SOCIAL STRATIFICATION - THE SEVEN CLASSES

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1 SOCIAL STRATIFICATION - THE SEVEN CLASSES Runciman identifies seven classes based upon the possession of different amounts of ownership, control and marketability. These are detailed in Table 1.1 with Runciman s estimated of the percentage of the British population in each class. The highest class, which he calls the upper class. Contains between onetenth and one-fifth of 1 percent of the population. It is made up of the owners of the means of production, the most senior managers and those with absolutely exceptional marketability. Runciman cites examples of each of these three types: the Duke of Northumberland, who qualifies in terms of ownership; the chief executive of shell, who has control: and the senior partners of the biggest firms of City accountants, who have marketability. Runciman specifically excludes very highly paid entertainers because their role is irrelevant to the institutional processes of production, distribution and exchange. Runciman chooses to divide the middle classes into three groups. The higher-grade professionals, senior civil servants and managers are placed in the highest of these three classes, and routine white-collar workers in more or less deskilled jobs are placed in the lowest. He argues that there is a sufficient gap in the lowest. He argues that there is a sufficient gap in the economic power of these two extremes in the middle class to justify the inclusion of a third group in between. This middle middle class includes lower professions and middle managers. Proprietors who are not in the upper class are allocated to one of the middle classes according to what the scale and kind of their property makes appropriate. Runciman argues that workers such as shop assistants. Checkout operators and copy- and audio-typists have insufficient economic power in terms of the marketability of their skills to be placed in the middle class. Instead they are seen as part of the working class. The working class itself is divided in two: an upper or skilled working class and a lower or unskilled working class. Semi-skilled workers are seen as belonging to the lower working class since, according to Runciman, it has become common for workers with minimal skills to be defined as semi-skilled. When he uses the terms skilled, semi-skilled and unskilled. Runciman is not referring to 1

2 some abstract measures of technical knowledge which is required to carry out jobs. He is thinking instead of the different degrees of marketability, control and ownership that individual workers posses. Thus a worker might be placed in the upper working class on the grounds of control if they have control over the operation of machinery, or on the grounds of marketability if their skills are in demand. Runciman also distinguishes an underclass at the bottom of the stratification system. It consists of those whose roles places them more of less permanently at the economic level where benefits are paid by the states to those unable to participate in the labour market at all, In effect, members of the underclass have no control ownership or marketability. (we discuss Runciman s views on the underclass in more details later in the chapter; see Operationalizing the class scheme Runciman made no attempt to use his class scheme for research, but he did suggest how that might be done. It would be necessary to determine individuals jobs the amount and source of their income, their actual and prospective capital resources, and their economic position within the household. These different types of information could then be combined to determine a persons class. Evaluation of Runciman There are a number of problem with Runciman s class scheme. It would be extremely difficult to use in research since it means gathering a wide ranges of data on individuals and the household in which they live. Many respondents to a survey might be unwilling or unable to give precise details of for examples their wealth. Runciman also offers no clear dividing line between the classes it is unclear how much marketability power or control a person needs for them to be placed in a particular class. His views that groups such as the self-employed or small proprietors should not be seen as constituting separate classes is somewhat controversial. Runciman himself admits that such groups might rates and socio political attitudes but he is still unwilling to allocate them to a separate class because they do not necessarily have similar amounts of economic power. 2

3 In addition because Runciman uses a graditional approach to class, where the difference between classes are a matter of degree rather than kind, his decision to settle on seven classes seems rather than kind, his decision to settle on seven classes seems rather arbitrary. He could just as easily have settled on a six or an eight-class model. Rosemary Crompton (1993), however, argues that Runciman s scheme is one of the few approaches to the class structure that has had some success in coming to terms with the social changes that have taken place in Britain since the Second World War. She argues that these changes include. A move away from the conventionally established class boundary between manual and non-manual work following the expansion of the service sector and the rountinization and feminization of much lower level white-collar employment am emphasis on the diversity of middle-class locations, an the identification of the poorest and most deprived as an under class this identification being linked to varying degrees, with the condition of state dependency. A major element of continuity, however, lies in the persisting concentration of economic, organized and political power within an upper class which comprises only a small minority of the population. Her description of changes in the class structure provides a succinct summary of some of the main social trends which will be discussed in this chapter. We will now proceed to consider changes in three of the main elements o the stratification system. The occupation structure the distribution of income, and the distribution of wealth. Changes in the British stratification system As we discovered in the previous section, most contemporary theories of stratification have been influenced by the Pioneering work of Marx or Weber. Despite the differences between these sociologists, both gave primary importance to material inequalities. Marx saw the most important divisions in any system of stratification as stemming from differences in the ownership of wealth, and specifically ownership of the means of production. Weber also saw ownership of wealth as an important criterion for distinguishing classes. Weber, however placed more emphasis than Marx on division within the property class whose members 3

4 did not won sufficient property to support themselves without working. Income levels and other life chances for this group depended largely upon the market situation of occupational group to which the individuals belonged. No group of class stratification is fixed and static. The distribution of resources within the class system constantly changes and the size and market situation of occupational groups also alter over time. The next sections will describe some of the broad patterns of change in the occupational structure and the distribution of income and wealth in Britain in the twentieth century. Later sections will examine the changing position of particular classes in more detail. Changes in the occupational structure Sociologists from Marx and Weber onwards have debated how best to define social classes. Many, though not all, now base their class categories, at least partly, upon occupational grouping. Official government statistics distinguish between socio- economic groups, which, it is claimed, bring together people with jobs of similar social and economic status. Scales of social class Although there are disagreements about where the boundary between the middle and working classes should be placed, it is often the case that manual workers are regarded as being working-class, and non-manual workers as middle-class. Until recently, official statistics on occupations were based upon the Registrar Generals scale which distinguished manual jobs according to levels of skill, with separate categories being used for the unskilled, semi skilled and skilled manual worker. Non-manual jobs are also usually divided into three categories routine non manual jobs, which include clerical and secretarial work intermediate non-manual jobs, which include teachers nurses, librarians and some managers and the highest class in this scheme, which includes professional such as doctors and accountants as well as senior managers. The old scale was replaced in 2001 by the National Statistics Social-economic Classification (NS-SEC), which provides broadly similar data but using different categories. Because of this it is difficult to make precise statements about recent 4

5 changes in the occupational structure, but it is certainly possible to identify broad changes. Although calculated in different ways, Tables 1.2 and 1.3 are both based upon the idea of socio-economic grouping. Tables show changes in the occupational structure between 1911 and Table 1.3 is calculated on a different basis but shows changes between 1975 and Table 1.3 includes personal service workers in the same category as semi-skilled manual and so includes a wider range of workers in the lower classes than table 1.2. The shift to non-manual employment The information contained in Tables 1.2 and 1.3 shows that there was a long-term trend during the twentieth century for the proportion of non-manual jobs to increase, and for manual jobs to decrease. In 2000 just 44 per cent of all workers had manual jobs, whereas in 1911, according to Routh (1980), 79 per cent jobs were manual. According to the General household Survey, the proportion of manual and personal service workers declined from 55 per cent to 44 per cent between 1975 and However, there have been marked increases in professional, managerial and routine non-manual work. The more recent information based upon the NS-SEC scale. This scaled uses seven occupational groupings and the statistics distinguish between employees and the self- employed. The small employees and own- account workers (group 4) are not included as they are mainly self-employed, and nor are the long-term unemployed. In the NS-SEC scheme groups 1 and 2 are similar to the highest classification in the Registrar Generals scale and they are some times combined to form a managerial and professional occupations category. Although the categories do not correspond exactly to the manual/ non-manual divide, groups 5, 6 and 7 are sometimes combined to form a routine and manual occupations category and groups 3 and 4 are some times linked in an intermediate class. Table 1.4 shows that in England and wales there was a continuing shift towards managerial and professional employment in the first few years of the twenty first century and a continuing declined in routine occupations and intermediate 5

6 occupations. In per cent of the economically active population were employed in professional and managerial jobs, compared to just 40.1 per cent in lower supervisory, technical or routine occupations. On the basis of these figures, there is no evidence that the expansion of higher classes at the expense of lower classes is coming to a halt. The shift towards non-manual employment has been caused both by the decline of manufacturing and by the growth of services. 1. Manufacturing industry has declined, while services industries, which employ a lower proportion of manual workers, have expanded. Ken Robers comments that over half of the manufacturing jobs that existed in the 1970s have gone, and in some industries the workforces have really collapsed (Roberts, 2001, p.65). Roberts points out that at one time three quarters of a million people were employed in coalmining and in 1981 it still employed miners. By 1994, however, there were just 8500 coalminers left. Others traditional heavy industries in which employment has declined rapidly include steel manufactures, shipbuilding and dock work. Other manufacturing industries have also declined. This is partly because new technology has increased productivity so that fewer workers are needed to produce the same quantity of goods. Roberts points out that industrial outputs has stayed about the same in Britain despite a declining workforce. A second reason is that British manufacturing has lost out in completion with businesses in lower-wage economics in Latin America. Eastern Europe and the Far East. Workers in Such countries produce an increasing proportion of manufacturing goods consumed in Britain. There have also been important changes in manual work connected to the decline of manufacturing. The old working class was employed in coalmines, shipyards, steel plants and engineering workshops ; the new working class in employed in supermarkets, security firms contract cleaners, fast food and other catering establishment, an suchlike. Roberts, 2001.p. 68 6

7 2. The service sector has grown considerably. According to Roberts, there was considerable growth in public sector services ( such as local government, health ad education) from the 1940s to the 1970s, but growth then came to a halt, Financial and business services grew rapidly from the 1960s to the 1980s but were than hit by the effects of computer technology which reduced the size of the workforce needed. According to Roberts recent growth in the service sector has largely come from the development of consumer service in leisure industries such as hotels, catering and retailing. Gender, full-time and part time work Women, particularly married women, increasingly started taking paid employment during the twentieth century, but they are not equally distributed throughout the occupational structure. Although women are more likely to have non-manual workers are concentrated in the lowest paid sectors of non-manual work, and have routine non-manual jobs. As Table shows only 23 per cent of women were managers, senior officials or professional in 2005 compared to 32 percent of men. Although the proportion of women who have such jobs has been rising, women with non- manual jobs are still concentrated in the associate professional and technical and administrative and secretarial categories. Men were ten times more likely than women to have skilled manual jobs in 2005 ( 20 per cent as opposed to 2 per cent). In both the middle class and the working class, women tend to be concentrated in the lower-paid and lower-status sectors of each class. There have also been significant trends in the proportions of men and women in full-time and part-time work. In the UK in 1971 more than 90 per cent of men but less than 60 per cent of women aged 16 to 64 were in employment. By 2005, 79 per cent of men and 70 per cent of women were employed (social Trends 2006, pp 52-3). However, it remains the case that women are much more likely to work parttime than men. According to the UK Labour Force Survey. In the first quarter of 2006 there were million men employed part-time but million women. Although a large majority of part-time work is still done by women, there was a much bigger increase in part-time work amongst men than there was amongst women between 2001 and Women still seem to have a disadvantaged 7

8 position in the labour market, and still earns less than men (see pp ), but there may be some move away from men working full-time and taking on the role of main breadwinner in families. The Changing distribution of income The importance of income Some sociologists have argued that inequalities in industrial societies are being progressively reduced; others go further and claim that class divisions are disappearing Income has an important effect upon life chances: for example on the chances of owning one s own home and on life expectancy. If income inequlities were gradually disappearing this would be strong evidence that class division were weakening. Some government policies seem designed to achieve greater income equality by redistributing income from more affluent to poorer groups. However, as we will see in the following sections income can be measured in various ways and official statistics should be used with caution. In additions it should not be assumed that long-terms trends in income distribution will continue for ever: there is evidence that there have been significant changes in these trends in Britain in recent years. In particular a long term trends towards a more equitable distribution of income has been reversed. The Measurement of income distribution Official Statistics measure income in a variety of ways. 1. Original income refers to income from sources such as employment, occupational pension, gifts, alimony payments, and investment.figures on original income do no include benefits such as state pensions, family credit and income support, which are paid by the state. 2. Gross income is a measure of all sources of income. Most individuals are not, however, free to spend all of their gross income, because some of it is deducted to pay income tax and national insurance contributions. 8

9 3. Disposable income is measure of gross income less the above deductions. 4. Some taxes (indirect taxes) are not paid directly out of income, but are paid by consumers as part of the purchase price of goods. For example, value added tax (VAT) is payable on most categories of goods in theuk Duties are also payable on products such as petrol, tobacco and alcohol. Post tax income is a measure of income after the above taxes, and taxes such as the council tax, are deduted. 5. Final incomes adds on to income after taxes the value of benefits provided by the state which are not given in cash, for example medical care and education. By examining these different measures it is possible to discover the effects of government policy on the distribution of income. Based on the family Expenditure Survey. By examining these different measures it is possible to discover the effects of government policy on the distribution of income. Give data for based on family Expenditure Survey. The effects of taxation and benefits Demonstrates that even after taxation and benefits are taken into account, considerable income inequalities remain. In the poorest 20 percent of household received just under half the average final income while the richest 20 per cent received nearly twice the national average. Howeverage, it is clear that be benefits help to reduce income inequality. In particular, benefits boost the very low original income of the poorest 20 per cent of households came from benefits compared to 2 per cent for the richest. Over all taxation and benefits also reduce the final income of richer groups in the population, although less than the higher rates of income tax for high earner would suggest. This is partly because poorer groups in the population tend to pay a higher proportion of their income in indirect taxes ( such as VAT and duties) than richer groups. The officials government figures need to b treated with some caution. Only about 70 percent of households approached agree to participate in the Family Expenditure survey. Further more, there is no guarantee that the information 9

10 obtained is entirely reliable. Individuals may not declare all their income, particularly if they have not been truthful to the Inland Revenue or the Dss. The figures may be particularly prone to under stimating the income of the highest earners, who have more opportunities to hide substantial amount of income than middle and lower-income groups. Sources of income Income comes from a number of sources. According to British government statistics, wages and salaries are the most important sources of income in the UK. For those of working age, in , 74 per cent of all household income came from wages and salaries, 10 per cent from self-employment, 7 per cent from disability and other benefits, 3 per cent from private pensions, 2 per cent from investments, 1 per cent from tax credits and 3 percent from other income sources ( social Trends 2006, p. 70). The sources of income vary considerably for households in different socioeconomic groups. For example 71 per cent of the income of those who had never worked or were long-term unemployed came from benefits, compared to 1 per cent of the income of those in higher managerial and professional occupations. Trends in income distribution Despite the limitation of the official figures, they do at least provide some indication of the overall historial trends in the distribution of income. In 1979 the Royal Commission on the Distribution of Income and Wealth published a report examining the changes in the distribution of income and wealth between 1949 and They found that over this period there was some income redistribution, but mainly towards middle-income groups rather than those on the lowest levels. The top 10 per cent of income earners reduced their share of total income by 3.7 per cent, but the bottom 30 per cent also had their share reduced in this case by 2.5 per cent. Although there was a slight shift in income distribution from the top half of income earners to the bottom half-middle income groups were the beneficiaries. 10

11 Changes in taxation The Royal Commission report was published in 1979, the same year as Margaret Thatcher s Conservative government came to power. Successive Conservative governments implemented policies that reversed the slight trend for income redistribution to poorer groups. The policies that had the most direct impact concerned income tax. Income tax is a progressive tax become higher earners pay a higher proportion of their income in this tax than lower earners. If overall levels of income in this tax than lower earners. If overall levels of income tax are cut, and if the higher rates in particular are reduced, the redistribution effects of taxation become smaller. Between 1979 and 1997 the basic rate of income tax was reduced from 33 to 23 per cent, while the highest rate fell from 80 to 40 per cent. In 1992 a lower rate band of 20 per cent was introduced on the first 2000 of taxable income, thise was widened to 4300 in By the early 1990s the government was running into problems financing government spending and was forced to raise through increases in indirect tax there was a increase in national insurance contribution of 1 percent in National insurance contribution are effectively a form of direct tax, and between 1979 and 2001 contribution were raised from 6.5 per cent to 10 per cent. In 1997 a new Labour government was elected in Britain, the first Labour government for eighteen years. Although traditionally committed to a redistributive tax system, the incoming government pledged not to increase income tax rates and to stick to conservative spending limits in its early years in government. However after this period a number of tax changes were introduced, many of which were designed specifically to help the low paid by cutting their tax bills. The main changes were as follows. 1. The introduction of a Working Families Tax Credit, which reduced the income tax bills for families with one or more children and at least one adult in employment. Poorer families received the full tax credit, but the value of the tax credit tapered off to zero for higher earners. 11

12 2. A children s Tax Credit was introduced in 2001 which lowered tax bills for those with children although this benefits was gradually with drawn for higher rates tax prayers. In 2003 the working Families Tax Credits and Children s Tax Credit were combined into the Integrated Child Credit. 3. The reduction of the tax rate on the lower rate tax band from 20 per cent to 10 per cent. 4. In 2003 an employment Tax credit was introduced reducing tax bills for lower wage earners. 5. The Standard rate of income tax was cut to 22 per cent in These measures primarily benefited lower and middle income earners particularly those in employment and some were specifically designed to reduced poverty and boost the income of the low paid. As we shall see, the evidence suggest that these policies certainly has an impact on slowing and nearly stopping the growth in income inequality but did not sifnificantly reduce income inequality. Since 1979 there has been a market shift towards indirect taxation, which tends to take a greater proportion of the income of lower-income groups than it takes from those on higher incomes. In the top fifth of household paid only 11 per cent of their income in indirect taxes compared to 28 per cent for the bottom fifth. In 1979 the twin VAT rates of 8 per cent and 12.5 per cent were replaces with a single rate of 15 per cent. This was raised again to 17.5 per cent in In 1993 it was announced that VAT would be extended to included domestic fuel and would be charged at 8 per cent. In 1997 the new Labour governmet cut the VAT rate on domestic fuel from 8 per cent to 5 per cent. Other important types of indirect tax are the duties levied on petrol, alcohol and tobacco. The new Labour government also introduced a range of direct taxes on items such as air travel which had not previously been taxed. 12

13 Recent changes in the distribution of income As outlined above, the Royal Commission on the Distribution of Income and Wealth found that there was some income redistribution from the rich to the poor between 1949 and However, there is clear evidence that changes in taxation introduced by conservation governments between 1979 and 1997 reversed this trend. A study of household income equality by Goodman, Johnson and Webb (1997) showed that any long-term trend towards more equitable income distribution in the UK had been reversed by the late 1990s. The poorest 10 per cent and the poorest 50 percent of the population both saw a fall in the proportion of national income they received between and This was particularly pronounced in pronounced in the poorest tenth of the population, whose share fell from 4.1 per cent to 2.9 per cent. On the other hand, the richest tenth of the population saw a rise from 21.3 per cent to 26.2 per cent over the same period. Goodman et al. found a number of reasons for these trends. One was a rise in inequalities in pay for male workers during the 1980s. Unemployment among males rose particularly fast in household where no body else was working, making those household where no body else was working making those household completely reliant upon benefits. Technological changes and government policies led to a reduction in the demand for unskilled labour and increasing unemployment and falling wages for unskilled workers. More people became reliant upon self employment as their main sources of income. The self employed are disproportionately found among both the highest-earning and the lowest earning groups, further widening income inequalities. Long term trends in the distribution of disposable income are shown in based on research by the Institute for Fiscal Studies (IFS). The Figures shows changes in the income of different groups the median (households in the middle of the income distribution scale ), the 90 th percentile (those near the top) and the 10 th percentile (those near the bottom). According to this research the big increase in income inequality in the 1980s stabilized in the first half of the 1990s but in the second half of the decade a slow increase in income inequality resumed, though it began to level off in the early years of the twenty first century (social Trends 2006). 13

14 Particularly evident from this figure is the very small increase in the disposable income of poorer groups and the rapid growth inincome of the most affluent. New labour under Tony Blair was elected to power in Suggest some slowing in income inequality in the early years of their government, but it does not show what happened in the later years. Further research by the IFS (Brewer et al, 2006) provides a clear pictures of more recent trends this research shows that in the 1996/7 to 2001/ 1 period thiere was continuing though slow, increase in income inequality but from 2000/1 and 2004/5 income inequality fell. This is shown which based on the Gini coeffient a statistical measure of inequality. (The Gini coefficient would be 0 if the income of all individuals was identical, and 1 if one per had all the income in a society. The higher the figure, there fore the greater the level of inequality. Over all during Labours first eight years in office after 1997 income inequality was little changed, with the increase in the first term inoffice being roughly matched by the falls in the second term. The IFS comment that this might appear surprising given changes such as the introduction of tax credits and the fall in unemployment which should have boosted the incomes of low income families they suggest that rising inequality within the labour market and particularly the rapidly increasing incomes of the highest earners may help to emplaint he failure of Tony Blair s government to reduce the overll level of inequality. The research were pessimistic that government policies would do much to further reduce inequality in the future. Writing in 2006, they said that Given the policy and spending commitments that have already been announced there seems little room for further announced there seems little room for further commitments that might serve to reduce income inequality substantially (Brewer et al p. 26) At the very top of the income distribution scale the best paid continue to thrive and see their income grow more rapidly than other groups. A survey for the obsever (Connor, 2006) found that the highest paid executive of Glaxo Smith Kline whose total remuneration package was worth 10.6 million in 2006, a 16 per cent increase on the previous year. second on the list was Lord Brown chief Executive of BP. In 2006 he had a basic salary of just 1.5 million, but with pension 14

15 contribution bonus and incentive of 19 percent on Although three of the ten best paid British executive had seen their income fall sir Tom Mckillop of Astro Zeneca had enjoyed a pay rise f 47 per cent to 4.6 million. with Generous bonuses for many workers in the city of London in recent years. And the rapidly rising incomes of many top sports stars and entertainers, the income growth of the most affluent has restricted any tendency towards greater over all income equality. The changing distribution of wealth The important of wealth Inequalities in the distribution of wealth, like inequalities in the distribution of income, are an important indicator of class divisions and class inequality. A particular form of wealth the means of production is especially important to Marxist sociologists. Like income, wealth can effect life changes, but to Marxists, ownership of the means of production also gives power. (Today,ownership of the means of production usually takes the form of share ownership.) Wealth is also important in Weberian theories of stratification, although it is given less emphasis than in Marxist theories. If it could be shown that over the years there had been a major redistribution of wealth from the rich to the poor, this would indicate a reduction in class inequalities. However, wealth is perhaps even more difficult to measure than income, and reliable data prove elusive. Measuring wealth The definition and measurement of wealth, like income, are not straightforward. One problem is that the government does not collect information on wealth for tax purposes. There is no wealth tax on the living, but taxes do have to be paid on the estates of those who have died. Figures on the value of estates of those who have died. Figures on the value of estates left by the deceased are sometimes used to calculate the overall distribution of wealth. However they may not be a reliable guide to the distribution of wealth among the living for instance individuals may transfer some of their wealth to other family members before they die. Moreover, those who die 15

16 tend to be older than other members of the population, and wealth is not equally distributed between age groups. Another method of collecting information on wealth distribution is to use survey research, but this too has its drawbacks. Those who refuse to cooperate with the research may be untypical of the population as a whole, and their failure to take part may distort the findings. Those who do cooperate may not be entirely honest, and the richest members of society may be particularly prone to understanding their wealth. Defining wealth Not only is wealth difficult to measure, but defining it is also problematic. Official statistics distinguish between marketable wealth and non-marketable wealth: 1. Marketable Wealth includes any type of asset that can be sold and its value realized. It therefore includes land, share, savings, savings in banks, building societies or other accounts, homes (minus any outstanding mortgage debts). And personal possession such as cars, works of art and household appliances. The figures on marketable wealth excludes the value of occupational pension, which cannot normally be sold. If such pension are included in the figures, the statistics show wealth as being more equally distributed than is otherwise the case. 2. Non marketable wealth includes items such as salaries and non-transferable pensions. From a sociological point of view, the official figures on wealth are not ideal.. They fail to distinguish between wealth used to finance production and wealth used to finance consumption. Wealth used for production for examples shares) is of particular interest to Marxist sociologist because they belive that power largely derives from ownership of the means of production. The distribution of wealth used for consumption is of less interest to Marxist, though it does give some indication of lifestyle. Such figures are also useful for indicating the distributing of various life changes for instances the chance that different social groups have of owning their own home. 16

17 Tends in wealth distribution Despite the limitation of the the available figures, it is possible to discern overall trends in wealth distribution in the UK over the twentieth century. Research to Westergaard and Resler (1976) showed that there was some reduction in inequalities of wealth between 1911 and In 1911, 69 per cent of personal wealth was owned by the richest 1 per cent of the population, and 92 cent by the richest 10 percent. By 1960 the share of personal wealth owned by the richest 1 per cent had fallen to 42 per cent and the share of the richest 10 percent had gone down to 83 per cent. These data suggest that there was a consider 83 per cent. These data suggest that there was a consider able reduction I the degree of wealth inequality during the early and middle years of the twentieth century. With much more redistribution of wealth than of income. That the trend towards greater equality of wealth distribution continued until the early 1990s when it went into reserve. Recent trends have produced a significant increase in inequality, with wealth becoming significant increase in equality, with wealth becoming particularly concentrated in the hands of the richest 1 per cent of the population. Thus in 2002 the wealthiest 1 per cent of the population owned 23 per cent of all 2005 Greens companies paid his wife a dividend of 1.2 billion. By paying it to his wife he avoided paying corporation tax at 25 percent, thus depriving the British Inland Revenue of more than 300 million. Many wealthy foreigners are allowed to live in Britain or run British companies while paying little it any tax Lansley says that Russian oligarchs, Greek shipping magnates and Swedish entrepreneurs have all made Britain their home because of the sympathetic treatment they receive from the British tax authorities. Rupert Murdoch s News International has paid hardly anything in tax in the UK since the late 1980s although one study put the profits of the subsidiaries of News Corps UK holding company at 1.4 billion over eleven years ( Lansley, 2006 p 187). Lansley argues that however unfair this might seem to the ordinary UK tax payer, it is neither illegal nor surprising. Tony Blair in particular has argued that high taxes on the rich are counter-productive since the rich will tend to take their wealth elsewhere to avoid British taxes. However, Lansely is critical of a situation where: 17

18 The Great majority of individuals pay their dues, while the very rich individuals and also the large corporation increasingly choose and have the power to opt out of their tax obligations, Lansley CLASSES IN CAPITALIST SOCIETIES We will now examine the changing position of particular classes within the class structure of capitalist societies, using British and American data. Three main class-the upper class, the middle class and the working class- will be considered in turn, though, as well show, the location of the boundaries between these classes is dispured. Most of the view dealt with in the following sections have been influenced by Marxist or Weberian theories of stratification. The Upper Class John Westergaard and Henrietta Resler- a Marxist view of the ruling class Class divisions In a study first published in 1975, John Westergaard and Henrietta Resler argued, essentially from a Marxist perspective, that Britain was dominated by a ruling class. They claimed that the private ownership of capital provided the key to explaining class divisions. Westergaard and Resler argued that in detail the class system was complex, but in essence it was simple, the major division was still between capital and labour. Sociologists who focused on the details of class- for example the differences between manual and routine white-collar workers- merely obscured the over all simplicity of the system. Such differences were insignificant compared to the wide gulf that separated the ruling class from the bulk of the wage and salary earning population. Distribution of wealth 18

19 To support their argument, Westerguard and Resler pointed to the concentration of wealth in the hands of a small minority, the richest 5 per cent of the population. Although there has been some change in the distribution of wealth in Britain since 1900, this has largely taken place within the richest 10 per cent. The expansion of home ownership has spread wealth a little more widely, but the ownership of capital in private industry has remained highly concentrated. Ruling-class power Westergaard and Resler argued that the maintenance of inequalities of wealth was due to the power of the ruling class. They maintained: The favoured group enjoyed effective power, even when its members took no active steps to exercise power. They do not need to do so- for much of the time at least-simply because things work that way in any case. Westergaard and Resler p It is generally taken for granted (by members of society and government alike)that investments should bring profit and that the living standards of the propertyless should be based on the demands of the market for their skills. In general, governments have favoured the interests of capital, assuming that the well-being of the nation is largely dependent upon the prosperity of private industry. Composition of the ruling class Westergaard and Resler believed that the ruling class was made up of perhaps 5 percent, and at most 10 percent of the population. It included the major owners of the means of production, company directors, top managers higher professionals and senior civil servants, many of whom are large shareholds in private industry. The subordinates classes consist of the bulk of the wage- and salary earning population. Westergaard and Resler put forward what was essentially a conventional Marxist view of the ruling class. They assumed that the ruling class continued to exist. They claimed that it was a united group which continued to dominate British society and argued that social changes had not significantly redistributed wealth and power. These views have been challenged by market liberal theorists. 19

20 Peter Saunders a market liberal (New Right) view of higher classes An influential economic elite Peter Saunders (1990) does not deny that there is a small group of people in British society who have considerable wealth and more power than other members of society. He accepts that many directors and top managers own share in their own and other companies, and he also accepts that there is an interlocking network at the topof British industry and finance in which the same names and face keep cropping up with different hats on. He notes that the hundred largest companies produce more than half of Britain manufacturing output and therefore. A few thousand individuals at most are today responsible for taking the bulk of the key financial and administrative decisions which shape the future development of British industry and banking. However, Saunders rejects the Marxist view that such people constitute a capitalist ruling class. He sees them as merely an influenced economic elite. Wealth, ownership and the capitalist class Saunders identifies some groups who might be seen as a capitalist class. These consist of families who continue to own majority shareholding in established large companies, entrepreneurs who have built up and still own big business and large landowners. Such people, however, control only a small fraction of the British economy. Most business are run by directors and managers whose income and power drive principally from their jobs and not from their ownership of wealth. Saunders claims that less than 25 percent of the top 250 British companies are run by managers and directors who own 5 per cent or more of the company s shares. The remaining 75 per cent are part of the economic elite. but they do not own 20

21 substantial parts of the means of production, so they cannot be seen as part of the capitalist class. Further more, saunders argues that it has become much more difficult than it once was to identify a distinctive capitalist class. Although few people are very rich many people have a direct stake in owning British enterprises. During the course of the twentieth century the proportion of shares owned by individuals declined. Most shares and a large proportion of commercial land, are now owned by banks unit trusts building societies and pension funds. Million of ordinary people therefore have investments tied up in the capitalist economy mortgage, life insurance policies and savings in banks and building societies. In addition, the privatization programme has widened direct share ownership. Saunders therefore claims that the capitalist class has fragmented into millions of tiny pieces and says: To see these pieces look around you. The ruling class From Saunder s point of view, then, directors and managers lack the wealth to be seen as a capitalist class. He further argues that they lack the power to be a ruling class. Although they make many important investment decisions, they do not monopolize power and they frequently fail to get their own way. There are many areas of societies that they do not control. These include the government the mass media and the education system. Indeed members of the economic elite are sometimes dismayed when politicians editors and educationalist fail to defer to their wishes and interests. Saunders believes that the class divisions of previous centuries have b is to be been weakened by the development of capitalism. Inequality is essential if a society is to be just and successful, but the success of capitalism spreads wealth and power more widely. In doing so it ensures that the most wealthy do not rule society. John Scott- who Rules Britain? John Scott(1982, 1991, 1997) has provided the most comprehensive description and analysis of the development of the upper class in Britain. His analysis suggests that there have been important changes within higher classes in British 21

22 society, but he does not believe the upper class has disapperared. He discusses many of the trends mention by Saunders but denies that they show the death or fragmentation of the ruling class. Scott uses Weberian concepts and borrows some elements of elite theory. (Elite theory is examined in Chapter 9) In the end, however, he support the Marxist view that Britain retain a ruling class, although he does believe that the British ruling class in part of the international grouping. The persistence of the capitalist class Scott rejects the view that a capitalist class is disappearing. He says unequivocally that there is in Britain today a capitalist class whose members owe their advantaged life chances to the occupancy of capitalist economic locations (Scott 1991) During the twentieth century certain types of property became more widely owned. More people now own their own houses and posses consumer goods and cars. Such possession however are They are important for the lifestyle and life chances of individuals and families but they do not place individuals in a capitalist class, Capitalist own this consists of capital invested in land, shares and commercial enterprises in general. True capitalist own considerable amounts of capital and not just for example, a few hundred shares in one company. Scott says that property and the income it can generate are the primary bases for the privileges of the capitalist class, but property may be accumulated through work. He rejects the view that there has been a managerial revolution which has undermined the power of the capitalist class. A considerable number of top managers and directors are able to join the capitalist class themselves. The rest are only likely to retain their jobs if their actions favour the capitalist class. Scott also attacks the idea that institutional control over many larger companies has led to the disappearance of a capitalist class. Even if in theory the assets of pension schemes, banks, insurance companies and similar institutions are owned by a multitude of small investors, in practice they are controlled by a few key members of the capitalist class. The policies of these institution are largely determined by their directors, who themselves are often members of the capitalist 22

23 class in their own right. It is these finance capitalist who make the key investment decisions that affect the lives of millions. Within this group is an inner core who sit on the boards of more than one company. Far from leading to the death of the capitalist class, institutional control improves coordination and cooperation within it. The composition of the capitalist class The capitalist class, then includes many of the directors of the largest companies, especially those with multiple director ships, successful entrepreurs and those who have inherited substantial amounts of wealth. Scott claims that in Britain this means about 0.1 per cent of the adult population. The richest forty families/ individuals in Britain in 2005, according to research carried out by the Sunday times, All of them had achieved billionaire status. The ruling class Having claimed to have established that a capitalist class still exists, scott goes on to try to show that it remains a ruling class. He say that a ruling class exists when there is both political domination and political rule by a capitalist class. He goes on to argue. This require that there be a power bloc dominated by capitalist class, a power elite recruited from this power bloc, in which the capitalist class is disproportionately represented and there are mechanisms which ensure that the state operates in the interests of the capitalist class and the reproduction of capital. By a power bloc, Scott means a group of people who can monopolize political power over a country for some time. The power elite are those people from the power bloc who occupy key positions in the state. In Britain these positions include those held by the prime minister, members of the cabinet, MPs, senior judges and top civil servants. Scott quotes figures showing that top civil servants and others in elite positions continue to be predominantly recruited from public school backgrounds. Scott 23

24 concludes that the evidence on self- recruitment shows that a power bloc continues to exist and is dominated by members of the capitalist class. Whether Conservative or labour government have been in power, their poli ies have become increasingly constrained by the interests of capitalism and capitalists. Governments have to pay close attention to the financial markets if they are going to borrow money, maintain the exchange rate of the currency and attract investment into the country. They cannot afford to ignore the interests of capitalists. In particular, government policy is strongly influenced by an inner core of finance capitalist in the City of London. The City point of view, advocated by this group, is rooted in short term commercialism and involves a commitment to free international capital flows, stables sterling exchange rates, and tight monetary controls. Changes in the ruling class Scott certainly believes that there have been changes in the ruling class. At the beginning of the twentieth century it was based around an upper circle of status superiors, many of whom had connections to the aristocracy. Aristocratic connections are far less important today and members of the ruling class have an increasingly international role. The growing importance of multinational corporation means there are greater links between the business classes of different societies. British public schools are still important for the recruitment of members of the British ruling class and the maintenance of ruling class networks, but international business schools are growing in important. Nevertheless, scott believes that both in Britain and in other countries a distinctive, nationally based ruing class remains. The character of the ruling class may have changed but its survival and continued domination of British society have been in question. Stewart Lansley- a new super class. Scott work is becoming a little dated, but is generally supported by more recent research. Stewart Lansley (2006) argues that a powerful and wealthy minority continues to be dominant in Britain. He admits that the composition of the dominant group may be changing. One change is that a few more successful 24