Chapter 7 - The Economy, Work and Social Policy

Preface to Chapter

The discussion in this chapter is hampered by the data collection and reporting strategies of the federal government and other agencies. The major problems are lack of reporting consistency across agencies, and lack of reporting on some populations. The first problem is characterized by different groupings from agency to agency. For example, the EEOC (Equal Employment Opportunity Commission) keeps quite good data on occupations by race and sex, however, it does not keep wage information. The categories that are reported by the EEOC are different from those used by the Bureau of Labor and Census Bureau. The second problem occurs in the form of lack of consistent reporting for various groups. For example, Asian and Pacific Islanders and Native Americans are consistently not reported in population, income, or poverty reports; the Hispanic population is rarely broken out into national origin or racial groups, and the Asian / Pacific Island population is never broken out period; the data available on Native Americans is only reported on the ten year cycle which puts it out of date with all other data. Another problem is that information for some groups is rarely if ever reported, and never in comparison to other groups. This is true for both Arab and Middle Eastern American and immigrant groups. Further, Eastern European, Arab, and African immigrants are never discussed at all.

I have made every effort to obtain consistent data. This has meant the combining of information from different sources which can lead to lack of perfect accuracy. However, my effort has been to get as consistent and current data that is available. While the reporting may be off by a small amount, the trends reflect “reality.”

Introduction

In Chapter 4, we examined social class and economic class divisions. In this chapter, we will look at the world of work in relationship to social stratification. In sociological terms, we are examining the social institution of the economy. While work and wealth are integrally related to social class, they also reflect the structuring of race and sex stratification. This chapter examines both broad factors such as national economic transition and specific processes and policies that affect social inequality.

There are patterns within patterns that occur within the area of inequality in the economy. There are large forces and trends that affect all of the population, though not necessarily in the same way or to the same degree. The economic base and form of our society – postindustrial capitalism – and the movement from a manufacturing to a service economy and globalization fall into the large scale forces. Inside the patterns and trends are consistent differences along race, class, and gender lines such as occupational and wage inequality. It is generally assumed that wage inequality is the essence of monetary inequality in the United States; however, non-wage income has dramatic effects on economic inequality and also is rooted in historical processes of privilege and disadvantage. This chapter attempts to illuminate these various patterns and their interrelationships, while giving you “hard data” that reflects those patterns.

Wage Inequality and Economic Transition

Certainly one of the pervasive components of economic inequality is the distribution of money through wages. On the broad scale, we all know that some people get a lot of money for what their work, and others get very little. This reflects the distribution of jobs across the wage spectrum that we discussed in Chapter 4. This distribution can reflect inequality in a broad sense if some occupations are extremely underpaid for their efforts and others are extremely overpaid. The most common example of this is that CEOs (Chief Executive Officers) are paid disproportionately more that the average worker in their companies. Anderson et al (1999) note that over the 1990s (1990-1998) CEO pay rose 443% (not adjusted for inflation) while workers’ pay increased 28%. If the average worker had had the same pay increases as corporate executives, the average pay would be more than $110,000 rather than roughly $30,000, and the minimum wage would be approximately $22.00 an hour. The Economic Policy Institute (1999) found that the adjusted executive pay increased 116 times the rate of workers (adjusted for inflation).

The median earnings of workers were 3.1% lower in 1997 than in 1989 (Mishel, et al, 1999), though government news briefings in August 2000 note that income has finally moved above the 1989 level. It should be noted that this is with families working an average of approximately 250 hours more per year than in 1989. Over that same period, hourly wages stayed the same or fell for the bottom three quintiles of workers (Mishel, et al, 1999). Further, while we may have purportedly returned to the 1989 levels of wages, we are still below the 1973 levels. In 1998, the weekly wages average was twelve percent below the 1973 average weekly wage. The State of Working America (Mishel, et al, 1999) notes: “The typical middle-class family had nearly 3 percent less wealth in 1997 than in 1989, despite the stock market boom. This is because the richest 10 percent of households in the U.S. have reaped 85.8 percent of growth in the stock market since 1989.”

What we have seen since the mid 1980s is a dramatic increase in income inequality - especially between the top twenty percent of families (primarily the top 5%) and the remaining eighty percent of earners. There are a number of reasons for this decline and it is reflected in numerous ways. Among the reasons for the decline that the overwhelming majority of the population is economically less well off than in the 1960s and 70s are: economic transition from a manufacturing to a service economy; decline in the real value of the minimum wage; changes in tax laws; decreased union representation; increases in temporary and part time work replacing full time employment; and globalization.

Economic transition and globalization

It is estimated that the change from a manufacturing to a service economy has resulted in a loss of roughly twenty-three percent for male workers. That is 23 cents out of each dollar of wages. Added to this, the downsizing and efficiency moves of business have hit the middle management level very hard. This transition has also been marked by a movement from full time to part time and temporary employment. Because of downsizing and the use of less than full time employees, job security has decreased and wages and benefits have been reduced. Most of the jobs created in this new economy have been in the lower levels of the labor market (low and mid level service positions) – not in the higher salary levels. The manufacturing jobs lost have not been replaced with equal positions in the new economy.

Let’s look at NAFTA (North American Free Trade Agreement) as an example. Table 7.3 reflects the jobs lost due to NAFTA from 1993 to 1996. There was a net total of 394,835 jobs lost (after new job creation from the agreement), most impacted were males (64%), whites (80%), and medium wage earners (45%). This is also the population that was most likely to be unionized; hence, much of this was the loss not just of good wage jobs, but unionized jobs.

At least two processes are coupled with the transition from a manufacturing to a service economy - a transition to a technology economy, and globalization. In the midst of, or as a part of, the manufacturing to service economy is a revolution in technology – particularly in computers and biology. Much like the transition from an agriculturally based economy to an industrial economy in the eighteen through early nineteen hundreds, we are transitioning from an industrial to what we might broadly call a post industrial economy. There is some question as to whether we have actually gone through two recent transitions. One was a transition from an industrial to a service economy (roughly 1950s to 1980s), and one from a service economy to an “information” economy (roughly 1980s through the 1990s). There is even some discussion that we are at the beginning of yet another transition to a biotechnology revolution (Rifkin, 1999).

Table 7.2 Job Losses Due to NAFTA from 1993-1996

Source EPI, 1997 analyses of BLS data

Economic transitions are one of the things that cause rapid change and disruption. They can cause a shifting of the distribution of resources within a society and affect people’s participation in survival activities. One of the hallmarks of economic transition is that portions of the population may not have the skills required to participate in the new economic structure. In our current transition, for example, many youths are more comfortable and knowledgeable about computer technology that many adults are. There are not many parents who can consistently compete against their children at computer games and win. Obviously computer games are not “work,” but they do represent the current technology. Many youth’s sense of comfort and competence with that technology (and the world it represents) far exceeds many adults.

The economic transitions of the last thirty to forty years have been dramatic in their speed and scope. We went from the relatively prosperous times of the 1950s and 60s to an oil crisis and a recession. Our manufacturing economy started deteriorating at a rapid rate making us more dependent on imports to sustain our lifestyle. We transitioned into what has broadly been called a “service” economy. A service economy is one where people are “making their living” providing services to others rather than material products. Services include everything from domestic services and lawn care, to banking, medicine, and information. We are still a service-based economy; however, yet another transition began in the mid 1980s with rapid advances in computer technology and the advent of the personal computer. Now computers in one form or another are pervasive throughout our society, and led to the concern about the “Millennium Bug” or Y2K. We are now virtually dependent on computers for the basic operation of our society.

Jeremy Rifkin, in his book The Biotech Century (1999) highlights what he considers to be the most sweeping revolution of human history. He argues that the merging of biological and medical technology (specifically genetic) and computer technology will transform the basic stuff of life into a gold rush of unimaginable proportions. In this revolution, genetic material becomes a resource to be mined. This revolution is made possible by the advances in computer technology and in some areas may blend totally with it. Researchers are already trying to use DNA as a computer because of its remarkable data storage and processing capabilities. Others are working on nano-technology where self- replicating machines smaller than a virus can do innumerable tasks at a cellular or atomic level.

The point here is not to paint a picture of the technological world at our door step, but to highlight the huge shifts that are occurring because of this. These shifts already include seeing humans and even their cells and property. Certainly seeing humans as property is not something new. But this is considering humans as private property as a silver mine is private property – to be mined, manipulated, transformed, and discarded. It is certain that in the near future, the medical advances promised by genetic research and development are not going to be available to everyone. They will be yet another social resource within the stratification system. With all the advances in medicine and health care prior to the biotechnology age, we still cannot provide access and adequate healthcare to our entire population. There is little reason to assume that the new advances will be distributed any more equitably.

Economic transitions and cycles of the past have been directly linked to the way we deal with other people and groups. In times of insecurity and economic downturn there has been mobilization of sentiments, movements and legislation against “others.” In times of relative security and prosperity we have seen trends toward social and economic equalization. While it is boasted that we are currently in a period of “unprecedented prosperity,” that prosperity has not extended to all (or even most) and many people feel highly insecure. The movements that we currently see happening in the United States are not dissimilar to what we saw in the mid 1800s. There is a generally high distrust of government; there are anti-taxation movements; anti-welfare, anti-immigrant, and anti-social service sentiments and policies. The schools are seen as inadequate and unsafe and those who can afford to do so (primarily white middle class and above) are removing their children to private schools - hoping to leave the “negative element” behind. To support this, there is a political push for school vouchers which are inadequate for many families to actually send their children to other than private schools. We have anti-affirmative action, and a perception of “white disadvantage.”

Another similarity to the mid 1800s is our relationship to a global workforce. The U.S. has always been dependent on a global labor force. From its colonial beginnings, we have brought in a labor force to fill our needs – to do those jobs that are difficult and dangerous for as cheaply as possible. Whether it was the immigrant rush, the encouragement of Mexicans and others south of the border, Asian contract workers, or slavery, we have brought people expected to be expendable to fill our labor needs. Today we have a different scenario, but perhaps not so dissimilar. We are actively engaged in globalization. We have often found it more profitable to utilize this workforce of “others” in their countries of origin rather than bringing them to the United States. To facilitate this utilization of people and resources we have entered into a number of agreements such as NAFTA (North American Free Trade Act) and GATT (General Agreement on Tariff and Trade). However, we still need some cheap labor domestically, and while we put an anti-immigrant policy into affect primarily at our southern border, we do virtually nothing about the U.S. businesses that are recruiting “illegal” workers.

Decline in the real value of minimum wage

The minimum wage sets the bottom of the pay scale for most workers. It does not set the bottom for everyone. The federal minimum wage does not cover everyone. It primarily applies to employers who generate over $500,000 a year, or engage in interstate commerce (Department of Labor). For example, many workers who receive tips get less than minimum wage, agricultural and piecework laborers frequently do not get minimum wages (or receive a reduced minimum wage), and many who work on commission do not get minimum wages. Even workers who are salaried may not receive a minimum wage. For example, some retail chains hire workers on a salary (usually a low salary) and then require them to work far more than forty hours per week. Salaried workers do not receive overtime pay so this can be cost effective for the employer. Workers, especially young workers, are excited by the status of being a salaried employee. The additional time required of them drives down their actual hourly wage. If you give someone a salary of $18,000 a year that is an hourly wage of $8.65. If you then require them to work sixty-five hours a week, their salary stays the same, but their hourly pay goes to $5.32 an hour. The company has just saved $324.38 a week on labor costs (or almost a week’s pay). Some sort of benefits generally accompany salaried positions. Most employers require at least a three month waiting period before benefits start, but most young workers in this situation don’t last long enough to ever receive benefits, which also saves the employer money.

The minimum wage was first enacted in 1938 and was set at 25 cents an hour for those workers it covered. It was increased slowly over time and farm workers were added in 1967 with a minimum wage of $1.00. In 1981 it changed to $3.35 an hour and remained at that level until 1989 when it went to $3.80 an hour. The last congressional legislation was enacted in March of 2000 and raised the minimum wage to $6.15 an hour (up one dollar from the last change in 9/97). A sub-minimum wage of $4.25 an hour may be paid to workers under 20 for the first 90 days of their employment. The minimum wage is not tied to inflation, and so it is worth less over time without adjustment. Under current law, it can only be changed by an act of Congress. States may set their own minimum wage laws as long as they do not fall below the federal level. (The information above is from the Department of Labor).

There have been extensive arguments over the benefits and disadvantages of having a minimum wage. Those who argue against having a minimum wage say that it raises costs of labor to employers who then pass that on to customers. Related to this they argue that it creates a significant hardship for small employers. Another argument against a minimum wage is that it disadvantages young workers – particularly young workers of color. Opponents of a minimum wage feel that the market should drive wages at the low end of the job ladder. They argue that if there were no minimum wage, then “less desirable workers” (those with few skills, low educational achievement, and the poor) would be able to compete if they could work below the minimum wage. Personally, I find this last argument offensive. What is actually being said is that “more desirable” workers wouldn’t work for below minimum wage, and “less desirable” workers aren’t worth minimum wage. In other words, it would open up low end jobs now held by workers who are more attractive to employers.

The reality is that increases in the minimum wage have not significantly increased costs to consumers, and savings on wages have not reduced costs to consumers. Many of the products purchased in the U.S. are made by laborers outside the country who receive nowhere close to U.S. minimum wage. Global workers making tennis shoes at a dollar an hour or less does not reduce the $150.00 price tag paid in the U.S. for those shoes. What it has done for large corporations is to dramatically increase their profit margin. Another problem with the arguments against minimum wage (and raising it) is that it is already incredibly low given the cost of living in the United States.

Changes in tax laws

Taxes involve more than the rate of taxation by income bracket. What counts as income and what counts as a deduction from income have differential effects on how much tax is actually paid. The largest deduction that most families have is home mortgage interest. This benefits those who own homes and is the single biggest tax moderator that the middle class has. Those who do not (or cannot) afford to own their own homes cannot take this deduction. Most changes to tax laws are promoted for broad appeal, but the effects are not necessarily equal for all. For example, there is currently a proposal in Congress to remove the inheritance tax. It is argued that this will save family farms and allow the passing on of family businesses. Obviously, the larger the estate or business or stock portfolio one has the larger the savings on this proposal. Since most of the population does not have large amounts to pass on (and some have nothing other than personal items) this proposed change dramatically affects the wealthiest. If the true intent was to save family farms, specific tax changes could be made.

While the tax rates for individuals have not changed dramatically since 1979, the taxes paid have. Changes in the tax law have reduced the tax payments of the wealthiest and burdened the rest. Between 1977 and 1985 tax changes reduced the average tax bill of the wealthiest one percent of families decreased by $97,250 and increased payments by the bottom eighty percent of families by an average of $221 (Mishel, et al, 1999). These advantages were reduced somewhat by tax law changes in 1986 and 1993, so that the average savings for the wealthiest one percent were only $36,710 from 1977 to 1998 (Mishel, et al, 1999).

Part of a larger trend has helped corporations reduce their tax burden. The tax rate on corporations is 35% of net income. As with personal taxes, corporations also have deductions. Corporations also benefit through subsidies. Between 1993 and 1995, the top ten corporations in terms of worker layoffs received $8.3 billion in federal tax subsidies that dropped them well below the 35% tax level. For example, industry specific subsidies for oil, gas, and energy companies will receive $22 billion in special tax breaks over a seven year period (Citizens for Tax Justice, 1996). Practices that negatively affect workers (such as downsizing and mergers) also have had positive tax affects for companies. Mergers frequently lead to layoffs and closures, but the interest on debt used to finance mergers is tax deductible. Congress passed and “accelerated depreciation” option for business that allow them to deduct the cost of equipment faster than it wears out. This save corporations over $39 billion a year (Citizens for Tax Justice, 1996). With runaway compensation for top executives, Congress moved to curb the excess in corporate executive pay increases. However, if those pay wages are tied “performance based” improvements, they are deductible. Since downsizing is generally tied to at least a short term increase in profits, and the stock market generally responds positively to news of downsizing, it improves the “performance of the company. Therefore, executive raises in the face of worker layoffs remains largely tax deductible (Citizens for Tax Justice, 1996).

Decreased union representation

People have a wide range of feelings about unions. Many feel that we don’t need unions any more. However, one thing that unions do is to improve the bargaining power of workers. This is true in the case of benefits and working conditions as well as wages. Union representation has decreased over time. In 1979, 24.1% of the workforce was unionized; in 1997 it had fallen to 14.1% (EPI, Union Coverage in the United States, 1979-1997). The weakening of unions has specific and general affects. In specific effects it relates to specific industries or worker groups. In the broader context it is somewhat similar to the minimum wage. Broad unionization affects the “going rate” for workers and the conditions workers expect to receive. The attacks on unions and the decrease in union representation has effectively contributed to lower rates of pay and other compensation for the majority of workers (in my opinion). Let me offer you a couple of examples.

In my state, Oregon, state workers are unionized while much of private industry no longer has broad union representation. State workers have a retirement program which previously was part of our compensation - our specific employers made contributions to our retirement fund. This came under attack by a tax cutting special interest group. The argument presented was that we (non-state) employees had to pay for our own retirement funds so it wasn’t fair to have state employees get theirs without paying for it. The special interest group won the day and most state employees lost all or part of their state contributed retirement contribution. However, we are still required to pay into the retirement program at the same rate. For many state employees this has led to an effective 10% decrease in their pay. The issue here is that workers (at least in Oregon) see union workers as having an “unfair advantage.” It also demonstrates the losses that workers in general have experienced under lack of a collective voice.

Another example --also from Oregon. Like most states, Oregon contracts out a tremendous amount of work rather than maintaining a state paid workforce to do it. For years, private contracting bids were based upon the union rate for labor. However, in 1998 that changed. A friend of mine works for a small company doing fencing (i.e. along highways and overpasses, state parks, etc) and the company has done a lot of business with the state. The effect of the state moving to a non-union rate effectively decreased the workers salaries by over 30%.

Many of the working conditions that we have come to expect as characteristic of a “good job” are a consequence of decades of union struggle and peoples lives. Things such as the 40 hour week, fair pay, overtime pay, sick leave, medical and vacation pay, are consequences of broad union action and the power of worker collective bargaining. With the weakening of a collective worker’s voice, these “standards” are also eroding. They play a part in the broader inequality picture.

It must be stated that for decades unions were not beneficial for everyone. Many unions excluded non-whites and women and added even mobilized white male workers against specific groups of workers. They played a part in the historical creation of white male advantage in the workforce. However, over the last forty years most unions have been much more inclusive and broad based.

Replacing full time workers with non-full time workers

The temporary job market has grown dramatically since 1979. In fact, temporary labor supply businesses have grown faster since 1979 than all other industries combined. Of the nearly 14.3 million jobs added between 1988 and 1996, twenty-two percent were in the business services area (Clinton, 1997:3). Clinton’s (1997:13) examination of the shift to hiring contingent workers was clear in the following industry sectors: personnel supply services, computer services, mailing and related services, services to businesses, engineering and architectural services, management and public relations services, and research, development and testing services. Tilly (1991) in his report on part-time workers notes that most of the growth in part-time employment came from full-time workers involuntarily taking part-time positions. This trend had not changed by 1999 where the Report on the American Workforce (Department of Labor, 1999) found that at least part of the increase in non-standard work situations came from the “just in time” practices of employers. Non-standard labor practices includes all wage and salaried labor which is not full-time, long term employment (e.g. part-time, temporary, day, and contract labor).

In her 1999 study of compensation differentials, Pierce (1999) found that in most job categories part time workers have significantly less non-wage compensation than their full time counterparts. This was consistent with Lettau’s (1991) compensation study that demonstrated that part-time workers receive not only lower pay, but significantly lower non-wage compensation than their full-time counterparts.

The nonstandard workforce made up almost thirty percent on the total non-agricultural labor force in 1997 (Hudson, 2000). This was not a substantive change from 1995 when 29.4% of jobs fell in this category (Kalleberg, et all, 1997). Table 7.4 (below) indicates that females are more likely than males to be in nonstandard employment. It also shows that 30 percent of Whites are in this employment type which is a very high percentage of the total White workforce. However, even though the number of White workers in nonstandard employment is very high, the likelihood of other racial/ethic groups is proportionately much higher. As a proportion of population, African Americans are 138 times more likely to be in nonstandard employment arrangements than Whites, Hispanic Americans 183 times more likely, and “other” groups (i.e. Asian and Pacific Islanders, American Indians, Alaskan Eskimos and Aluets) 484 times more likely.

Table 7.4 Non-agricultural Workers, by work arrangement 1997 (in percents)

Work arrangement statistics are from Hudson (2000: Table 1, page 3). Population statistics are from The Statistical Abstracts of the United States (1999, Section 1 - Population No. 12 Resident Population Selected Characteristics, 1790 to 1998, p14)

While we would like to think that workers are voluntarily choosing less than full-time employment, the reality is that many are involuntary members of the nonstandard workforce.

“While it is true that many workers prefer the flexibility provided by some kinds of nonstandard jobs, large numbers of workers feel compelled to accept these arrangements for economic and personal reasons beyond their control. Unfortunately, given current labor market policies, nonstandard employment has the potential to become a mechanism for providing substandard wages and benefits. Responsible public policies should endeavor to ensure that workers are not penalized in terms of pay and benefits because of their work arrangements.” (Hudson, 2000:2)

Workers in the contingent labor force are disadvantaged not only by lower wages (except in the areas of highly skilled medical professionals and some high technology contractors), but also by reduced non-wage compensation. Nonstandard workers generally have reduced benefits such as sick leave, medical insurance, educational benefits, stock sharing, and vacation leave. They also may suffer over the long term in reduced retirement benefits (retirement funds, social security, and long term savings). The important point is that employers are utilizing nonstandard employment, not necessarily workers choosing nonstandard employment. While this utilization has dramatic effects on people’s lives and our overall economy, it also further disadvantages groups that are already seeing unequal returns on the education, skills, and work. By replacing full-time workers with nonstandard workers, employers are able to not only manage their personnel costs, but to maintain a lowered ceiling on full-time wages and compensation.

Why don’t we see that the work environment has shifted dramatically?

The information above is frequently met with surprise and disbelief. People don’t feel like they are worse off economically now than they were in the 1970s and 1980s. If things have changed so much how come we don’t notice. There are three primary reasons why some people feel they are not doing as badly as the statistics reflect: 1) married women’s entry into the workforce; 2) willingness to accept debt; 3) declines in personal savings.

The entrance of wives, particularly middle class wives, into the workforce has helped stabilize family incomes. Between 1979 and 1996 wives work contributed the following percentage to family income (starting with the lowest quintile and going to the highest): 5.2%, 10.2%, 12.1%, 12.8%, and 14.5% (EPI, 1). For most families this contribution was not adequate to entirely make up for the decline in men’s wages, but it kept income deterioration from being as extreme. Between 1977 and 1999 the percentage change in after tax income for each quintile (starting with the lowest) was as follows: -9%, 1%, 8%, 14%, 43% (Center on Budget and Policy Priorities, 1999). Table 7.3 illustrates the average change in hourly wages by educational level. Between 1973 and 1997 the only group that experienced a modest increase in wages was the advanced degree group. They had an increase of $1.04 (in 1997 constant dollars) over the 24 year period. However, wages are not the only thing that have stagnated or decreased. Workers have also lost non-wage compensation such as health insurance, sick leave, pensions, and vacation time (Pierce, 1999). Brooks Pierce (1999) notes, that the inequality in compensation increased even more dramatically than the increase in wage inequality. Workers in the lower levels of the labor market lost almost 50% of non-wage compensation between 1982 and 1999. While benefits are not income, they certainly impact families cost of living and quality of life, and also lead to increased cost of living. For example, if an individual or family loses employer paid health care, then they must cover health care costs, and if sick leave is lost income is lost when one is too ill to work.

Table 7.3 Average Hourly Wages by Education 1973,1980,1990,

1997 (1997 dollars) EPI, 2

Wages for workers with one to five years of experience (entry level workers) has fallen for college and high school graduates and both sexes. In 1973, males entering the workforce earned an average of $14.82 per hour with a college degree and $11.10 with a high school diploma; women earned $12.95 and $8.36 respectively (in constant 1997 dollars). In 1997 those wages changed to $13.65 and $7.95 for males and $12.20 and $6.81 for females (EPI, 1999, Entry Level Wages, 1973-1997). This is a real wage decline of 7.9 percent for male and 5.6 percent for female college graduates, and a decline of 28.4 percent for male and 20.9 percent for female high school graduates. Over that same period, inflation increased roughly forty percent.

Family savings have fallen and family debt has dramatically increased. Between 1959 and 1984 personal savings ran between 7% and 11% of income, but from 1984 to 1999 it has declined to roughly 2% (Collins, Hartman, Sklar, 1999). Savings are critically important because it provides people with a buffer in times of emergency, or increasingly, in times of unemployment. The dramatic decline in average savings removes that buffer and makes individuals and families much more economically vulnerable. We have been encouraged to make up the deficit in earnings by turning to credit. From 1989 to 1999 revolving credit increased from just under two billion dollars to almost six billion dollars nationally. The number of personal bankruptcies went from just over 600,000 in 1989 to approximately 1.4 million in 1999; meanwhile, business bankruptcies decreased thirty-six percent over that same period (Collins, Hartman, Sklar, 1999).

Most of the discussion above has addressed broad aspects of wage inequality. These issues reflect social class implications of wage structure and the effects of economic transition on various social classes. However, another process is involved in economic inequality in relationship to wages, and that is occupational segregation.

Occupational Segregation

Occupational segregation is the disproportionate representation in different occupations by various groups within the population. Essentially this means that different groups hold different positions. For example, there are jobs that are held primarily by males and others by females. A considerable amount of research has been done on sex-based occupational segregation, and much less on race-based occupational segregation. This discussion will attempt to cover both types.

As we all know, different occupations have different rates of pay. If different groups are more likely to be found in different occupations, it is likely that there are going to be income differences between the groups. Occupational segregation is part of the structural issues related to economic inequality. Let’s start with a discussion of Table 7.4. It depicts the representation of workers in different occupational categories by sex and race for 1998. Within each occupational category (i.e. Officials and managers, professionals, etc) are hundreds, sometimes thousands of specific job categories. There is a range of wages and groupings by sex and race within these jobs as there are within the occupations. The data in Table 7.5 is summarized to occupational group (which comes from information from the EEOC) and the median income for each category comes from the BLS (Bureau of Labor Statistics).

Haggerty and Johnson, (1995:112) in their report “The Hidden Barriers of Occupational Segregation,” state that whale African Americans comprised 10 percent of workers, that “30 percent of nursing aides are black; 29 percent of domestic servants are black; 25 percent of vehicle washers are black; and 21 percent of janitors are black. Conversely, 0.7 percent of geologists are black; 1.5 percent of dentists are black; 2.1 percent of architects are black; and 2.6 percent of lawyers are black.” They are discussing the patterns that are reflected in Tables 7.5 and 7.6 which show clearly that different racial and sex groups are doing different jobs. This is the reality of occupational segregation.

A number of things show up in Table 7.5. The table has summarized occupational breakdowns for all workers, all minorities, four racial groups and one ethnic group. It is clear from looking at the table that using the summarized data may actually misrepresent what is happening in specific race and sex groups (or both). An excellent example of this is that 15.7% of workers are in the “Professional” grouping, and within that we see that more females are in this grouping than males. This seems to not make sense, but when you look through the rest of that column, you see that 28.4% of Asian and Pacific Islander Females are in this occupational grouping. This is more than two times the number of females from any other group for this category, and exceeds most males except White and Asian and Pacific Island males. Likewise, while Office and Clerical makes up 14.4% of the workforce, roughly 23% of women are in this occupational grouping.

Being in an occupational group has economic consequences. The 1998 median wage for the Officials and Managers group was $48,902 while for Unskilled Laborers it was $13,915. We can see in Table 7.5 that there is not equal representation across occupations.

Table 7.5 Occupational Employment in Private Industry by Race/ethnic group/sex and by Industry, United States, 1998 (in percents)

Sources: EEOC 1998 Occupational Report and BLS 1998 Occupational Earnings

Table 7.6 (based upon Table 7.5) depicts over-representation by various groups in different occupational categories. The attempt here is to give a more visual representation of who is in the occupational categories. We can clearly see that Whites, and specifically White males are the only group over-represented in the Officials and Managers group. They are also under-represented in the lowest paid occupational categories. Likewise, while females are over-represented in the Office and Clerical category. White females are also the only minority group under-represented in the Service Worker category. While both White and Black females are over-represented in the Office and Clerical group, it is unlikely that they are sharing the same jobs within that group. In other words, White women are more likely to be personal secretaries, administrative assistants and receptionists, while Black women are more likely to be file clerks and data entry operators (all of which fall within this occupational category). Interestingly, males of color are also over-represented in this occupational group.

Perhaps one of the biggest anomalies is the over-representation of Asian and Pacific Islanders in both the Professional and Technicians group. This over-representation accounts for the improved earnings compared to other minority groups (including white women); however, they are also over-represented groupings at the lower paying end of the occupational spectrum (i.e. unskilled labor and service workers). This reflects the reality that Asians are not a single group. This is discussed in some depth by Darity et al (1996) who notes that Japanese, East Indian, and Chinese ancestry are higher in income and occupational ranking than other Asian groups. However, Vietnamese, Other Southeast Asians and Filipino ancestry groups face similar experiences as other groups of color within the United States. Those of Korean ancestry fall between the two with those who are self-employed doing much better than the rest of the Korean American group generally.

            Table 7.6 1998 Occupational Groups by Race and Within Sex Groupings 

As we can see from the two tables above, occupational segregation is not necessarily total segregation but sometimes it comes close to that. Bergmann’s (1999:760) study of North Carolina state employees found that in jobs that were sex segregated accounted for seventy percent of all jobs. Further that another sixteen percent were heavily over-represented by females or males, and that only in 14% of jobs was there nearly equal representation of the sexes. She also found racial segregation, though not to the extent of sex-based segregation. In relationship to race, only 55% of state workers were in positions that were totally race segregated, thirty percent were in jobs that were mostly segregated, and 15% were in positions that had approximately equal racial representation.

The persistence of occupational segregation is clear, as are the effects that it has on wages. While the data here is based on measuring individuals’ labor force experience, those individuals are bound to families and communities. The kinds of groupings we see in occupational segregation are therefore reflected in broad economic and opportunity inequalities in our society. These patterns were even more present prior to the initiation of Civil Rights legislation, and in fact formed part of the justification for those laws and programs. Though occupational segregation has decreased, it has hardly disappeared.

Social Policy - “Affirmative Action”

“Affirmative Action” is one of the most hotly debated and least understood of social policies. The assumption is that “affirmative action” is one law. The reality is that it is a number of laws and executive orders aimed at ending various forms of discrimination in U.S. society including: education, hiring, promotion, housing, services, and harassment in various forms. Affirmative Action had its official beginning with President Kennedy’s Executive Order 10,925 which required government contractors to take action which ensured hiring based on race would not take place. This was reinforced by the passage of the 1964 Civil Rights Act – particularly Title VI and Title VII. Title VI prohibited discrimination based on race, color, or national origin for any program or agency receiving federal aid. Title VII made it unlawful for employers (excluding small businesses and others) and government agencies to discriminate based on race, color, religion, sex or national origin (Brody, 1997). Title VII also created the Equal Employment Opportunity Commission to monitor and enforce the Act. The Civil Rights Act of 1991 amended Title VII to include the Glass Ceiling Act of 1991 which extended protection to promotions as well as hiring; however, overall it weakened the original Act by placing the burden of proof on the person alleging discrimination rather than on the employer (Brody 1997).

President Lyndon Johnson issued Executive Order 11246 in 1965 which required employers to include non-discrimination policies as part of their employment practices. It was actually President Nixon in 1969 who issued Executive Order 11478 which required affirmative action programs in federal agencies. The in 1978 President Carter issued Executive Order 11250 which required non-discrimination in federal financial assistance programs(Brody 1997).

So what is affirmative action? Affirmative action is a body of executive orders, legislation, and supreme court decisions that ban discrimination in a wide array of activities based on race, color, sex, religion, national origin, disability, age and veterans status. These actions affect hiring, employment, and service provision in federal, state, and local governments activities, and for government contractors with over $50,000 in contracts. It can and has been extended to certain private businesses and agencies where patterns of discrimination have been legally proven. Many companies – especially large companies – have voluntary affirmative action programs. This means that while these organizations are not required by law to have affirmative actions programs, they have chosen to do so for their own reasons.

Affirmative action programs utilize one or more of four types of activities (Coalition Against Bigotry and Bias): expanding recruiting efforts to expand applicant pools, reviewing and modifying job criteria for job relevance, evaluating merit standards for job relevance, and establishing goals for a more diverse environment. It is this last activity that has been labeled as “quota systems,” leading to the claim that affirmative action is a quota system. However, the supreme court has ruled numerous times that goals and quotas are two different things, and in those cases where organizations treated goals as quotas they were acting illegally.

What are affirmative action goals and how are they set? Affirmative action goals are based upon the demographics of the population served. For recruiting and hiring purposes, goals are set based on each position or job category. Let’s look at an example.

Example of an Affirmative Action Plan for one job category

            Job Category - Manager

            Number of positions at the organization - 50

            Usual recruitment area - state wide

In the example above, this organization has fifty managers. Their characteristics are reflected in the “Current Workforce” column. The organization generally recruits for management openings on a state-wide basis. Therefore, they use state-wide data on the distribution of the workforce in the normal recruitment area for this position. In other words, what are the characteristics of the people who have the qualifications for the job. Organizations generally utilize federal or state collected data for this information. These percentages are reflected in the “Representation in area workforce (%)” column. Finally, “goals” are created based upon the number of positions and the representation (this is reflected in the “Goals” column). The “Goals” column reflects what the demographics of the companies managers would be if management reflected the available qualified workforce.

The above information would tell the organization where it need to expand its recruiting activities for future positions. Give the heavy imbalance towards white males, it might want to examine job qualifications and criteria , and hiring practices, for relevance and unintended bias. As positions came open, it would make increased outreach efforts to populations under-represented in its workforce. It might do this by expanding how it advertises positions.

The goal of having managers who reflected the demographics would be worked towards over time as normal attrition occurred through managers leaving the organization. Affirmative Action would dictate equal consideration - not mandatory hiring.

There is a widespread belief that people of color in general and African Americans in particular, have been overwhelmingly benefitted by Affirmative Action policies. However, various studies seem to indicate this has not been the case. Bispring and Fain’s (2000) study of the impacts of affirmative action show that white females benefitted the most followed by nonwhite females and non-white males respectively. A Washington state analysis tends to support Bispring and Fain’s study. The Coalition Against Bigotry and Bias (1995) analysis of data from the Washington Department of Personnel on classified employees (classified reflects a contract category) showed that among classified (refers to contract type) state employees white women made up 59.6% of those affected. White male Vietnam Veterans made up another 18.7% and people of color were 21.7 (7% African American) percent of hires.

There is also widespread belief that we are now all equal and that the need for affirmative action policies is passed. Patrick Mason (1998) argues convincingly that while progress was made through the 1960s and 70s, the progress of African American males in particular essentially stopped in 1979. He points explicitly to continued occupational segregation as the primary source of the wage differences, and differential returns on education and training, for African and European American males. The table below shows the 1998 median earnings differentials for both sex and race.

Table 7.7 Comparison of 1998 Median Earnings by Race and Sex

Source: Money Income in the United States 1998 US Census Bureau

Table 7.7 clearly demonstrates wage inequities both across and within race and sex groups. The comparison is between groups of workers not controlling for education or position. Because it does not control (take into consideration) these variables, it shows the composite effect of wage inequalities, occupational segregation, and differential work arrangements (e.g. full time versus part time). Therefore the data reflect the outcomes of the sum of differences between groups of workers.

Scanning down the table are divisions by race and sex within each race. Scanning across the table the table are the comparisons between specific groups of workers. If we look at the first two rows of data, we see that men’s median earnings in 1998 were $26,942 compared to women’s earnings of $14,430. This means that women earned 54% of what men earned (column 3). All men of color and Hispanic males earned 89% of what white males earned, and all females earned 48% of what White non-Hispanic males earned. All females earned 95% of what White non-Hispanic females earned. Essentially, this means that males earn significantly more than females, and White non-Hispanics earn more than Hispanics and other racial groups. Further that these earnings differences are greater for sex than they are for race.

Looking at the table as a whole, we see that the patterns of earnings difference reflect that males earn more than females in every racial and Latino group. Further, that within race non-Hispanic males and females have the greatest difference (51%, and that Asian and Pacific Islander are the closest (68%).

While the categories do not match exactly, we can see the relationship of earnings to work arrangements by comparing to Table 7.4. In Table 7.4 we see that women are over-represented in nonstandard jobs (33.7%) and that Whites in general are also over-represented in this work arrangement. It should be noted that Whites in Table 7.4 include White Hispanics. On the other hand, all people of color and Hispanics have larger percentages of workers in regular full time employment than do whites, yet Whites still earn more (Table 7.7, 104% for males and 100% for females).

Table 7.7 also reflects the occupational segregation shown in Tables 7.5 and 7.6. All females and males of color are over-represented in Office and Clerical and in Service Workers (median wages of $24,450 and $14,268 respectively from Table 7.5). White males are over-represented in Management ($48,902), Professional ($46,988), Technicians ($36,703), Sales ($30,332) and Craft Workers ($28,600). We see this pattern reflected in Table 7.7 with White non-Hispanics males earning 113% more than all other workers.

Putting It Together

This chapter demonstrates the interconnections within the economic system of the United States that create manifestation of inequality. We have seen that the broad transitions, such as movement into a post industrial economy and globalization, have broad implications for all members of our society. Even though these are drastic changes, there persists the allocation of jobs and wages along familiar lines of difference. In other words, while the picture has changed, the organization of the picture has remained remarkably consistent. This reflects the persistence of stratification as an organizing framework for social organization.

Even policies such as “affirmative action” have not erased the inequalities of the system. However, they have drawn increasing criticism and attack from groups (primarily white, male, and many political leaders) that they are a form of “reverse discrimination.” It is interesting to note that what positive changes have been made are seen as a threat to the groups that benefit the most from the current social organization. However, it also points to how beliefs and rhetoric reinforce each other. For example, we are raised with the belief that “all people are equal,” and that our movement in the class system is solely based upon our own efforts and abilities.

Underlying this is the belief that the structure is fair and equal to all participants. Therefore, policies and actions which attempt to address inequality of opportunity are “unfair.” However, as progress has been made it is seen as encroaching on the “turf” of higher status groups. Certainly it increases the competition for reserved spaces and privileges. These advances have also occurred most significantly at the lower levels of the white class boundaries, and much less significantly at the upper levels. Since lower and middle class whites (and males) are less likely to see themselves as “privileged” or “protected” by the system, they are also most likely to see the movement of “outsiders” into their areas of livelihood as a threat and unfair. Representatives of higher status groups can then mobilize whites along class lines to protect “their” interests which reinforces racial and sexual divisions while hardening class divisions.

White women and people of color also get sucked into this process in at least two different ways. First is by being perceived as the recipients of things they haven’t “earned,” and secondly by efforts to break racial (and sexual) distinctions through class separation for people of color. Women of all races and people of color are frequently treated as if the only reason they have gotten a “non-traditional” (read outside their socially assigned occupational category) is because they received special consideration. In other words, they do not have the skill or ability to have the positions they hold. This results in pressure to argue that they are different from others of their group and therefore have competed fairly and earned their positions through personal effort. The reality is that no one receives their positions solely through their personal merit.

This pressure to deny the realities of structural and cultural barriers leads to struggles against those policies that help break down those barriers. They are encouraged to see themselves as winning because of their own efforts (the message of class). This encouragement is at once both macro-social in terms of media and society, and micro-social in terms of their occupational peers and self-esteem. Therefore you see some white women and people of color actively arguing against affirmative action (Ward Connerly and Clarence Thomas for example).

Expanding the model

Given the information in this chapter, look at the information in the models for sex, class, and race you have created. How would you modify the information you have listed there? How does the actual workings of the class structure link across stratification system components?

Looking Forward

Because of the strong linkage between education and occupation / social class, Education will be the next social institution examined. While education is undeniably linked to linked to occupation and social class, this institution plays a number of critical roles within our society. Not the least of which is as a socialization agent. We will examine how education as an institution works within our systems of stratification.

Key Concepts and Terms

Affirmative Action                             Civil Rights Act                      economic transition

EEOC                                                 Executive Order 11478           globalization

minimum wage                                   occupational segregation        NAFTA

quota                                                   Title V11

Suggested Readings

Anker, Richard. 1999. “Theories of occupational segregation by sex: An overview.” International Labour Review, Autumn97, Vol. 137 Issue 3, p315-360.

Atkinson, Donald R. 2000. “Ethnic Parity Goals Are Not Race-Based Quotas.” Counseling Psychologist, 2000. 11/01, Vol. 28, Issue 6

Catanzarite, Lisa. 2000. “Brown-collar Jobs: Occupational Segregation and Earnings of Recent-immigrant Latinos.” Sociological Perspectives, Spring2000, Vol. 43 Issue 1, p45-86.

Eherenreich, Barbara. “The Silenced Majority: Why the Average Working Person has
Disappeared from American Media and Culture.” In (eds.) Anderson and Collins 2000. Race Class and Gender - An Anthology. Wadsworth Publishing Company: Belmont, Ca.

Espiritu, Yen Le. “Ideological Racism and Cultural Resistence: Constructing
Our Own Images.” In (eds.) Anderson and Collins 2000. Race Class and Gender - An Anthology. Wadsworth Publishing Company: Belmont, Ca.

Fain, James R.. 1999. “Ranking the factors that affect occupational outcomes.” Industrial Relations, Jan99, Vol. 38 Issue 1, p92-106.

Fields, Judith. 2000. “Gender Differentials in Industry Wage Premia, Affirmative Action, and Employment Growth on the Industry Level.” Gender Issues, 2000,10/01, Vol. 18, Issue 4

Haggerty, Mark; Johnson, Colleen. 1995. “The hidden barriers of occupational segregation.” Journal of Economic Issues, Mar95, Vol. 29 Issue 1, p211-223.

Jacobsen, Joyce P. 1997. “Trends in workforce segregation: 1980 and 1990 Census Comparison.” Social Science Quarterly, Mar97, Vol. 78 Issue 1, p234-236.

Jennings, James. Kusbnick, Louis. “Poverty as Race, Power, and Wealth.” In (eds.) Anderson and Collins 2000. Race Class and Gender - An Anthology. Wadsworth Publishing Company: Belmont, Ca.

Lorde, Audre. “Age, Race, Class and Sex: Women Redefining Difference.” In (eds.) Anderson and Collins 2000. Race Class and Gender - An Anthology. Wadsworth Publishing Company: Belmont, Ca.

King, Mary C.. 1995. “Black women's labor market status: Occupational segregation in the United States and Great Britain.” Review of Black Political Economy, Summer95, Vol. 24 Issue 1, p23-44.

Maume Jr., David J. 1999. “Glass Ceilings and Glass Escalators.” Work & Occupations, Nov99, Vol. 26 Issue 4, p483-500.

Maume Jr., David J. 1999. “Occupational Segregation and the Career Mobility of White Men and Women.” Social Forces, Jun99, Vol. 77 Issue 4, p1433- 1460.

Miller, Will; Kerr, Brinck; Reid, Margaret. 1999. “A National Study of Gender-Based Occupational Segregation in Municipal Bureaucracies: Persistence of Glass Walls?” Public Administration Review, May/Jun99, Vol. 59 Issue 3, p218-232.

Polakow, Valerie. “The Shredded Net: The End of Welfare as We Knew It.” In (eds.) Anderson and Collins 2000. Race Class and Gender - An Anthology. Wadsworth Publishing Company: Belmont, Ca.

Preston, Jo Anne. 1999. “Occupational gender segregation.” Quarterly Review of Economics & Finance, 1999, Vol. 39, p611-625.

Semyonov, Moshe; Jones, Frank L. 1999. “Dimensions of gender occupational differentiation in segregation and inequality: A cross - national study.” Social Indicators Research, Feb99, Vol. 46 Issue 2, p225-248.

Semyonov, Moshe; Haberfeld, Yitchak. 2000. “Race composition and occupational segregation and inequality across American cities.” Social Science Research, Jun2000, Vol. 29 Issue 2, p175

Steinem, Gloria. “Media Magic: Making Class Invisible.” In (eds.) Anderson and Collins 2000. Race Class and Gender - An Anthology. Wadsworth Publishing Company: Belmont, Ca.

Toren, Nina. 1999. “Women and Immigrants: Strangers in a Strange Land.” Gender Issues, Winter99, Vol. 17 Issue 1, p76-97.

Watts, Martin. 1997. “Multidimensional indexes of occupational segregation.” Evaluation Review, Aug97, Vol. 21 Issue 4, p461-483.

Zinn, Maxine Baca. Eitzen, D. “Economic Restructuring and Systems of Inequality.” In (eds.) Anderson and Collins 2000. Race Class and Gender - An Anthology. Wadsworth Publishing Company: Belmont, Ca.