Income as a Component of Social Class

Income as a Component of Social Class
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As you saw in the previous lesson, sociologists have gradually concluded that social class does exist in the US and it is made up of a complex set of factors. Additionally, yesterday’s lesson shows that government policy affects how much inequality there is. By the end of this unit, I want you to understand what the average American family looks like and how your family compares to that. Today we will begin to explore some of the factors that contribute to a social class by examining income.

Social Class Component #1: Income

What is income and what are some different types of income?

The first component of social class that we will examine is income. Income is usually what Americans think of first when they think of social class. Income is how much money a person or household takes in each year. Income can come from different sources. It can be hourly wages such as a secretary or construction worker that makes $25 per hour and they only get paid for the hours they work. Or it can be a salary like a teacher or a manager who makes a salary of $75,000 per year, regardless of the number of hours they work. A third type of income is from capital gains which are profits made off of investments. An example of capital gains might be a stock trader who buys Apple stock at $100 per share and then sells it 2 years later for $200 per share.

Here is the Google Form for this lesson.

What is the typical American family income?

1. What do you think the median household income in the United States is – please guess if you are not sure.

(Median is the middle, whereas mean is the average).

2. What is the actual median household income?

Click on the Census Data finder here and search “income”.

3. How do you think your family compares to the average income? Higher or lower? By how much? If you do not know what your family’s income is (or if you are not comfortable writing about it, use the average incomes below)

This 2014 graph from NPR shows the way occupations fall into various income levels. The graphic is posted below, but if you click on the link it will allow you to highlight occupations that fall into more than one income level.

Otherwise, you can use this 2020 data of the median income for the largest villages in our district. What village do you live in? Are you above or below the average in the village?

4. What is our school district’s median income?
You can search the latest data here. Click on filter then geography then school district then Adlai 125. Below is a chart showing the latest data as of 2020:

Another way to examine income is through percentile.

What is the percentile for our district or the suburbs in our district? Is the chart of income by percentile surprising?

The first point about income is that it is very stratified in the US The median income is much closer to the bottom than to the top, so it is highly skewed toward higher-income earners. And, we tend to segregate based on income, so we don’t notice the stratification so much. In other words, an average person in D125 feels average but in reality their family earns double what the average American family earns. Also, media tends to show the uber-rich so the vast majority don’t feel like they are rich because they look up to the most wealthy.

Income inequality has been growing

Here is Income Inequality from One graph showing that income inequality has grown:
Figure 5:

The Center on Budget and Policy Priorities published this report with this graph detailing the rising inequality.
Figure 6:

This 2017 NY Times editorial explains the rising inequality in one chart.
Figure 7:

Check out this post from Slate about income inequality. This details how there was much income inequality during the beginning of the 20th century, then the inequality lessened known as the great compression (1940-1980) followed by a growth in income inequality known as the great divergence (1980 – present).

Figure 8:

Another resource for income is from the Federal Reserve Economic Data (FRED) You can search for real income (adjusted for inflation) in multiple years for comparison. Here is a graph showing the real income from 1984 to the most recent data.

Figure 9:

Despite the growing inequality in income, Americans are working more than ever. The graph below from PEW shows the share of households who have two income earners from 1960 to 2012. Families are busier and working more, but earning less and less of a share of the income in the US

Figure 10:

The second point about income inequality is that it has been growing for the last 50 years or so. During that time, a larger and larger share of income is at the top. And even though the vast majority of Americans are not keeping up with the highest income earners, the vast majority of Americans are actually working more.

5. Choose one of the figures 5-10 and explain how it shows income inequality is growing.

Policies affecting growing income inequality

So, income has been becoming more unequal, but government policies can affect this inequality. For example, some of the highest income earners actually pay less in taxes than middle income earners! From the Tax Policy Center, this chart (below) shows that higher income earners pay more of their taxes as capital gains taxes which are taxed at a lower rate than the majority of Americans who pay income taxes at a higher rate.

And this chart (below) from Visualizing Economics shows the rate that capital gains have been taxed compared to other taxes. Note capital gains have always been taxed at less than income tax. And what this chart does not show is that if you can earn all of your money by capital gains and declare no income, then you can reduce your capital gains tax to zero! If you find the chart or all of the tax talk confusing, simply know this: Some of the highest income earners in the US can pay the less income tax than the average American. And, as tax rates have fallen since the 1950s, inequality has gone up. The higher tax rates allowed the government to provide loans for college, small businesses and buying homes, and the taxes fueled projects that created jobs like building infrastructure such as highways, airports and the power grid, and even Red Rocks Amphitheater.

6. Can you explain how income is related to social class? Yes or No and explain.

Here is a link to Marketplace where you can input your income and compare it to social class data in the US. What items on here might be part of Bourdeiu’s social capital?

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