (Cycle of Poverty).

• Is difficult to identify why this correlation exists (heritability of traits vs. wealth inheritance).

• “Being born on third but think you hit a triple”

Impact of Recent Economic Recession • The unemployment rate has hovered around 10% over

the past two years, with underemployment rate closer to 20% (Slide).

• Approximately 16% of the US population lacks health insurance (47 Million)- even higher rate of 21% in New Mexico.– Recession has led to a greater percentage of the

population relying on Medicade for coverage, which has impacted state budgets.

• Rising health care costs and sagging economy have lead to many using up savings (13%), difficulty paying other bills (13%), being contacted by collection agency (12%),or being able to pay for basic necessities due to medical costs (7%).

US citizens….number

is higher when immigrants are

included.

Differential Impact of Economy • The number of millionaires in the US rose 16

percent to 7.8 million in 2009.

Differential Impact of Economy • The pay of CEO’s soared during economic crisis,

causing political debate regarding the TARP Bail Outs.

• The median raises for top 500 CEOs‘ saw a record 27% increase in 2010, with median income at 9 million.– CEOs received a median of $2.2 million from bonuses,

up 47% from $1.5 million in 2009.– CEO of Viacom saw a 149% increase, with a salary of

over $84 million.– Median salary of private sector workers only increased

2% over this period with unemployment hovering around 10%.

• The median CEO pay in 2011 rose a more modest 2% to $9.6 million.

Unpopular bailout

Uneven Impact of Recession

Personal Responsibility: Role of Credit• Have too many Americans foolishly turned to credit

to achieve the American Dream?– During height of economic crisis approx. 75% of

households had at least one credit card, and these families had an average of more than $10,000 in credit card debt.

– The aggregate credit card debt in September 2008 was 975 billion!

– Approximately 43% of families spend more than they earned.

• Silver lining of economic crisis is that Americans are shedding debt, and banking industry is making it more difficult to engage in risky financial behavior.

Personal Responsibility: Role of Credit• Foreclosure rates have skyrocketed during

the economic down-turn, and have fueled debates about predatory lending.

http://www.youtube.com/watch?v=VP5m17RtoCE

• Personal bankruptcies have doubled over the last decade!

• Structural Discrimination vs. Personal Responsibility?– ARM Mortgages, Home Equity Loans, and

Same Day Loans are prominent examples of risky behavior.

I-Clicker Question Do you believe that the majority of blame for

Recent personal economic woes falls on:

A)Banks and credit card companies who preyed on public, along with Government which did not protect consumers well enough.

B)Individuals, who should have known better than to make risky financial decisions.

Inequality and Public Policy• Hudson argues that public policy has contributed to

this notion of rich getting richer and poor getting poorer. – In short, “deindustrialization” and “downsizing” led to

greater inequality.

• Some other examples include: – Federally induced increases in Interest Rates to control

economic growth.– National minimum wage below inflation.– NAFTA and WTO – increased globalization.– Erosion of Social Welfare Policies including employer

based health care and retirement. – Less resources for workforce training and college

education.

http://www.youtube.com/watch?v=E3y1ZNd1YWo

Connecting Immigration and Economic Policies: Impact of Farming Industry on Immigration Trends

• Many have argued that the rise in social inequality is largely driven by the relationship between money donated to elected officials from powerful companies.

•Hidden campaign of fundraising etc.•Not everyone is as honest as John Breaux (D-LA): "My vote can't be bought -- but it can be rented." •However, there is evidence of a correlation between $ and legislator behavior.

Money and Politics Part of the Problem

Is Inequality a Challenge to Democracy?

To what degree does the democratic ideal of political

inequality require a measure of social and economic

equality?

1) These inequalities undermine the democratic value of political equality by creating vastly unequal levels of political representation.

- Money and wealth are resources that can be used to impact political outcomes through campaign contributions.

- SES is a major predictor of political participation. - Elected officials themselves tend to be wealthy, and

they therefore are more responsive to their wealthy constituents.

2) These inequalities are a barrier to community formation as people no longer think of themselves as equal. – Suburbanization has led to greater economic

and racial segregation. This has led to us vs. them mentality and polarization in community resources- greater tax base for suburbs, poorer services in urban areas. (NIMBY Phenomenon)

3) Social inequality may lead to rebellion and repression (LA Riots as an example)

Solutions?• Increased funding for Education

– State colleges and universities provide free education for state residents?

– Greater federal provided grants and low interest loans, and control rising tuition.

• Progressive and/or Redistribute Tax Policies– Hudson argues that the wealthy should pay more in

taxes than middle and low income families. – Obama’s tax plan uses this approach.

• Raising of minimum wage and pressure on businesses that receive state and local support to provide living wages.

In Class Activity

• What responsibility does government have to eradicate social inequalities?• Should government tackle inequalities through

staggered tax and social program systems, and/or specific educational programs aimed are equality in resources.

OR• Are inequalities simply a product of a capitalist

system that requires some citizens to be “haves” and others “have-nots”