Socio-economic mobility in the United States

Socio-economic mobility in the United States refers to the movement of Americans from one social class or economic level to another,[1] often by changing jobs or marrying. This "vertical" mobility can be the change in socioeconomic status between parents and children ("inter-generational"); or over the course of a lifetime ("intra-generational"). It typically refers to "relative mobility"—the chance that an American's income/status will rise or fall compared to others in another income/status group[2]—but can also be "absolute"—whether (and by how much) living standards in America have increased.

Belief in strong social and economic mobility—that Americans can and do rise from humble origins to riches—has been called a "civil religion",[3] "the bedrock upon which the American story has been anchored",[4] and part of the American identity (the American Dream[5]), celebrated in the lives of famous Americans such as Benjamin Franklin and Henry Ford,[3] and in popular culture (from the books of Horatio Alger and Norman Vincent Peale to the song "Movin' on Up"[6]). Opinion polls show that this belief has been both stronger in the US than in years past, and stronger than in other developed countries.[7]

However, in recent years several large studies have found that vertical inter-generational mobility is lower, not higher, in the US than in comparable countries.[3] Studies differ on whether social and economic mobility has gotten worse in recent years. A 2013 Brookings Institution study found income inequality was becoming more permanent, sharply reducing social mobility.[8] A large academic study released in 2014 found income mobility has not changed appreciably in the last 20 years.[9][10]

Popular belief

The American Dream Report, a study of the Economic Mobility Project, found that Americans surveyed were more likely than citizens of other countries to agree with statements like

and less likely to agree statements like

In the US only 32% of respondents agreed with the statement that forces beyond their personal control determine their success. In Europe, in contrast, majorities of respondents agreed with this "fatalistic" view in every country but three (Britain, the Czech Republic and Slovakia).[12] The Brookings Institute found Americans surveyed had the highest belief in meritocracy—69% agreed with the statement "people are rewarded for intelligence and skill"—among 27 nations surveyed.[13]

Another report found such beliefs to have gotten stronger over the last few decades.[7]

Intergenerational mobility

Current state

The correlation between parents' income and their children's income in the United States is estimated between .4 and .6. If there was perfect economic mobility and being raised in poverty was not a disadvantage, you would expect to see 20% of children who started in that bottom quintile remaining there as adults. That is not what research shows. According to a 2012 Pew Economic Mobility Project study[14] 43% of children born into the bottom quintile remain in that bottom quintile as adults. Correspondingly, 40% of children raised in the top quintile will remain there as adults; 63% of children in the top quintile will remain above the middle. Additionally, large shifts in income between childhood and adulthood are very unlikely to occur. Only 4% of those raised in the bottom quintile moved up to the top quintile as adults, and only 8% of children born into the top quintile fell to the bottom.[14] These findings have led researchers to conclude that "opportunity structures create and determine future generations' chances for success. Hence, our lot in life is at least partially determined by where we grow up, and this is partially determined by where our parents grew up, and so on."[15]

Economic mobility may be affected by factors such as geographic location, race, sex, as well as family wealth.[16] These factors exist because of the social constructs that are present within the United States.

Famous historical cases

Besides Benjamin Franklin and Henry Ford,[3] popular examples of upward social mobility between generations in America include Abraham Lincoln and Bill Clinton, who were born into working-class families yet achieved high political office in adult life. Andrew Carnegie, arrived in the U.S. as a poor immigrant and later became a steel tycoon.

Comparisons with other countries

Intergenerational income elasticities for nine developed countries

Several large studies of mobility in developed countries in recent years have found the US among the lowest in mobility.[3][7] One study (“Do Poor Children Become Poor Adults?")[7][11][17] found that of nine developed countries, the United States and United Kingdom had the lowest intergenerational vertical social mobility with about half of the advantages of having a parent with a high income passed on to the next generation. The four countries with the lowest "intergenerational income elasticity", i.e. the highest social mobility, were Denmark, Norway, Finland, and Canada with less than 20% of advantages of having a high income parent passed on to their children. (see graph)[7]

“ If Americans want to live the American dream, they should go to Denmark. ”

— Richard G. Wilkinson at a 2011 TED conference on economic inequality.[18]

According to journalist Jason DeParle

At least five large studies in recent years have found the United States to be less mobile than comparable nations. A project led by Markus Jantti, an economist at a Swedish university, found that 42 percent of American men raised in the bottom fifth of incomes stay there as adults. That shows a level of persistent disadvantage much higher than in Denmark (25 percent) and Britain (30 percent)—a country famous for its class constraints.[19]

Meanwhile, just 8 percent of American men at the bottom rose to the top fifth. That compares with 12 percent of the British and 14 percent of the Danes.

Despite frequent references to the United States as a classless society, about 62 percent of Americans (male and female) raised in the top fifth of incomes stay in the top two-fifths, according to research by the Economic Mobility Project of the Pew Charitable Trusts. Similarly, 65 percent born in the bottom fifth stay in the bottom two-fifths.[3][20]
Intergenerational immobility versus economic inequality.

In 2012, a graph plotting the relationship between income inequality and intergenerational social mobility in the United States and twelve other developed countries—dubbed "The Great Gatsby Curve"[21]—showed "a clear negative relationship" between inequality and social mobility.[22] Countries with low levels of inequality such as Denmark, Norway and Finland had some of the greatest mobility, while the two countries with the high level of inequality—Chile and Brazil—had some of the lowest mobility. The curve was introduced in a speech by chairman of the Council of Economic Advisers Alan Krueger,[22] and the President’s Economic Report to Congress.[23]

Decline

Some studies have found that not only is the degree of social mobility in the US not large but it has either remained unchanged or decreased since the 1970s.[12][24][25][26] Other research shows that economic mobility in the U.S. increased from 1950 to 1980 but has declined sharply since 1980.[27]

The centrist Brookings Institution said in March 2013 that income inequality was increasing and becoming permanent, sharply reducing social mobility.[8]

Absolute mobility

Even though mobility has gone down, most Americans still have more income than their parents. A 2007 study "Economic Mobility Project: Across Generations," using Panel Study of Income Dynamics, found 67% of Americans who were children in 1968 had higher levels of real family income in 1995–2002 than their parents had in 1967–1971[28] (although most of this growth in total family income can be attributed to the increasing number of women who work since male earnings have stayed relatively stable throughout this time[28]) As to whether this figure is higher or lower than other countries is difficult to say as this type of measure has not been done for other countries.[28]

Intragenerational mobility

Another form of mobility—"intra-generational"—is the change in class and/or income over a single life-time. To the extent this mobility is present in society it means not only opportunity for the poor (or middle income) and ambitious, but also less relevance for whatever high levels of "short-term" inequality there may be, since the more mobility over the course of a career there is the more evenly distributed "lifetime" income will be. How strong Intra-generational mobility is in the US is disputed.[29]

According to Thomas A. Garrett,[30] a US Treasury study of income mobility from 1996 to 2005 found that less than half (between 40–43%) "of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Only about 25 percent of the individuals in the top 1/100th percent in 1996 remained in the top 1/100th percent in 2005." The study reassured Americans concerned about the "long-term trend of increasing income inequality in the U.S. economy" (after-tax income of the top 1% earners has grown by 176% percent from 1979 to 2007 while it grew only 9% for the lowest 20%) of "the opportunity for upward mobility" in America: "There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period"; 80 percent of taxpayers had incomes in quintiles as high or higher in 2005 than they did in 1996, and 45 percent of taxpayers not in the highest income quintile moved up at least one quintile[31]

However others found mobility less than significant. A 2007 inequality and mobility study (by Kopczuk, Saez and Song) found the pattern of annual and long-term earnings inequality "very close", and the population at top income levels in America "very stable" and "not mitigated the dramatic increase in annual earnings concentration since the 1970s."[32]

A 2011 CBO study on "Trends in the Distribution of Household Income Between 1979 and 2007" also found multi-year household income distribution in America "only modestly" more equal than annual income.

Given the fairly substantial movement of households across income groups over time, it might seem that income measured over a number of years should be significantly more equally distributed than income measured over one year. However, much of the movement of households involves changes in income that are large enough to push households into different income groups but not large enough to greatly affect the overall distribution of income. Multi-year income measures also show the same pattern of increasing inequality over time as is observed in annual measures.[33]

In other words, "many people who have incomes greater than $1 million one year fall out of the category the next year—but that’s typically because their income fell from, say, 1.05 million to 0.95 million, not because they went back to being middle class."[33][34]

Economist Paul Krugman complains that conservatives have resorted to "extraordinary series of attempts at statistical distortion" in claiming high levels of mobility.

Studies by the Urban Institute and the US Treasury have both found that about half of the families who start in either the top or the bottom quintile of the income distribution are still there after a decade, and that only 3 to 6 percent rise from bottom to top or fall from top to bottom.[29]

While in any given year, some of the people with low incomes will be "workers on temporary layoff, small businessmen taking writeoffs, farmers hit by bad weather"—the rise in their income in succeeding years is not the same 'mobility' as poor people rising to middle class or middle income rising to wealth. It's the mobility of "the guy who works in the college bookstore and has a real job by his early thirties." [29]

Causes and issues

Explanation for the relatively low level of social mobility in the US include the better access of affluent children to superior schools and preparation for schools so important in an economy where pay is tilted toward educated workers; high levels of immigration of unskilled laborers and low rate of unionization, which leads to lower wages among the least skilled; public health problems, like obesity and diabetes, which can limit education and employment;[3] the sheer size of the income gap between the rich which makes it harder to climb the proverbial income ladder when the rungs are farther apart;[35] poverty, since those with low income have significantly lower rates of mobility than middle and higher income individuals.[36] The factors which affect social mobility vary across the United States as does social mobility which in favored areas is much higher than in less favored areas.[37]

Education

Multiple reports have found that education promotes economic mobility.[38][39][40] The report “Pursuing the American Dream: Economic Mobility Across Generations” found that a four-year college degree promotes upward mobility from the bottom and prevents downward mobility from the middle and top. For instance, having a four-year college degree makes someone born into the bottom quintile of income three times more likely to climb all the way to top as an adult.[38]

Wages and earnings correlate with education. A 2009 survey of young adults[41] who worked full-time [42] throughout a full year,[43] found the median income of whose without a high school diploma ($21,000) was below the poverty level for a family of four ($22,050)[44] and less than half of what whose with a bachelor's degree earned ($45,000).[45]

Education and Income (2009)[45]
Educational Attainment Young Adult
Median Income
Master's degree or higher$60,000
Bachelor's degree$45,000
High School Diploma
(or equivalent)		$30,000
No High School Diploma
(or equivalent)		$21,000
SOURCE: U.S. Department of Education, National Center for Education Statistics. (2011). [45]

The difference has worsened since 1979 when the average college graduate made 38% more than the average high school graduate. By 2011 college graduates averaged made 75% more income.[46] "Mobility" to the "class" of college graduates has declined. Those born with parents who graduated from college have far better odds of graduating from college than those born to high school graduates.[47]

Some scholars (such as Isabel Sawhill) have complained about the effect of education on mobility

“At virtually every level, education in America tends to perpetuate rather than compensate for existing inequalities. The reasons are threefold. First, the K through 12 education system is simply not very strong and thus is not an effective way to break the link between parental background and a child’s eventual success. … Second, because K–12 education is financed largely at the state and local level, resources devoted to education are closely linked with where people live and with the property wealth of their neighbors. For this and other reasons, poor children tend to go to poor schools and more advantaged children to good schools. … Finally, access both to a quality preschool experience and to higher education continues to depend quite directly on family resources.”[48]

Others (Robert M. Hauser) have defended educational attainment as also freeing "individuals from the constraints of their social origins."[49]

Poverty

Comparing the US with one high-mobility state (Denmark), journalist Kevin Drum concluded that lack of mobility for the poorest children seems to be the primary reason for America's lag behind other developed countries.[36] A study from the Economic Mobility Project found that growing up in a high-poverty neighborhood increases Americans’ risk of experiencing downward mobility and explains a sizable portion of the black-white downward mobility gap. The report’s analysis also showed that black children who experience a reduction in their neighborhood’s poverty rate have greater economic success in adulthood than black children who experience poverty rates that increase or are stable.[50]

Gender and race

Reports analyzing the economic mobility of African-Americans compared to that of whites have found stark differences. One report found that 53 percent of blacks born in the bottom income quintile remain there as adults, while only 33 percent of whites do.[51] Research has also found that the children of black middle-class families are more likely to fall out of the middle class.[39]

Despite the increased presence of blacks and women in the work force over the years, women and non-whites hold jobs with less rank, authority, opportunity for advancement and pay than men and whites,[52][53] a "glass ceiling" being said to prevent them from occupying more than a very small percentage in top managerial positions.

One explanation for this is seen in the networks of genders and ethnic groups. The more managers there are in an employees' immediate work environment, the higher the employees chances of interacting and spending time with high status/income employees, the more likely these employees are to be drawn on for promotion.[54][55] As of the 1990s, the vast majority of all clerical and office workers are women, but made up less than half of all managers. Less than 15% of all managers were minorities, while roughly a quarter of all clerical and office employees were. The networks of women and minorities are simply not as strong as those of males and whites, putting them at a disadvantage in status/income mobility.

For women, another explanation for this "glass ceiling" effect in the American work force is the job-family trade off.[56] While both men and women feel that a conflict exists between job and family, women with children, particularly married women, are more likely to either temporarily leave the labor force or cut back on employment by using flex time, working part-time or part of the year.[57][58][59] Unfortunately, lower mobility results as part-time employment is usually lower paying employment, with less chance of promotion into a higher status job or likelihood of a return to full-time employment for at least a few years.

Taking a leave from the work force tends to decrease human capital when it comes to finding a job.[60] Women are also more likely than men to take leave from their jobs to care for others rather than themselves.[61][62][63] Knowing this, employers are wary of hiring and promoting women in the work force.

Others have pointed out that men have statistically been willing to accept job conditions that women were not, such as working outside in extreme weather, working where you can become physically dirty on a regular basis, working more hours, etc. This is based on survey information, and shows that it is difficult to make direct comparisons ('apples to apples').[64] Conservatives also question the extent of gender discrimination arguing that competition between firms would lead them to bid up wages of any group if they provided the same or better value of work for less pay as employees.

Immigration

According to economist George J. Borjas, most immigrants to the US are at "a sizable earning disadvantage" compared to native-born workers, and the earnings of different groups of immigrants vary widely. Borjas found that intergenerational upward economic mobility averaging a 5% to 10% in increase in income from the first to the second generation of immigrants although there was wide variation among ethnic groups. Other research suggests that length of time resided in the U.S. narrows the occupational gap between Hispanic immigrants and non-Hispanic whites and U.S.-born Hispanic counterparts.[65] Overcoming language barriers and adjusting to the new environment and culture to American society creates barriers for new immigrants, and “there is significant economic ‘catching up’ between the first and second generations" (second generation being defined as child with at least one parent not born in the United States). This intergenerational mobility includes poor as well as middle income groups, although among the high income Borjas noted a regression towards the mean or equalizing tendency in income/status, whereby children of very successful immigrants tended to have lower, not higher, incomes/status than their parents, becoming successful but not as successful.[66]

Impact of incarceration

According to some researchers, America's high incarceration (imprisonment) rate, and “War on Drugs” policies, have created an underclass with severely limited social mobility. Within the United States the prison population has been steadily increasing since the early 1970s and has now surpassed two million, making it the highest per capita rate in the world. This boom has been fueled to a large extent by the War on Drugs starting in the 1980s. In addition to the mobility handicaps of imprisonment, this "war" has effectively created a poor, immobile class by denying one of the most important tools for social mobility—education—in a number of ways

  1. The drug war has combined with public school zero-tolerance policies to remove tens of thousands of adolescents from their public schools.
  2. Denial of higher education has been adopted as an additional punishment for drug offenders.
  3. The war on drugs siphons drug users out of society and into prison.[67]

The lack of education for convicted felons is compounded with difficulties in finding employment. These two factors contribute towards a high recidivism rate and downward social mobility.

Tax expenditures

Tax expenditures, partial exemption of the poor from taxation through reliance on progressive income taxes rather than sales taxes for revenue or tax rebates such as the earned income tax credit loosely correlate with income mobility with areas which tax the poor heavily such as the Deep South showing low mobility.[68][69]

Other factors

Significant correlations have been found between intergenerational mobility and economic inequality, economic and racial residential segregation, measures of K-12 school quality (such as test scores and high school dropout rates), social capital indices, and measures of family structure (such as the fraction of single parents in an area)[70]

History of study

Sociologists Blau and Duncan collected mobility data along with the U.S. Bureau of the Census in 1962. The data included information on occupational family backgrounds. In 1962, 56.8% of sons with fathers who had occupations in upper nonmanual ended up with occupations in the same level. Only 1.2% of sons with fathers who had farming occupations ended up in upper nonmanual occupations. In 1973, these differences increased. 59.4% of sons with fathers in upper nonmanual occupations achieved occupations of this same level and 0.9% of sons with fathers in farming occupations ended up in upper nonmanual occupations. However, the occupational structure is more rigid towards the top and bottom. Those in lower nonmanual occupations, and upper and lower manual occupations were more likely to be vertically mobile. Upper nonmanual occupations have the highest level of occupational inheritance.[71] In the 1980s studies found that only 20 percent of the income gap persisted between generations in America, according to the Christian Science monitor. However by 2003 improvements in econometrics showed that poverty could endure over several generations.[72]

See also

References

  1. ↑ Random House Unabridged Dictionary second edition.
  2. ↑ Glossary from politybooks.com
  3. ↑ 3.0 3.1 3.2 3.3 3.4 3.5 3.6 Harder for Americans to Rise From Lower Rungs | By JASON DePARLE | January 4, 2012]
  4. ↑ Economic Mobility: Is the American Dream Alive and Well? Economic Mobility Project| May 2007
  5. ↑ English grammar 4U online| "In general, the American dream can be defined as being the opportunity and freedom for all citizens to achieve their goals and become rich and famous if only they work hard enough."
  6. ↑ the theme song of the 1975–85 TV sitcom The Jeffersons
  7. ↑ 7.0 7.1 7.2 7.3 7.4 CAP: Understanding Mobility in America – April 26, 2006
  8. ↑ 8.0 8.1 Vasia Panousi; Ivan Vidangos; Shanti Ramnath; Jason DeBacker; Bradley Heim (Spring 2013). "Inequality Rising and Permanent Over Past Two Decades". Brookings Papers on Economic Activity. Brookings Institution. Retrieved 23 March 2013.
  9. ↑ LEONHARDT, DAVID (January 23, 2014). "Upward Mobility Has Not Declined, Study Says". New York Times. Retrieved January 23, 2014.
  10. ↑ Chetty, Raj; Nathaniel Henderson; Patrick Kline; Emmanuel Saez; Nicholas Turner. "NBER WORKING PAPER SERIES, WHERE IS THE LAND OF OPPORTUNITY? THE GEOGRAPHY OF INTERGENERATIONAL MOBILITY IN THE UNITED STATES" (PDF). January 2014. Equality of Opportunity Project. Retrieved 23 January 2014.
  11. ↑ 11.0 11.1 Economic Mobility Project
  12. ↑ 12.0 12.1 Ever higher society, ever harder to ascend Whatever happened to the belief that any American could get to the top? economist.com 29 December 2004
  13. ↑ International Comparisons of Economic Mobility Julia Isaacs| brookings.edu, 2008
  14. ↑ 14.0 14.1 Urhan, Susan. "Pursuing the American Dream: Economic Mobility Across Generations" (PDF). Pew Charitable Trusts.
  15. ↑ Howell-Moroney, Michael (2008). "The Tiebout Hypothesis 50 Years Later". Public Administration Review 68: 101. doi:10.1111/j.1540-6210.2007.00840.x.
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  17. ↑ Corak, Miles. 2006. “Do Poor Children Become Poor Adults? Lessons from a Cross Country Comparison of Generational Earnings Mobility.” Research on Economic Inequality, 13 no. 1:143–88.
  18. ↑ Wilkinson, Richard (Oct 2011). How economic inequality harms societies (transcript). TED. (Quote featured on his personal profile on the TED website). Retrieved 12 December 2014.
  19. ↑ American Exceptionalism in a New Light: A Comparison of Intergenerational Earnings Mobility in the Nordic Countries, the United Kingdom and the United States Markus Jäntti et al.| January 2006
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  21. ↑ Income Inequality From Generation To Generation Robert Lenzner| forbes.com| 26.3.2012
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  26. ↑ Katharine Bradbury, Trends in U.S. Family Income Mobility, 1969–2006, Federal Reserve Bank of Boston, Working Paper No. 11-10, Boston, MA, October 20, 2011.
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  28. ↑ 28.0 28.1 28.2 Economic Mobility of Families Across Generations. Julia B. Isaacs. 13 November 2007. Economic Mobility Project, Washington, D.C.
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  32. ↑ Uncovering the American Dream: Inequality and Mobility in Social Security Earnings Data since 1937 Wojciech Kopczuk, Emmanuel Saez, Jae Song, September 15, 2007, Figure 4B
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  34. ↑ Millionaire For A Day Paul Krugman. 3 November 2011,
  35. ↑ White House: Here's Why You Have To Care About Inequality Timothy Noah | tnr.com| January 13, 2012
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  37. ↑ Hendren, Nathaniel; Raj Chetty, Patrick Kline, Emmanuel Saez (July 2013). "Summary of Project Findings, July 2013" (REVISED DRAFT). equality-of-opportunity.org. There are some areas in the U.S. where a child’s chances of success do not depend heavily on his or her parents’ income.
  38. ↑ 38.0 38.1 "Pursuing the American Dream: Economic Mobility in the United States". Pew Charitable Trusts Economic Mobility Project. Retrieved 1 August 2012.
  39. ↑ 39.0 39.1 "Downward Mobility from the Middle Class: Waking Up from the American Dream". Pew Charitable Trusts Economic Mobility Project.
  40. ↑ "Promoting Economic Mobility by Increasing Postsecondary Education". Pew Charitable Trusts Economic Mobility Project.
  41. ↑ ages 25–34
  42. ↑ (35 or more hours per week)
  43. ↑ (50 or more weeks of employment)
  44. ↑ 2009 HHS POVERTY GUIDELINES US Department of Health and Human Services.
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  47. ↑ The Wrong Inequality By David Brooks| nyt.com |31 October 2011.
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  66. ↑ George J. Borjas, Making It In America: Social Mobility in the Immigrant Population Fall 2006
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  68. ↑ Hendren, Nathaniel; Raj Chetty, Patrick Kline, Emmanuel Saez (July 2013). "The Economic Impacts of Tax Expenditures Evidence from Spatial Variation Across the U.S" (REVISED DRAFT). equality-of-opportunity.org. We focus on intergenerational mobility because many tax expenditures are loosely motivated by the goal of expanding opportunities for upward income mobility for low-income families. For example, deductions for education and health costs, progressive federal tax deductions for state income taxes, and tax credits aimed at low-income families such as the Earned Income Tax Credit (EITC) all are targeted toward providing increased resources to low income families with children.
  69. ↑ David Leonhardt (July 22, 2013). "In Climbing Income Ladder, Location Matters: A study finds the odds of rising to another income level are notably low in certain cities, like Atlanta and Charlotte, and much higher in New York and Boston.". The New York Times. Retrieved July 22, 2013.
  70. ↑ Hendren, Nathaniel; Raj Chetty, Patrick Kline, Emmanuel Saez (July 2013). "Summary of Project Findings, July 2013" (REVISED DRAFT). equality-of-opportunity.org. we found significant correlations between intergenerational mobility and income inequality, economic and racial residential segregation, measures of K-12 school quality (such as test scores and high school dropout rates), social capital indices, and measures of family structure (such as the fraction of single parents in an area)
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  • McGuire, Gail M. "'Gender, Race, Ethnicity, and Networks: The Factors Affecting the Status of Employees’ Network Members.'" Work and Occupations vol. 27. November 2000: 500—23.
  • Western, Bruce. Punishment and Inequality in America. New York: Russell Sage Foundation, 2006.

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