Today we will play in class!
What is the probability of winning a coin?
Everyone starts with three coins. What do you think will happen to the competition?
- Each will receive 3 cents.
- You have to find something to bet against and keep betting.
- Take turns flipping and betting (one person picks the bet and the other calls).
- When I pause the action, be sure to count your coins and you’ll be counted!
Coin distribution chart
round 1 2 3 4 5
The exercise was a metaphor for social class.
The exercise resembles real life in many ways:
Americans believe that the economic system is fair and equal
1.Like life in the US, the exercise appeared to be fair and equal, with everyone having a 50% chance of winning. USA is anopen system– not a caste system or a closed system like monarchy or apartheid.Our systemit gives the impression that everyone has equal opportunities and that the system is fair. In the metaphor of flipping a coin, it seems that everyone has a 50-50 chance of success. This is also true for the US public. FromA Glimpse of the American Dream by Jen Hochschild.,Americans believe in the “American Dream”; success is within everyone’s reach. However, just like in real life, the coin game requires a bit of luck. Being lucky enough to be born rich is an advantage, as is being lucky enough to win early in the game.
Social class “Rules” create a similar distribution of wealth
2. However, our system, while open, is asocial classwhich consists of unwritten rules. As the rules are written, the money will go to the top when only a few have the most coins and most people have very little. (See graphic to the right of here)
More money, more problems? Not for social class
3. The more money you have, the more options you have. Donald Trump’s corporation filed for bankruptcy at least 4 times, but he had enough wealth, power and prestige to recover from the bankruptcies. (note: I use this example long before Trump’s foray into politics)
Definition of middle class
4. The difficulty of the middle class. Most Americans identify as middle class. People making $30,000 a year and people making $200,000 a year claim to be middle class. But finding a middle ground is difficult because there is so much moneyleaning up and so many people at the bottom.Although the odds of the game appear to be 50-50, the rules encourage the fortunes to go upwards. Every time we play this, the result is the same: the most money at the top and the most people at the bottom with very little money. This is true in both real life and metaphor. Here is a chart showing the distribution of wealth in the US:
Compare this graph with the coin distribution graph at the end of the game.
Some specific similarities:
How hard is it to define the middle class.
Big difference between those at the top and those at the bottom.
Lots of Americans who have no assets/no coins.
In conclusion, most US citizens do not like the idea of social class. They do not like to recognize the rules that create the distribution of wealth that we see in the exercise. But the reality is that our wealth and even our income in the US resembles a coin flipping metaphor; a few individuals at the top with enormous wealth and income while the majority of people at the bottom earn very little (comparatively).
And the “rules” of our society help to create that dynamic. By “rules” I mean the opportunities and obstacles we face because of our social class.
Study of data on social class
So why bother studying social class in the US?
From the Institute of Economic Policy
Most Americans believe that a rising tide should lift all boats—that as the economy expands, everyone should benefit. And for two and a half decades, starting in the late 1940s, our economy worked like this. During this period, wages (wages and benefits) for typical workers increased along with productivity (how much workers produce per hour). In other words, as the economy became more efficient and expanded, everyday Americans reaped the corresponding benefits of better wages. However, this began to change in the 1970s.
Social class inequality in the US has been growing for decades. This growth is fundamentally shaping the United States, although few seem to recognize it. Economic inequality is influenced by many factors, including economics, public policy, and social change. Income inequality has been on the rise for the past few decades. The top earners in America have earned more and more over the past 50 years, while the lowest earners have earned nearly as much.
All these components indicate and increase social class inequality. Read on for each element. Remember to think about what the average American looks like and how your family compares. I want you to have a better understanding of where your family fits in compared to the average American.
Property; The first component of social class
Wealth is hard to understand. This is everything the household owns, such as houses, vacation homes, cars, 401k, savings, stocks, jewelry, etc. But you have to subtract what the family owes. So if my house is worth $200,000, but I owe $160,000, my equity is only $40,000.
First, hypothesize how much wealth (the pie) the US makesyou thinkeach quintile (person) has:
Bottom 20%:______ 2 20%_______ 3 20%________ 4 20%_______ 5 20%_______Top
(at least) (at most)
Second, write how much you think about each quintileshoulddo you have
Bottom 20%:______ 2 20%________ 3 20%________ 4 20%_______ 5 20%_______Top
After you finish answering the above questions, watch the following video:
What is the reality? How is wealth actually distributed?
1. How does your guess about wealth differ from how it is actually distributed? (Here’s the Google form for this lesson – I recommend opening it in a new window and answering each question after reading the information.)
This video from ST. Louis Fed also explains wealth gap in US (2019).
The general conclusion about wealth is that the wealth gap is greater than the income gap (see the pie chart below). The top 1% in America owns 34% of everything. The top 10% control 70%. And half of America owns 96% of everything. In other words, the bottom half, 50% of America, has next to nothing. They have no money saved – neither for retirement nor for anything else. When you take away their debt, they have almost no equity, whether it’s their home, their property or their bank accounts.
Average American wealth
From DQYDJ (Don’t Quit Your Day Job)
…is a finance and investment website founded in 2009 that publishes posts about investing and addsinteractive features, tools and calculatorsto their posts.
DQYDJ’s 2020 Wealth Analysis in America estimates that the median net worth of Americans is $121,000:
The median is higher since 2010. The Huffington Post reports analyzing the Congressional Research Bulletin on the property of T.hethe medianhousehold net worth — the level where half of households have more and half have less — was $77,300.For a much more detailed analysis of the property, see this post from a business owner.
The average American:
- 90% have 1 car, 50% – 2 cars (the actual average is 1.8 cars per household),
- 50% have 401k.
- 66% have 1 home (only 6% have a second home, such as an apartment or lake house).
- what is the total net worth of the household
- 401 thousand
- own a house or a second home
Wealth creates the opportunity for passive income, another component of social class.
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