Income Inequality Sociology

We often see and hear success stories of successful entrepreneurs in America, such as the story of Bill Gates and how his success came about from founding Microsoft through hard work and dedication. We also see and hear stories about the poor, however, these stories are presented in a much less sensationalized tone when compared to stories of successful entrepreneurs. The general public tend to think that poor people are generally poor because they are lazy and unwilling to work. This is based around the idea of income inequality, where Americans believe that the more effort someone puts to find employment and completing their job, the more money they will make in the long run. But is income inequality truly the reason why there are so many
poor people in America or are we turning our focus on the wrong problem?
In America, the media typically reports on social problems such as income inequality. There are certain individuals at the top of America’s economic ladder that are making proportionately more money than millions of other Americans. But income inequality only shows the gap between annual incomes earned in America. It does not show the actual distribution of wealth in the country. For example, two people could be making the same amount of money in a given year, but the first person owns assets worth a few million dollars while the second person’s wealth is only worth a few thousand dollars. One would be considered in poverty while the other person would be well off. Income inequality is not an accurate measure of the inequality between the richest and poorest Americans. Instead, the focus should be on wealth inequality, which shows the unequal distribution of goods and assets in the country. Wealth is the value of what a household owns in assets, such as property and other goods needed to improve the living conditions of the household. Typically, the more wealth a household accumulates, the household experiences higher living standards and has the ability to spend on leisure, or ways to control more wealth. This unequal distribution of wealth results in the concentration of wealth in a small elite group or corporations who is able to use their wealth to control many aspects of society, such as the means of production and even the ability to control the political landscape of America.
The Washington Post article, “If you thought income inequality was bad, get a load of wealth inequality” written by Christopher Ingraham in 2015, discussed the importance of wealth inequality and presents statistics of the distribution of wealth in America. People think of the unequal distribution of wealth as a group of people making a larger percentage of total earnings within a given year. While this is true, the wealth gap is much larger than the income inequality. The Organization for Economic Co-operation and Development produced a report which included a graph which plotted the share of income and wealth owned by the top 10% of each country. Overall share of income in 18 countries by the top 10% is around 20-30%, but the overall share of wealth by the top 10% in these countries varied drastically depending on the country. The article also draws data from a study done by New York University which visualizes the share of total U.S. net worth by each particular percentage of the population. 20% of the U.S. population, which accounts to 64 million Americans, owns more than 88% of the total wealth in the United States. This leaves a much smaller share of wealth for the 255 million other Americans who only control less than 12% of the total wealth. The author of this article does not directly take a sociological approach to this problem, but has acknowledged that the American society is structured to benefit only a small fraction of people at the cost of the vast majority of everybody else in the country. Wealth inequality is neither a social pathological nor disorganization problem, but rather a structural problem.
There are three main competing sociological perspectives that try to address why a problem occurs in society: social pathology, social disorganization, and social structure.
Social pathology is the idea that there are people or groups that are biologically less “fit” than everybody else, which puts them at a disadvantage when trying to compete in society. It follows the person blaming approach, where the cause of the problem is the person themselves and is responsible for their poor living conditions. This sociological perspective takes a social Darwinism approach and states that poor people are poor because they do not have the ability to work as well as other people in society. The richest Americans are the wealthiest because they have put in the effort to accumulate their wealth and should be rewarded for their work. The other 90% of Americans do not have the ability to work as hard as the top 10% simply because they do not have the ability to compete with the 10% who have the ability to control most of the country’s wealth. An example is John Rockefeller and his belief of social Darwinism. He is quoted to saying that “the growth of a large business is merely a survival of the fittest.” Because of his desirable traits such as intelligence and skill, Rockefeller believed he had the inherent abilities to outcompete other businesses at the time, which contributed to his
success.
The social disorganization theory believes that there are changes that cause individuals to stray from the norms of society. While this is different than social pathology, social disorganization also focuses on blaming certain individuals for problems in society. People are deviant because of their inability to adapt to society. In lecture, immigrants coming to America was used as an example to show the difficulty immigrants had with integrating into American society. Immigrants usually live together in areas who have been established by other immigrants who came before them because it gives new immigrants a sense of familiarity of their old country. Because of this, immigrants do not find an urgent need to learn the language and customs of the new country, which means that they would have difficulty fitting into society outside of their city or region. This causes the immigrants to become disadvantaged due to the fact that they cannot compete with other Americans because they are not able to receive the resources necessary to be economically successful in society. This includes services such as an education or the technical skills required to operate tools in higher paying jobs. These deviants of society will always live in extreme poverty with very little wealth, compared to individuals who received adequate education and are able to have a job and earn a living. Rockefeller was able to take advantage of industrialization in America and grow his wealth in tandem with the rapid growth of America’s economy. People, such as immigrants, who have not assimilated to American society were left behind financially because they were not able to take advantage of the economic growth in America during this time period.
Finally, the social structural theory approaches the problem of wealth inequality as a social construct. Instead of the victim blaming approach taken by social pathology and social disorganization, the social structural theory states that social problems are caused by society itself. Societal policies have created inequality which benefits a small group of people at the expense of everybody else. One example is the creation of government laws and other policies such as tax breaks to help the wealthy keep more of their wealth. The wealthy have the money to hire politicians and other lobbyists to help influence political decisions to reduce taxes on the wealthy such as estate taxes that are applied to properties that is purposely set at extremely high amounts. This graph is from a paper written by two professors of economics at Berkeley that analyzes the tax rates, the total wealth share of the top 0.1% in the past 100 years, and the effects these variables have on wealth inequality. In the time of the 1920s, tax rates remained relatively low as there were massive tax cuts made by the Harding and Coolidge administrations. As a result, the top 0.1% was able to control 25% of total wealth in the United States. Between the 1940s until 1980s, tax rates in America were relatively high as a result of World War 2 and the Cold War, which meant that wealthier Americans had to give up a higher percentage of their wealth to the government. America runs on a progressive tax system, where the amount being taxed depends on the individual’s total wealth. Beginning in the 1980s, the government decided to reduce taxes again, which allowed the wealthy to keep more of their money. These tax cuts have lasted even until this day, with top 0.1% is in control of more than 20% of America’s wealth again, similar to the amount the wealthiest Americans controlled back in the 1920s. Government policies of tax breaks have reduced taxes across the country while wealth distribution policies have remained the same, which has increased the wealth gap between the rich and poor by a considerable amount.
The American government has also reduced the effectiveness of welfare, which has hurt many Americans who rely on welfare to stay out of poverty. Without this financial safety net, these Americans are not able to buy many necessities and cannot use the money to get an education or other resources needed to help improve their lives. As a result, these individuals would have to turn to criminal activities just to make enough money to survive. The War on Drugs is an ongoing government campaign where the government tries to stop the trade of drugs in America. In the process, many Americans are sent to prison from violating drug laws with harsh penalties. With a criminal record and very little education, these individuals would have a hard time finding employment after they leave prison. Societal structure is set up in a way that keeps those in extreme poverty from moving up the socioeconomic ladder and allowing the richest Americans in control of most of the country’s wealth.
The least useful approach to view poverty is through the social pathology perspective. Wealth is not a result of biological superiority or inferiority, nor is gaining wealth a competition where only the fit can survive, as social Darwinism puts it. People are not born with certain genetics that allow them to accumulate wealth at a much greater rate than everybody else. Social disorganization addresses the social problem as coming from deviance in society. However, the theory still revolves around the idea of victim blaming and targeting deviants who stray from the norm as the cause of the problem. Wealth inequality is not a result of people who do not assimilate into American society. Social structural theory offers the best explanation to the causes of poverty, as it connects poverty as the result of certain social structures put in place in America. The government creates laws and other policies which has helped the rich get richer and kept the poor in poverty.
One solution to solving wealth inequality is to change how wealth is redistributed throughout the country, such as reintroducing a higher tax rate in the country.
From the data shown above, we can visually see that wealth inequality has dropped in the years where there was a higher tax rate. The high taxes allow the money held by wealthy individuals to be collected by the government to potentially fund social programs, such as welfare programs. A current candidate for president this year, Senator Bernie Sanders, has brought up this issue repeatedly in his campaign. One of his solutions is to raise taxes for the wealthy in order to make the wealth gap between the richest Americans and the poorest Americans smaller. The government can then use this money to fund safety net programs that would benefit the poor. Another approach that our country can take is to revise our laws for non-violent/low risk offenses which has harsh consequences for many Americans. These offenses make it much more difficult for Americans who have a criminal record to find jobs and to earn a living wage. By employing more workers, people with criminal records can be given the opportunity to earn a wage to support themselves. This gives felons the ability to climb up the socioeconomic ladder and be able to climb out of poverty, instead of turning back to a life of crime just to make money to support themselves. Wealth inequality is a solvable issue, if there are enough people who take action to change the
societal structure that causes this unfair distribution of wealth.