One central factor in stratification is economic inequality. An examination of the structure of economic inequality in the United States shows that it has been increasing over past decades. The Census Bureau provides information on how income is distributed that shows this change. One method of examining this data is to divide all households into equal-size quintiles (fifths) and then look at how all the income earned in the country is distributed among these five categories.
Table 1.1 shows that in 2003, 49.8 % of all income in the United States was earned by one-fifth of all households. These were the highest-earning one-fifth of all households. This percentage has increased since 1967, when this highest-income fifth of all households earned just less than 44 percent of house- hold income. Across all other categories, the share of income received by house- holds has decreased since 1967. Income disparity becomes even more striking when breaking out the income share of the top five percent of all households—in 2003, those with in- comes of $154,120 or more. In 2003, this small percentage of households earned 21.4 percent of the income earned in the United States. The other 95% of households shared less than 80 percent of the U.S. aggregate income (see table 1.2).
Table 1.1 – Share of Aggregate among Households (1967-2003)
Percentage of Aggregate Income
Table 1.2 – Share Aggregate Income Earned by Top Five Percent of Housholds (1967-2003)
Discussions of income inequality are often conducted in concert with discussions of poverty. But what is poverty, and who is poor? In a stratified system in which resources are unequally distributed, those having the least are the “poor.” But exactly how poor is defined is not as straightforward as it may seem. Poverty can be defined in absolute or relative terms.
In the United States, the Office of Management and Budget sets an absolute definition of povertywith a “poverty threshold” that is used to officially define who is poor. Those people living in families with an income below this poverty threshold are considered “poor” by the government definition.
These thresholds vary by family size and composition. However, they are not adjusted for variations in the cost of living across the nation. A snapshot of these poverty thresholds is shown in table 1.3. In 2003, the poverty threshold for a family of four (consisting of two adults and two children) was $18,660. By these official definitions, 35.8 million Americans (or 12.5 percent) lived in poverty in 2003
9 573 $
12 321 $
One Parent, Two Children
14 824 $
Two Parent, Two Children
18 660 $
Table 1.3 – Poverty Thresholds by Family Size, 2003
Most people define poverty in nonnumerical terms based on their personal circumstances. They are using a relative definition of poverty,measuring it on the basis of whether their basic needs and wants are met. They are poor by their own understanding of the term as subjectively determined by such things as whether they have enough food to eat, clothes to wear, or money to buy necessities (e.g., baby diapers).
Cost of being poor
Research has documented a number of hidden costs of being poor. The poor pay more for many items. Among these costs, rent-to-own arrangements are often available to the poor when other stores will not extend credit. These rent-to-own stores may charge lower payments for items, but they have longer contracts. They may also be able to avoid legal problems from charging high interest rates by replacing them with other fees and charges. Additionally, defaults and repossessions are common, and money invested by the poor is forfeited.
Costs are also more than financial. The poor face a bigger time squeeze than the affluent. They face trade-offs in demands between work and family life. This dilemma includes time to monitor their children’s educational needs (e.g., supervised study time), which can have long-term consequences for children, especially in the context of increasing emphasis on standardized academic testing in schools.