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Chapter 8

SOCA02H3 Chapter Notes - Chapter 8: Human Capital, Social Inequality, Organ Transplantation

Course Code
Malcolm Mac Kinnon

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Chapter 8: Economic Inequality in Canada
-regarding the sale of body parts people selling body parts are almost
invariably poor and people buying body parts are invariably rich
-North America (especially US) poor people are more likely than rich to suffer
illnesses that could be alleviated by organ transplantation and yet are less likely
to be offered transplant opportunities In the US, this is largely the result of the
poor not having adequate private health insurance to cover transplantation
-Materialism, the attempt to satisfy needs by buying products or experiences, is
a defining characteristic of modern society economic prosperity has made
Canada one of the best countries to live in
-Figure 8.1 shows growth of prosperity in post-WW2 Canadian economy (Note:
incomes in graph corrected for inflation) Today’s average income $70000
versus $30000 in the early 1950s
-purchasing power of families rose b/c economic productivity was enhanced by
improvements in workers’ skills and by advances in the technologies used for
-Notice from Figure 1 that average earnings have increases at a slower rate
recently event though the number of earners in a family increased more women
entered the paid labour force Despite working harder and longer, families’
incomes have not grown proportionately
-Figure 8.1 simplification b/c it is based on averages
-economic prosperity and benefits of materialism are not equally shared
-two extremes (rich and poor) most of use inb/w the two extremes
-best way to measure inequality that falls b/w these two extremes organize
into quintiles
-the concept of the share of income held by each quintile is frequently used to
investigate income inequality in Canada and elsewhere
-Figure 8.2 shows that for 2002, lowest quintile (20%) of income earners
received 4.6% of all income while the top quintile received 45% of all income
almost half of all income was held by 20% of individuals and families
-Income inequality is somewhat less marking in Canada than in the US
-Figure 8.2 also shows that since the mid-1980s, there has been growing
evidence of widening income inequality in Western industrial countries,
including Canada
-incomes in Figure 8.2 pre-tax incomes: the money ppl receive before paying
-Table 8.1 illustrates that in 2002, the gov’t did redirect some income from the
highest earners in Canada (the top quintile) to each of the other quintiles
-furthermore, during the last decades, redistributive effort of governments
declined in Canada
Explanations of Income Inequality

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-much about income inequality traces back to what kinds of work (career, job) a
person is able to obtain (see Table 8.2)
-Although talent and effort matter, rewards follow only when these are refined
into particular skills who gets to develop which skills depends on access to
learning environments
-when individuals begin to participate in formal education, what they encounter
varies in compatibility with earlier experience, mostly gained with family
-success at formal schooling is the key to acquiring economically valued skills
natural talent and effort are important ingredients in this process, to be sure,
but education matters a lot
-importance of education as a determinant of occupation and income continues
to increases
-although education opportunities have expanded enormously, in nearly all
developed economies, including Canada, the chances of advancing in
educational systems has consistently remained higher for people born into
families that are relatively more education
-Individuals must supply talent and effort to accumulate human capital (useful
knowledge and skills) but rates of success also depend on the human capital
their families accumulated in the previous generation
Human Capital Theory (HCT)
-HCT stresses the increasing centrality of education as a factor affecting
economic success human capital is investment in education and training
-knowledge intensive jobs are increasingly numerous in Canada and better
educated workers are more skilled and productive in these jobs b/c they have
made investments in acquiring the research skills and knowledge base essential
to the new economy
-much evidence supports a HC interpretation of the link b/w schooling and
incomes but this is not a complete explanation for why ppl earn what they earn
-part of the reason why ppl with the same amount of human capital may receive
different economic rewards is that they possess different amounts of social
capital Social capital refers to people’s networks or connections knowing
the right people and having strong links to them helps in attaining opportunities
-A related version of this argument is captured in the notion of cultural capital
-cultural capital emphasizes a set of social skills people have, their ability to
impress others, to use language and images effectively and to influence and
persuade people
-social capital stresses your networks and connections with others but cultural
capital emphasizes you impressions managements skills and your ability to
influence others
-both concepts emphasize that families higher in the social hierarchy enjoy
more capital of all types
Summary: natural talent and effort are important, level of education is a critical
factor in finding continuous, well-paying employment and in addition, social or
cultural capital is consequential for many in finding economic success see
Figure 8.3
Income Vs. Wealth

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-Table 8.3 suggests a mix of opportunism, business acumen, and a family
fortune as key determinants of wealth
-also illustrates the increasingly diverse ethnic origins of elite families in Canada
-only a few families acquire the great wealth of major business enterprises, but
all families own assets and these add up to greater or lesser family wealth
-Figure 8.4 shows the percentage of Canadian families that had accumulated
wealth in 1999 two patterns stand out 1) for most families, wealth
accumulation is fairly modest and 2) the relative few who manage to
accumulate a lot do so relatively late in life
-Unfortunately, social scientists have neglected the study of wealth, partly b/c
reliable data on the subject are hard to find
-US has surpassed all other highly industrialized societies in wealth inequality
-Table 8.4 1999, wealthiest 1/5 of families owned 73.1% of the wealth while
poorest had -0.6% of the wealth
-also wealth inequality in Canada increases sharply from 1984-1999 and the net
shift of wealth was away from the bottom 90% in favour of the wealthiest 1-%
-Wealth inequality is also significant b/c only a modest correlation exists b/w
income and wealth income distribution has little effect on the distribution of
Income and Poverty
-at the other extreme of the income distribution are the homeless
-in recent decades the number of ppl with “no fixed address” has increased
-homelessness is one manifestation of poverty
-poverty lacks an agreed definition should poverty be defined in absolute or
relative terms?
-an absolute definition of poverty focuses on bare essentials (food, shelter,
clothing, etc)
-what constitutes bare essentials depends on social context (e.g. heating is
essential here but not in Ethiopia)
-Should poverty be defined on the basis of income or on the basis of
-Definition of poverty matters b/c social policies are enacted (or not enacted)
based on levels and trends in poverty
-Social policy has a profound impact on the distribution of opportunities and
rewards in Canada
-politics can reshape the distribution of income and the system of inequality by
changing the laws governing people’s right to own property
-politicians can also alter patterns of inequality by entitling people to various
welfare benefits and by redistributing income through tax policies
-A definition of poverty showing fewer poor Canadians implies little need for
gov’t action
-Unlike other countries like the US, Canada does not have an official definition of
-Stats Canada reports what it calls a low-income cutoff
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