Assessing Class: Wealth

The study of social class — structurally produced economic hierarchies — and how to best measure it has been a central theme in sociology since the work of Marx in the nineteenth century and Weber in the early twentieth century. Social class is a key concept in sociology and the foundation for scholarship on poverty, stratification, and inequality. However, there is considerable debate about how best to measure class and how various measurements translate over time, place, and societies. Indeed, new methodologies, increasing statistical sophistication, and the availability of large multinational and longitudinal data sets provide more resources for researchers who seek to uncover not only the best measures of social class, but how wealth, broadly defined, is interpreted and affects the lives of people.

Keywords Net Worth; Occupational Prestige; Power; Power Elite; Prestige; Stratification; Status System; Wealth

Stratification & Class in the US > Assessing Class: Wealth

Assessing Class: Wealth

Overview

The study of social class — structurally produced economic hierarchies — and how to best measure it has been a central theme in sociology since the work of Marx in the nineteenth century and Weber in the early twentieth century. Social class is a key concept in sociology and the foundation for scholarship on poverty, stratification, and inequality. However, there is considerable debate about how best to measure class and how various measurements translate over time, place, and societies. Indeed, new methodologies, increasing statistical sophistication, and the availability of large multinational and longitudinal data sets provide more resources for researchers who seek to uncover not only the best measures of social class, but how wealth, broadly defined, is interpreted and affects the lives of people.

Many researchers argue that inequality is a function of class status and the transmission of wealth (e.g., Wilson, 1980). Wealth, broadly defined, refers to the money (e.g., income) or assets (such as property or stocks) held by an individual or a group. It is a key component in the measurement of social class and stratification, which are also impacted by power and prestige. Although power is a contested concept, it broadly refers to the probability of a person or group carrying out their will even when opposed by others (Giddens, 1997). Prestige is defined as the respect associated with a person or group according to their social status.

Measures of Class

Stratification in the United States and around the world is a consequence of the unequal distribution of rewards. There are several ways this inequality is measured. The three most common are power, prestige, and wealth. Each measure and definition contributes to our understanding of social stratification and has various consequences for understanding wealth inequality.

Power

Power is often described as the ability a person has to get others to do things (Thio, 1992). Those who have access to greater resources (such as income, education, property) also tend to have more power, whether in the home, industry, or politics. Those with fewer resources tend to have less power. Three theoretical perspectives regarding the use of power as a measure of stratification and inequality are:

• Marx's theory of capitalism
• Elite theories
• Pluralist theories

Marxist theories of power focus on the consequences of the social arrangements between those who own the means of production and those who do not. For instance, Marxists argue that the ruling class within capitalism holds not only economic power (because they own the means of production) but also political power, regardless of whether its members hold political office. The ruling class protects its interests through lobbying efforts and political contributions, and thus shapes the political debate in its favor. In addition, the ruling class holds social and cultural power by establishing hegemony, or, “manufacturing consent” through manipulation of the mass media (Herman and Chomsky, 1988).

Elite theories of power and its distribution, notably developed by C. Wright Mills (1956), argue that there is are limited few — mostly associated with the government, military, and a few executives in large industries — who have shared values and goals that facilitate the preservation of power and thus preserve class divisions.

Pluralist theories of power put forth an alternative argument regarding the distribution of power and its relevance to stratification and inequality. Pluralist theories suggest that power is more widely dispersed and equally distributed between various social groups. Pluralists argue, however, that the power of the individual is most evident when people band together to create social change, for instance, via voter participation and social movements (Piven & Clowerd, 1977; Burstein & Linton, 2002; Brooks & Manza 2008; Christian 2008).

Prestige

The notion that prestige can be an adequate measure of stratification and inequality is based on the idea that individual occupations have different levels of prestige, which result in pay differentials that form a status system. For instance, since the late twentieth century the General Social Survey in the US has collected data from households and asked respondents to rate over 90 occupations based on their perception of prestige. Occupations that have consistently received the highest rankings include physicians, college professors, judges, and lawyers. The occupations with the lowest prestige scores are housekeepers, garbage collectors, and janitors. Research that has tested the relationship between occupational prestige and income has suggested, compellingly, that there is a positive association between occupational prestige and patterns of income inequality (Caston, 1985). That is, occupations that are ranked highly according to socioeconomic prestige are also associated with higher levels of income. However, this picture is complicated by status inconsistencies, in which other socioeconomic factors, such as race and gender, may result in diminished prestige for minorities and women (Gittleman & Wolff, 2004), and, concomitantly, lower social class.

Wealth

The distribution of wealth is another means of measuring class. Wealth, broadly defined, refers to the money or assets (such as property or stocks) held by an individual or a group. Wealth is generally described in terms of accumulated items, including economic resources such as cash and investments, or the possession or control over property and other revenue-generating industries. Wealth is important because of its relative value: it can be converted into cash and therefore represents a source of consumption; it provides collateral to secure credit; and it can be passed to future generations (Deere and Doss, 2006). While wealth is central to determining income variation between and within groups, it is distinct from income, which refers to the wages people earn (or income from other sources such as rented property or dividends).

Further Insights

Measuring Wealth

It is difficult to acquire information about the distribution of wealth. In the US, data associated with wealth distribution is collected by the Federal Reserve Board’s Survey of Consumer Finances. According to the 2013 Survey of Consumer Finances, in the US, in 2013, the wealthiest 3% of families received roughly 30.5% of the nation's income; the top 10% of families received more than 47%. The bottom 90% received just over 52 percent of the nation’s income in 2013. Data also not only offer compelling evidence that there is a growing gap between those who are among the richest 20% and those who are among the poorest 20% (in 2004, 34.4% of the wealth was owned by the top 1%), but there is a disparity between the capacity of different racial and ethnic groups to transfer intergenerational wealth. This intergenerational disparity affects the capacity of these groups to enhance the next generation's life chances by passing down accumulated wealth.

The inequitable distribution of wealth is of central concern as it affects levels of poverty in the US, inequality, stratification, mobility patterns, education, and employment opportunities. This is mostly due to the fact that the top fifth of the wealthiest people in the US have consistently held over two-thirds of the nation's wealth. Those who have the least amount of wealth make up the largest portion of the population. The upper middle class (20%) have access to roughly 11% of the wealth, the middle class (20%) have access to 4% of the wealth, and the poor and working class (40%) have access to approximately 0.2% of the wealth (Wolff, 2010).

Variants in the Measure of Wealth

While data clearly show inequity in the distribution of wealth in American society, such data tells us little about how the gap in wealth matters to the lives of people. For example, what does it mean to be wealthy, and how does wealth relate to class? Are those who are wealthy part of the upper class or do the two concepts describe different mechanisms of stratification? Income alone is insufficient to determine class, given that there are many people who are upper class via means other than occupation, such as celebrities, lottery winners, and others who inherent money. Thus, some researchers have advocated for the inclusion of assets, such as ownership in a company, stocks, bonds, or other investments (Brady, 2003), in measures of class. However, with the availability of credit and financing that plagued much of the 1990s and early 2000s, many people appeared to be wealthy or part of the upper and middle class in so far as they had assets. Yet they owed a significant amount of money to lenders for the lines of credit used to purchase various commodities. Thus, more attention has been given to investigating the debt to income ratio, better known as net worth, as a measure of wealth (Campbell & Henretta, 1980).

Measuring Net Worth

Campbell and Henretta (1980) have investigated the measurement of class, wealth, and social status. These scholars view wealth as net worth: as a multidimensional concept that includes an individual's income, assets, tax transfers, and debt among many other indices. They used this concept to investigate various dimensions of social class as it relates to net worth and occupation. Their primary objective was to determine if their multidimensional model of net worth provides a more accurate picture of individual level status (class) than previous measures of status attainment, including measures of occupational prestige. Using longitudinal data from the Survey of Labor Force Participants, Campbell and Henretta concluded that the best predictor of status is one that incorporates net worth along with other socioeconomic indices (including occupational prestige). This suggests that status attainment is not only a function of one’s debt to income ratio but also of family structure, upbringing, educational attainment, and occupation.

Additional empirical studies have attempted to disaggregate the work of Campbell and Henretta by considering how these other socioeconomic indicators influence net worth, the accumulation and transfer of wealth, and social class assignment. In addition, researchers have investigated differences among sub-populations like women and minorities.

Viewpoints

Variations by Race & Gender

The literature investigating wealth as a measure of social class has increasingly focused on race and gender as the primary factors that contribute to variation in the accumulation of wealth within one's lifetime and across generations. The inequitable access to wealth of women and minorities translates into an inability to be upwardly mobile and break through class barriers.

Race

In the US, there is great disparity between patterns of wealth accumulation, assets composition, and home ownership between African Americans and white Americans (Blau & Graham, 1990; Gittleman & Wolff, 2004; Charles & Hurst, 2002). Moreover, there is a statistically significant difference in the proportion of wealth ownership between African American families and white American families, and white families have a greater ability to transfer wealth to future generations. Arguably, this disparity is most evident in relation to homeownership, personal businesses, and equity.

Historically, white Americans have had higher rates of home ownership than African Americans. This is partially due to barriers such as segregation and early legislation that barred African Americans from borrowing money. In the twenty-first century, however, the disparity is more often attributed to the ratio of mortgage applications between African Americans and white Americans, which favors the latter in terms of down payments and some other economic qualifications. For instance, Charles and Hurst (2002), in their study of racial differences in the likelihood of applying for a mortgage, argue that African American applicants are almost twice as likely as comparable to white Americans to have their applications rejected, even when credit history proxies and measures of household wealth are accounted for.

Gender

In 1977, Harbuty and Hitchens published a paper on women, wealth, and inheritance. The paper sparked a great deal of subsequent research that looked at the relation between women and economic wealth. This work was one of the first to call attention to the variations in personal wealth between men and women. A central question was how women establish wealth: through inheritance or entrepreneurship. The data suggested that the majority of women, nearly 60%, accumulated wealth through marriage, while less than 10% accumulated wealth by starting businesses or through other entrepreneurial endeavors. The percentage of women entrepreneurs has greatly increased since the 1977 statistics. In addition, later research suggests that within marriage and households, the distribution of assets (including economic wealth) is not necessarily equitable. Thus while women may have married into wealth, we cannot assume they have access to it. While there historically have been few studies of women's asset ownership, even among the most wealthy Americans, women have been less likely to be among the property elite than men, and more likely to have their wealth managed in ways that differ from men (Tickerman, 1981). Indeed, data from 2006 suggest that the largest gender wealth gap is found at the very top of the wealth distribution (Deere and Doss, 2006). Women's capacity to acquire wealth is affected "by the state, the family, the community and the market" (Deere and Doss, 2006, p. 12), in particular through the gender wage gap, which makes it difficult for women to accumulate wealth through savings.

The variation in differences between men and women in their money management, property ownership, and resource allocation puts women at a disadvantage in increasing their wealth compared with men. This variation in wealth accumulation matters because differences in asset accumulation may explain some differences in poverty between men and women.

Intergenerational Transfer of Wealth, Life Chances & Social Class

The distribution of rewards in society affects financial well-being and security (Keister & Moller, 2000). Given that the ownership of wealth is held by a small percentage of the population, it is no wonder that those who are not part of the upper classes or wealthy are fearful for their financial well-being and security as it pertains to jobs, housing, access to health care, and education. Moreover, intergenerational wealth transfer has consolidated the growing gap between the wealthiest Americans and the poorest (which increasingly include portions of what would be seen as the middle classes) in ways that have impact on educational opportunity, home ownership, and upward mobility. Consequently, those with resources are more able to provide future generations with a head start on opportunities and to secure life chances. In contrast, those with limited resources are unable to share their wealth with children and grandchildren, thus requiring each generation to start from the same place as the previous generation. In summary, wealth impacts social class by creating privilege, through which those with access to wealth are able establish lifestyles and "modes of consumption" that exclude those without access to wealth (Scott, 1994) and further divide society into economic hierarchies.

Terms & Concepts

Net Worth: A measurement of wealth that includes a balance of assets against debts.

Occupational Prestige: The measure of variation in occupational status as a function of public opinion, which is argued to be linked explicitly to differentials in pay, prestige, and wealth.

Power: The ability a person has to get others to do things without using force.

Power Elite: Those who are among the wealthiest, most powerful, and prestigious in society.

Prestige: The notion that one’s placement in society and economic incentives are tied to social constructions regarding the importance of one’s occupational status.

Status System: A system that stratifies individuals based on their socioeconomic conditions.

Stratification: The division of individuals into subgroups based on power, privilege, and/or wealth.

Wealth: The accumulation of income, assets, and resources.

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Suggested Reading

Ehrenreich, B. (2007). The bloated overclass. Progressive, 71 :16. Retrieved December 30, 2008 from EBSCO online database, Academic Search Complete, http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=26234616&site=ehost-live

Hayes, T. J. (2014). Do Citizens Link Attitudes with Preferences? Economic Inequality and Government Spending in the 'New Gilded Age'. Social Science Quarterly (Wiley-Blackwell), 95, 468-485. Retrieved December 11, 2014, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=95865076

Keister, L. A., & Southgate, D. E. (2012). Inequality: A contemporary approach to race, class, and gender. New York, NY: Cambridge University Press.

Moller, S. (2008). Framing class: Media representations of wealth and poverty in America. Social Forces. 86 :1347. Retrieved December 30, 2008 from EBSCO online database, SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=31673152&site=ehost-live

Ozawa, M. N., Jeounghee K. & Myungkook, J. (2006). Income class and the accumulation of net worth in the United States. Social Work Research, 30 : 211–222. Retrieved December 30, 2008 from EBSCO online database, SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=24091621&site=ehost-live

Wilby, P. (2007). The very rich versus the rich. New Statesman, 137 (4865), 16. Retrieved December 30, 2008 from EBSCO online database, Academic Search Complete, http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=26919985&site=ehost-live

Wilson, W. (1980). The declining significance of race, blacks, and changing American institutions. Chicago, IL: University of Chicago Press.