8.1.1: Property Property

 8.1.1: Property

 Property comes in many forms, such as buildings, land, animals, machinery, cars, stocks, bonds, businesses, furniture, jewelry, and bank accounts. When you add up the value of someone’s property and subtract that person’s debts, you have what sociologists call wealth. 

This term can be misleading, as some of us have little wealth—especially most college students. 

Nevertheless, if your net total comes to $10, then that is your wealth. (Obviously, wealth as a sociological term does not mean wealthy.) Distinguishing Between Wealth and Income Wealth and income are sometimes confused, but they are not the same.

 Where wealth is a person’s net worth, income is a flow of money. Income has many sources: The most common is wages or a business, but other sources are rent, interest, and royalties.

 Even alimony, an allowance, and gambling winnings are part of income. 

Wealth and income usually go together, but not always. Some people have much wealth and little income. For example, a farmer may own a lot of land (a form of wealth), but bad weather can cause the income to dry up. Then there are those who have a large income and no wealth. Here is a real-life example of someone who makes $375,000 a year and is dead broke: Gregory Owens is a New York City lawyer who makes $375,000 a year. 

Yet he is broke. In his bankruptcy petition, Owens revealed that taxes, alimony, required retirement contributions, rent, food, and transportation eat up all his income. 

He spends $52 more a month than he earns. (Stewart 2014)

 Distribution of Property If we add up the value of the property in the United States—all the houses, apartments, cars and trucks, farms, businesses, and bank accounts—the total comes to about $62 trillion (Statistical Abstract 2019:Table 749). This certainly is a hefty sum. And who owns this vast property?

 One answer, of course, is “everyone,” as this $62 trillion is the total of what all Americans own. 

What this statement overlooks, though, is how the nation’s property is divided among “everyone.” 

You might be surprised at how concentrated U.S. wealth is. 

Look at Figure 8.1. 

Just 1 percent of Americans owns more than one-third of all real estate, stocks, bonds, and business assets in the entire country. 

As you can also see from this figure, 

10 percent of Americans own 77 percent of the nation’s wealth.

 Figure 8.1 Distribution of the Wealth of Americans Distribution of Income How is income distributed in the United States? 

Economist Paul Samuelson (Samuelson and Nordhaus 2005) put it this way: “If we made an income pyramid out of a child’s blocks, with each layer portraying $500 of income, the peak would be far higher than Mount Everest, but most people would be within a few feet of the ground.” To better grasp this layering, look at Figure 8.2. You can see that if each block were 1½ inches tall, the typical American would be just 13 feet off the ground. This portrays the average income in the United States of about $52,000 per year. (This is per capita income, which includes every American, even children.) The typical family climbs a little higher, since most families have more than one worker. 

Together, they average about $73,000 a year (Statistical Abstract 2019:Tables 704, 727). 

Compared with the few families who are on the mountain’s peak, the average U.S. family would still find itself only 18 feet off the ground. 

Figure 8.2 How the Income of Americans Is Distributed Source: Based on Statistical Abstract of the United States 2017:Tables 704, 727. The figure illustrates that if a one-and-a-half-inch child’s block equals 500 dollars of income, the average individual’s annual income of $52,000 would represent a height of 13 feet, and the average family’s annual income of $73,000 would represent a height of 18 feet. The income of some families, in contrast, would represent a height greater than that of Mt. Everest, 29,028 feet. 232 The fact that some Americans enjoy the peaks of Mount Everest while most—despite their efforts—make it only 13 to 18 feet up the slope presents a striking image of income inequality in the United States. Another picture emerges if we divide the U.S. population into five equal groups and rank them from highest to lowest income. As Figure 8.3 shows, the top 20 percent of the population receive half (51.1 percent) of all income in the United States. In contrast, the bottom 20 percent of Americans receive only 3.1 percent of the nation’s income. Figure 8.3 The More Things Change, the More They Stay the Same: Dividing the Nation’s Income Two features of Figure 8.3 stand out. First, look at how income inequality decreased from 1935 to 1970. 

Then notice how inequality has increased since 1970. 

Since 1970, the richest 20 percent of U.S. families have grown richer, while the poorest 20 percent have grown poorer.

 Despite numerous government antipoverty programs, the poorest 20 percent of Americans receive less of the nation’s income today than they did decades ago. 

The richest 20 percent, in contrast, are receiving more, as much as they did in 1935. 

The chief executive officers (CEOs) of the nation’s largest corporations are especially affluent.

 The median compensation (including salaries, bonuses, and stock options) of the CEOs of the 300 largest U.S. companies is about $11,000,000 a year. 

(Median means that half received more than this amount, and half less.) 

On Table 8.1, you can see the pay of the five highest paid CEOs.

 Table 8.1 The Five Highest-Paid CEOs Rank Name Company Compensation 1* 1* Safa Catz Mark Hurd Oracle Oracle $108 million $108 million 2 Robert Iger Disney $66 million 3 Brian Roberts Comcast $33 million 4 James Dimon J.P. Morgan Chase $31 million 5 Randall Stephenson AT&T $29 million *A tie. Oracle has two CEOs, a woman and a man, each with identical compensation SOURCE: Sauter 2019. The average income of these highest-paid CEOs, $62 million is about 1,000 times more than the average pay of U.S. workers (Statistical Abstract 2019:Table 670). 

This does not include these CEOs’ income from businesses, stock investments, dividends, interest, or rents. 

Nor does it include the value of their company-paid limousines and chauffeurs, airplanes and pilots, and their private boxes at the symphony and sporting events. To really see the disparity, consider this: Let’s suppose that you started working the year Jesus was born and that you worked full-time starting then. 

Let’s also assume that during each of these years you earned today’s average per capita income of $52,000. 

It would have taken until this year for you to have earned what the highest-paid executive listed in Table 8.1 earned in just one year. 

Imagine how you could live with an income like Safa Catz and Mark Hurd. And this is precisely the point. Beyond these cold numbers lies a dynamic reality that profoundly affects people’s lives. The difference in wealth between those at the top and those at the bottom of the U.S. class structure means that people experience vastly different lives. For example, A colleague of mine who was teaching at an exclusive Eastern university piqued his students’ curiosity when he lectured on poverty in Latin America. That weekend, one of the students borrowed his parents’ corporate jet and pilot, and in class on Monday, he and his friends related their personal observations on poverty in Latin America. 233 Few of us could ever say, “Mom and Dad, I’ve got to do a report for my soc class, so I need to borrow the jet—and the pilot—to run down to South America for the weekend.” What a lifestyle! Contrast this with Americans at the low end of the income ladder who lack the funds to travel even to a neighboring town for the weekend. For parents in poverty, choices may revolve around whether to spend the little they have at the laundromat or on milk for the baby. The elderly poor might have to choose between purchasing the medicines they need or buying food. In short, divisions of wealth represent not “empty” numbers but choices that make vital differences in people’s lives. Let’s explore this topic in the following Down-to-Earth Sociology. Down-to-Earth Sociology How the Super-Rich Live Larry Ellison, one of the richest men in the United States, loves basketball so much that he has his own basketball court on his yacht. When he misses the basket, a ball sometimes ends up in the ocean. Not to worry. Ellison has hired a man whose sole job is to drive a 44-foot powerboat behind the yacht to retrieve the errant balls. And when Ellison gets bored with playing on his yacht’s basketball court? He climbs in his personal helicopter flown by his personal pilot. Flying above the yacht, he shoots hoops to his heart’s content. His personal basketball retriever faithfully trails the yacht, scooping up those errant balls. (Gay 2014) As F. Scott Fitzgerald said in The Great Gatsby, “The rich are different than you and me.” And how! Let’s take a glimpse at the lifestyle of another very rich man, John Castle (his real name). John has made more than $100 million in banking and securities (Lublin 1999). But the super-rich yearn for more than just money. Displayed in the right way, vast wealth can bring distinction and create envy. Wanting to be connected to someone famous, John bought President John F. Kennedy’s “Winter White House,” an oceanfront estate in Palm Beach, Florida. John spent $11 million to remodel the 13,000-square-foot house so that it would be more to his liking. Among those changes: adding bathrooms numbers 14 and 15. He likes to show off John F. Kennedy’s bed and also the dresser that has the drawer labeled “black underwear,” carefully hand-lettered by Rose Kennedy (Bloomfield 2012). John has a yacht, too, a source of pleasure and pride. How much did his custom-built Hinckley yacht cost? John can’t tell you. As he says, “I don’t want to know what anything costs. When you’ve got enough money, price doesn’t make a difference. That’s part of the freedom of being rich.” Right. And for John, being rich also means paying $1,000,000 to charter a private jet to fly Spot, his Appaloosa horse, back and forth to the vet. John didn’t want Spot to have to endure a long trailer ride. Oh, and of course, there was the cost of Spot’s medical treatment, another $500,000. Other wealthy people besides Ellison and Castle spend extravagantly, too. If you are among them, you might spruce up your Saturday night with a $35,000 bottle of champagne at the 1 Oak Lounge in New York City (Haughney and Konigsberg 2008). Or perhaps a $10,000 cocktail at the Jardin in Las Vegas is more to your liking. But if you are looking for a bargain, you might consider the Jardin’s weekend Valentine package. For just $100,000, you can have this cocktail included (Stern 2016). Parties are fun, but what if you want privacy? You can buy that, too. Wayne Huizenga, who sold a half ownership in the Miami Dolphins for $550 million (“Builder Stephen . . .” 2008), bought a 2,000-acre country club, complete with an 18-hole golf course, a 55,000-square-foot-clubhouse, and 68 slips for visiting vessels. The club is so exclusive that its only members are Wayne and his wife (Fabrikant 2005). Withdrawing behind gated estates is one way to gain privacy, but Microsoft co-founder Paul Allen has found another way. On his 414-foot yacht, the Octopus, are two helicopters, a swimming pool, and a submarine (Freeland 2011). While the length of Allen’s yacht creates envy among the plutocracy that would make Freud break into a sweat, some might say that Charles Simonyi has even outdone this. He bought a $25-million ticket for a rocket ride to the International Space Station. Simonyi liked the experience so much that he bought a second ticket (Leo 2008). No frequent flyer miles included. But at the pace that prices are increasing, $50 million isn’t worth what it used to be anyway. At 533 feet, the Eclipse is the world's second largest yacht. It is owned by Roman Abramovich of Russia, the world's 11th richest person. Credit: Terence Waeland/Destinations/Design Pics Inc/Alamy Stock Photo