Study Social Class and Wealth in America

Physician's Money Digest, July31 2003, Volume 10, Issue 14

Have you done better or worsethan your parents? What doyou expect for your children?A new study shows that classstructure in America may be morestatic than we all thought. But forphysicians, who generally rank in thetop 20%, it may mean their childrenwill enjoy even greater advantages.

The study, coauthored by WichitaState University sociologist DavidWright, PhD, shows that class mobilityhas decreased over the pastfew decades, effectively making the"rags to riches" story more fairy talethan fact. At the same time, thestudy shores up the idea that "therich are getting richer."

The study compared incomesand occupations of 2749 father-and-sonpairs from 1979 to 1998 andfound few sons had moved up theclass ladder. Nearly 70% of the sonsin 1998 had remained either at thesame level or were doing worse thantheir fathers in 1979. Yet the studyalso showed that at the upper level,the affluent sons were moving intobetter positions more frequently thantheir fathers had.

RICH GETTING RICHER

According to the sociologists, 4types of "capital" determine whereyou end up on the class scale:

  • Social capital—who you know;
  • Credential capital—where youreceived your education;
  • Consumption capital—refers toincome and wages; and
  • Investment capital—consists ofstocks and bonds.

The fact that the top class ofAmerican society has access to most,if not all, of those forms of capitalsecures their class status and ensuresthat their wealth keeps growing, thestudy shows. The majority of Americanshas access to consumption capital,but is limited in their access tothe other 3 types.

Effectively, not much separatessomeone in a lower-paying job, likethe fast food industry, from a professionalworker since both workers' abilityto remain in their class depends ontheir paycheck, or consumption capital,Dr. Wright explains. However,the CEO of a major company isn'tthat dependent on a paycheck tomaintain their class status. "There'senough investment capital andenough credential capital to live on,"Dr. Wright says. "Money generatesmore money." That's not the casewith most of America's workers.

As a result, the sociologists de-fined the various classes as follows.The top 20% is the privileged class.This relatively large class consists of2 distinct segments: the top 1% of allUS wealth and income holders, thesuperclass, and the next 19%, thecredentialed class. The remaining80% of Americans are members ofthe new working class.

WHAT ABOUT PHYSICIANS?

"Physicians would be in the privilegedcredential class," Dr. Wrightsaid. "Physicians, in general, fair prettywell in our society, with annualincomes ranging from $125,000 to$190,000.While they bring in considerableconsumption capital (salary),the high discretionary capital theyhave is strongly channeled into investmentcapital—either as stocks orbusiness investment capital such asreal estate or venture capital. Ofcourse, their social capital frommedical school and their day-to-daycontacts provide important sourcesof information in making decisionsabout investments."

The study showed that the richare definitely in control of the investmentcapital. In 1999, the top 1% ofthe wealthy owned 51.4% of allstocks, while the next 9% owned37%, Dr. Wright notes. The bottom90%—the majority of Americans—only had 11% of the stocks.

THE WIDENING GAP

If the rich are getting richer, whyisn't everyone enjoying more advantages?It probably has as much to dowith whom you know and whereyou've gone to college, as well as yourfamily's portfolio. Unfortunately forthe 80% in the new working class,during the past 30 years, the privilegedclass increased its control overorganizations, which distribute the 4capital resources. Thus, the gapbetween the classes has only widened.

Another reason for the stagnationin class mobility is that better-payingjobs aren't being created. In the1970s, better-paying manufacturingjobs were more available, but many ofthose jobs have gone overseas. Thejobs that are increasing in Americaare those in the service or retail industry,but those don't pay as well.

The market is also being floodedwith college graduates. Each yearabout 650,000 jobs are created thatrequire a degree, but 1.6 million peoplegraduate from college each year,Dr. Wright says. "That's why todayabout 28% of people with a collegeeducation work in a job that requiresa high school education or less," hesays."That's a sad statistic." On top ofit all, those college-level jobs are payingless than what they did in the1970s, according to labor statistics.

HOW ABOUT CHILDREN?

While you may be in the privilegedcredential class, what if yourchild picks the wrong school orcareer? According to Dr. Wright,"Nearly all studies on mobility showa strong relationship between parentsoccupational fields and theirchildren. This makes sense in bothterms of role modeling and access tooccupational structures and entry.The same can be said for physicians.It's not that their children would bemore likely to be physicians, but thattheir children would pursue or haveaccess to occupational structuresthat would place them at comparablelevels with what their parents doin terms of income and prestige."

And higher education levels, as requiredfor physicians, make a difference.While the oversupply of collegegraduates occurs at the BA/BS level,graduate degrees have not increasedat the same rate. And graduate students—whether professional or academicdegrees—compete in a differentlabor market than undergraduatestudents. "The problem for physiciansin coming years," Dr. Wrightsays, "will be the increase in foreign-bornphysicians who receive theireducation in the United States andstay to compete in the medical field."

Despite static class structures, certainoccupations do offer opportunityfor upward mobility—medicine isone of them. "The medical field andeducation currently stand as growthfields for both employment andincome,"Dr. Wright says. "Folks whoinvest in these occupations will havegreater chances of occupationalmobility than others. On the otherhand, information technology maynot be the hot ticket we think it is. Wehear a lot of hype about the IT [informationtechnology] and computerfield, but it supplies less than 3% ofall employment, and contrary to popularpress, [it] will be less than 3.5%of all employment in 2010."

However, Dr. Wright points outthat besides occupation, there is a"functional" level that also determinesupward mobility. "One groupis comprised of people who acquirean occupational skill where they executetasks (eg, engineers or nurses).The other group is comprised of peoplewho coordinate the actions of others(ie, managers). The first groupwill see little upward mobility, butsome will live well off, while otherswill have little material comforts. Thesecond group, however, will experienceupward mobility throughouttheir lifetime. They may actually startat a lower level than the first group,but after 10 years they will surpassthe first group in earnings."

Note:

The study looked only atmales since there existed a largersample of father-son pairs who areemployed than mother-daughterpairs.