Oversimplification: An Example
Yet such gross oversimplification is concerning. There are issues with the current models of socio-economic stratification. The people, who may be put into the same class, can have quite different lives and impacts on the economy, and the economy may have very different impacts on these people. To see how this could happen, it might help to look at three individuals, all with approximately the same income and net worth, each of whom would be characterized as being within the middle class under the current model, and see that they have quite different positions within the socio-economic system. The three individuals are a telecommunications mechanic, working full time, a small business owner working upwards of 60 hours a week who cuts himself a paycheck every two weeks, and a lottery winner who receives monthly distributions. Admittedly these examples are somewhat contrived, but are not unreasonable.
So clearly these three individuals make roughly the same amount each year. However, almost everything else about them is different. The telecom mechanic might have a relatively stable job, but it could certainly be lost during a recession. Most likely this person also has a fair amount of debt; it’s unlikely that one could purchase a house outright with that income. This person’s net worth, therefore would probably not be too high. The second person: the business owner, is in a high risk position. If the economy were to tank, the business would be at risk. In terms of net worth, given that a business may take on a lot of debt, especially in its early years, may not be too much higher than the telecom mechanic’s. What is really quite different between the business owner and the telecom mechanic however is the value that these two put back into the system. The business owner may be responsible for employing a dozen people.
Spectrum Based Class Stratification
Perhaps a more scientific and precise view of class would be useful. This view could be predicated on more quantitative values and instead of crisp separations between classes, we could utilize ranges of values. What values should be used as metrics? Property value, debt, income and income rigidity, hours worked, input back into the system, and ability to influence the flow of resources through the system all seem like reasonable factors in making policy decision. Property value and debt are more or less trivial to determine, as is income. Income rigidity, by which I mean how unlikely it is to lose the source of income is somewhat more difficult to calculate, but still not impossible. Actuarial work to estimate the the probability of becoming unemployed exists to some extent due to unemployment insurance programs. Evaluating the number of hours worked is no more difficult than determining income. However, the last two concepts: the input back into and the ability to influence the flow of resources through the system are far more difficult to measure.
Conclusion
Based on the growing level of emotional arguments being used in both the media and in political discourse, there is a growing need to reevaluate class stratification within the United States and within similar socio-economic systems around the world. Any future model must, within reason, eliminate ambiguity and must provide a clear indication of role in the socio-economic system. And, in order to create such a model, further research must be performed.