The material below pursues the theme of institutional discrimination.  It explores the economic status of people of color with emphasis on how the economic system affects their status and opportunity (Farley, 2005:261).  The observation is made that people of color are roughly divided into two broad groups:   There are those people who are college educated and who have experienced a decrease in the racial disparity with whites.  For many, however, the disparity has not changed much.  A large portion of the minority population continues to live in poverty and many are unemployed or underemployed.  Minorities continue to be generally excluded from ownership of the means of production (Farley (2005:261).

I.     Asset Ownership in America

A.     The Power Elite

Much of America's wealth is controlled by a small number of transnational corporations.  Control of these organizations are in the hands of a very small elite. The power elite, as C. Write Mills (1956) calls them, occupy positions that literally dictate the course of world history.  They have profound influence on the character of social structure both domestically and internationally.   Minorities are by are large missing from this group of elites (Farley (2005:261).

The ruling class is able to play a major role in shaping the social and political climate because it dominates the federal government through a variety of organizations and methods.

• It controls the corporate community where power is further enhanced as a result of large corporations being linked to form a corporate community.
• The American ruling class is linked through joint ownership of stock, joint ventures, and common sources of bank loans.
• Large corporations have similar legal, accounting, and consulting firms.
• They share similar values and goals.
• They also have common enemies like labor movements and middle-class reformers.

The ruling class is able to influence the nonelite population by providing funding for policy groups, foundations, think tanks, and university research institutes. It influences public schools, churches, and voluntary organizations by providing them with movies, television programs, books, pamphlets, speakers, advice, and financial support.

While Domhoff's (1974) ruling class represents only about 1 percent of the population, they control most assets in America. 

• They own 25 to 30 percent of all privately held wealth in America,
• They own 60 to 70 percent of the privately held corporate wealth
• They receive 20 to 25 percent of the yearly income
• They direct the largest corporations and foundations
• They dominate the federal government in Washington.

The Super Power Elite People who make up the power elite are not on equal terms even within the ruling class. Some members of the "ruling class" have much greater power than others. Michael Parenti in Democracy for The Few (1983:14-15) presents some characteristics of two families (the duPonts and the Rockefellers) that might be included in the super power elite. According to Parenti: The duPonts control ten corporations, each with more than $1 billion in assets, including Penn Central, General Motors, Coca Cola, Boeing and United Brands. The duPonts control scores of smaller firms. They serve as trustees in scores of colleges, including some of the countries elite schools. They own about forty estates and private museums in Delaware alone, and, in an attempt to keep the money in the family, have set up thirty-one tax exempt foundations. Another powerful family enterprise, that of the Rockefellers, holds more than $300 billion in corporate wealth, extending into just about every industry, in every state of the Union and every nation of the nonsocialist world. The Rockefellers control five of the twelve largest oil companies and four of the largest banks in the world. They finance universities, churches, "cultural centers," museums and youth organizations. At one time or another, they or their close associates have occupied the offices of the president, vice president, secretaries of state, commerce, defense, and other cabinet posts, the Federal Reserve Board, the governorships of several states, key positions in the Central Intelligence Agency (CIA), the US Senate and House, and the Council of Foreign Relations.

B.     Minorities own Few Stocks

One reason why minorities own few stocks is that they have less discretionary income.  There fore, it is more difficult for minorities to generate additional income through investments.  The bulk of stock is owned by a very small number of stock holders and nearly all of them are white (Farley (2005:262).

C.     Housing

Home owning is a major source of wealth in the United States and Whites are far more likely to own their own homes.  As a result, white non-Hispanic households are approximately ten times as wealthy as  Black or Hispanic households (Farley (2005:262-263).  Access to wealth has impact on other socio-economic concerns.   Wealth, and not income, determines who can live in neighborhoods that have the best schools.

D.     Why Do Minorities Lack Wealth?

1.     New to the Upper Class

They have not had generations to pass down wealth from one generation to the next.

2.     Housing Discrimination

Housing discrimination in the past have excluded minorities from areas that have increased in value the fastest.

3.     Minorities lack positions of power in major corporations

As of 1996, only 3 percent of Corporate directors were Black (Farley (2005:263).

II.     Theories of Discrimination

The following theories attempt to explain why economic inequality and discrimination persists.

A.     Gary Becker's Theory:  Focus on Attitudes (Functionalist Theory)

Becker represents the first effort to construct an economic theory of discrimination. His theory draws from social psychology and functionalism. According to Becker, some people have a taste for discrimination (conative prejudice).  Personal preference is important here.  For example, a choice is made about whom to hire for good jobs.  The choice can be made based on the employers personal prejudice.  It can also be based on the employer's impression of the desires of white workers or the customers (Farley, 2005:264-65).

Becker argues that this kind of discrimination is dysfunctional for both the employer and for society. In Becker's model, the only beneficiary of a discriminatory system is white workers who get higher pay and better jobs.   However, by hiring based on race and not quality, productivity is hampered. Lower productivity harms the employer in terms of profit, and it harms the minority who is not hired. It might be argued that even the less-qualified white worker is harmed, as well, through the loss of productivity in the system (Farley, 2005:264).

Becker (in Farley, 2005:264) contends that in a complex industrial society discrimination should eventually disappear. He argues that firms that discriminate will be less productive than those firms that do not discriminate. Logically, there fore, the discriminating firms should eventually go out of business.

In fact, this happens only to a limited degree.  This scenario assumes a free-market with free competition.  When firms hold monopolies in a given area, they can dictate terms despite the free-market.

B.     Split-Labor Market Theory:  Focus on White Labor (Conflict Theory)

The split-Labor market theory (a conflict theory) argues that discrimination resides within social structure and not within individual preferences. It is a conflict theory in that discrimination results from competing interest groups (Farley, 2005:265).

Split-Labor Market Theory argues that it doesn't make since to discriminate  because, like Becker argued, firms that discriminate experience lower productivity in the long run. Capitalists want the best worker for the lowest wage.   It does not make sense to discriminate because discrimination limits the pool of potential employees.

Split-Labor Market Theory suggests that an employer's economic interests rule out personal taste as an explanation for discrimination.   It argues that owners discriminate because they are forced to by another interest group that benefits from discrimination (i.e., white laborers). Discrimination is in the interest of white laborers because it insulates them from potential competition from a minority group. The white laborers, when they are powerful enough, demand the exclusion of minority workers from the most desirable jobs (Farley, 2005:265).

In a split-labor market white labor costs more than minority labor. Logically this is a GOOD reason for employers not to discriminate. This is largely why, high paid white workers demand discrimination. Without discrimination, wages would fall.

Discrimination can be imposed through a variety of avenues.

• The minority might be excluded from gaining skills via some type of education.
• It might seek to exclude minorities from a given territory.
• It might keep minorities out of a segment of the labor market, by not letting them join unions (Farley, 2005:265).

In the short term such strategies worked, but one must question the long term consequences. As black laborers were antagonized by this system, they began to act as strike breakers. This, in turn, had the effect of weakening the unions designed to support worker rights in the first place.  In the long run, the position of all labor is compromised.

C.     Marxist Theory on Discrimination:  Focus on the Capitalist Class (Conflict Theory)

Farley (2005:266) contends that Marxist Theory, like split labor theory, is a conflict-situated theory. It disagrees with Split-Labor Market Theory in that Marxist Theory argues that it is the capitalist (employers), not the white workers who gain because of discrimination. This happens because the labor force is, itself, divided because of discrimination. Racial division weakens the labor movement.

White unions excluded blacks and blacks were used as strike breakers when whites went on strike. The consequence was a weakening of unions and a loss of wages for both. Eventually, under FDR, unions realized their folly and began to opposed discrimination.

Reich (1991) argues this is precisely what happens between the white and black working class when they opposed things like school desegregation and neighborhood integration.   People of different racial and ethnic groups see each other as the enemy and, therefore, fail to recognize their common self-interests. They are unable to help each other influence the political process. They are unable to protect themselves against the interests of the wealthy elite (see Farley, 2000:280)

III.     Recent Trends and their Effects
of Racial Economic Inequality

This material has two main thrusts. It explores mechanisms that maintain racial economic inequality and it investigates recent social trends and their impact on racial economic inequality.

A.     Rising Educational Demands and the Employment of Minorities

The expansion of white-collar jobs benefits minorities and has created the opportunity for a large minority middle-class to develop.

The expansion of white-collar jobs, however, has caused problems relating to the demand by employers for greater educational credentials. Farley argues (2005:271) that this is not overtly racist, but might be racist in its consequences. Minority populations have lower levels of education than whites so they might be excluded from jobs they can perform. He goes on to argue that inflated educational requirements might explain, in part, higher unemployment rates for minorities.

B.     Job Decentralization

Most Blacks and about half of Latin Americans live in central cities. Employment opportunities have been moving out of central cities. This is true of business and retail jobs. It is also true for industrial jobs that have historically been important source of high paying jobs for minorities (Farley, 2005:272).

The jobs have moved into areas dominated by whites. Many minorities lack personal transportation and many cities do not have adequate public transportation (especially between the central city and suburban areas).

Segregated housing patterns also acts to exclude a growing number of minorities from the job market. Even where segregation is not an issue, moving costs may be limiting factors, particularly when jobs relocate from one region of the country to another (Farley, 2005:273).

1.     Reasons for Job Shifts

Many of the following explanations for the movement of jobs have little or nothing to do with prejudice directly, but the ultimate effect clearly contributes to racial inequality (Farley, 2005:274-5).

• Manufacturing is more efficient in single level factories as opposed to multi-level factories. The growth of efficient truck transportation means factories can relocate to rural areas where as in the past they were required out of necessity to locate in central cities along major water and rail networks.
• Some movement might be the result of prejudice
• The work habits of inner city employees have been criticized.
• Some manufacturing concerns move to avoid unionization.
• Retail and wholesale trade moves to the suburbs to be where the buyers are.

2.     Adjustment to Job Shifts

Farley (2005:275) argues there are two possible responses to the job shifts. People can either commute long distance or they can move. The lack of low-income housing in suburban areas and segregated housing patterns limit the latter.

3.     Where have the Jobs Gone?

Some job opportunities have simply disappeared (Farley, 2005:276).

• Some jobs are lost to international competition
• Some multinational corporations move to Third World locations
• Jobs are eliminated through automation.

IV.     Housing Discrimination and Segregation

Segregation refers to the tendency for people in any two groups or races to live in separate areas (Farley, 2005:276).

A.     Economic Explanation of Housing Segregation

One explanation for segregation argues that African-Americans cannot afford to live in white neighborhoods. Farley (2000:292-4) offers evidence that suggests that segregation would be much less intense if incomes were equalized, however, segregation would not disappear. 

Even if income was more equal, hosing discrimination would continue.   In fact, when comparing housing segregation and income inequality, one finds that it is housing segregation and not income inequality that largely restricts blacks to the central cities.

B.     Black Preference

Many explain African-American segregation be suggesting that Blacks prefer to live in Black neighborhoods. While a "Black preference" does exist, it in no way describes attitudes for most blacks. In fact, many Blacks prefer integrated neighborhoods. Segregation cannot be explained in terms of "Black preference" (Farley, 2000:295-97).

C.     White Preference

Farley (2000:297-99) offers significant evidence that "white preference" plays a major role in segregation. Many whites resist integration and many argue that they would move out of their neighborhood if it became integrated. In fact, whites express a desire to leave the type of integrated neighborhoods that blacks prefer to move into. As Blacks move in, whites move out. It, therefore, becomes difficult to maintain an integrated neighborhood.

D.     Practice in the Real Estate Business

Not all segregation can be explained be the desire of whites to maintain segregated neighborhoods. Many whites, in fact, prefer integrated neighborhoods. Furthermore, many whites express a concern, not against blacks per se, but a fear that the neighborhood will "tip" and become all black. The behavior of real estate agents plays a role in this fear (Farley, 2000:299).

1.     Racial Steering

Racial steering refers to the selective showing of properties to majority and minority group members.  Pearce (1976) and CBS's 60 Minutes offer dramatic evidence that realtors steer whites to white neighborhoods and blacks to black neighborhoods. This behavior maintains patterns of segregation (Farley, 2000:299).

2.     Block Busting

Shifting racial patterns (from white to black) in neighborhoods can be very profitable for real estate agents. The typical scenario has agents telling white owners that they should sell fast to get a decent return on their investment. This creates panic where whites sell at a lower price. Blacks are then recruited to buy homes in integrated neighborhoods. They are sold property at inflated prices. The real estate agents make money via all transactions via commissions and via the unequal exchange between the selling price of whites and the buying price of blacks (Farley, 2000:302).

E.     Housing Segregation other than Black/White

Patterns of segregation between whites and other minorities exist but are not as intense as those found between blacks and whites. Mexican Americans, in fact, are more segregated from blacks than whites (Farley, 2000:302-304).

F.     Impact of Segregation

1. It deprives people of free choice in places to live.
2. It restricts the market of available housing.
3. It can lead to segregated schools
4. It can aggravate minority unemployment
5. It probably influences racial attitudes, because it restricts day to day interaction between races.
6. When contact occurs, it is often of a destructive nature (Farley, 2000:304-306).

V.     Fiscal Crisis of Cities and Its Impact on Minorities

In recent years large cities, with a substantial population of minorities, have experienced serious fiscal difficulties.

A.     Problems with the Tax System

Farley (2000:306) argues fiscal problems occur primarily from a tax system that requires local financing of city services. As business, industry, and a middle-class population move out of an area lower income minorities are concentrated in cities with a lower tax base.  There is simple less high-value property to tax.

B.     Less Help from the Fed's.

In addition, the federal and state governments have cut back financial assistance to cities. All this creates a situation where those with the greatest need and least able to raise the revenue to pay for necessary services (Farley, 2000:307).

VI.     Health Care

Farley (2000:310) notes that health care in the U.S. is purchased according to one's ability to pay.  Among industrialized countries of the world, only the United States and South Africa have health care systems based solely on the ability of individuals to pay.  In every other industrialized country, health care is a right of citizenship.  IN the United States and South Africa, health care is a privilege to those who can afford it.

Minority groups suffer in terms of:

• higher infant mortality (black babies are twice as likely to die in infancy than white babies)
• shorter lives (infant mortality explains much of the low life expectancy experienced by minorities.)
• more serious illness
• more frequent illnesses.

These discrepancies are due to a variety of causes -- only part of which can be directly attributed to the characteristics of the health care system. Some jobs cause health problems (e.g., coal mining). Poor nutrition can cause health problems. So does inadequate shelter. Life styles can be stressful. Some are more prone to violent crime. The following material deals directly with the health care system.

A.     Cost of Health Care

Health care is expensive and is based on the ability to pay. The U.S. and South Africa are the only industrialized countries where health care is based on the ability to pay. Health insurance mediates some pain associated with cost. Those without insurance pay premium price and minorities fall into this category at rates nearly two to one compared to whites (Farley, 2000:312-13).

B.     Frequency of Seeking Medical Care

The frequency of seeking medical care plays a role in deciding who gets sick. People who can afford it seek medical care at greater rates than people who cannot. Farley (2000:314-15) provides examples where studies show that cost prevents people from seeking medical care.

Other factors limit access to medical care.

1. Part is cultural -- some prefer to rely on folk remedies.
2. Some do not trust medical staff because of impersonal treatment.
3. Part of the problem is the lack of minority doctors.

C.     Availability of Health Care Personnel

Medical services are not readily available in inner city neighborhoods. Nationally there is approximately one doctor for every 500 patients. In inner city neighborhoods the ratio is closer to one doctor per 3000. In the South Bronx the ratio is one per 10,000. The reasons are numerous (Farley, 2000:316).

1. In a system where care is based on ability to pay, there is little incentive for doctors to work in poor neighborhoods.
2. Health care personnel locate in clusters where other health care people are. E.g., the best health care facilities attract the best doctors.
3. The lack of health care personnel perpetuates itself. Doctors prefer to company of other doctors for referrals, professional association, etc.

D.     Lack of Minority Physicians

There are fewer minority doctors compared with the population of minorities (Farley, 2000:317-18).

E.     Type of Care: Race and Class Differences

1.     The Middle Class

Middle-class people are likely to go to private care physicians who are their regular source of medical care. This has many advantages (Farley, 2000:318).

• Primary physicians maintain detailed medical history that can be helpful in diagnosis and treatment
• They are more likely to be aware of existing conditions
• They are more likely to know the patient as a person

2.     The Poor

The poor receive medical treatment, not from private physicians, but from emergency rooms, hospital clinics, public hospitals, and from Medicaid mills. Certain consequences flow from these sources of health care (Farley, 2000:319).

• Patients usually do not see the same doctors
• Emergency room care focuses of relief from the symptom and not on the condition.
• Detailed medical histories are not taken
• The use of lab tests is minimal.
• The attitude of the health care staff is less than ideal regarding the poor patient.

F.     The Medicaid Program

This program was established in 1965 to provide health care for the very poor. Because it targets such a small population, millions of the poor and near poor are not covered.  Farley (2005) contends that 41 percent of people with incomes of less than 14,000 receive Medicaid.

1.     The Positive Points

Farley (2000:322) argues that Medicaid has, in part, helped improve the infant mortality rates and life expectancy rates of minority populations.

2.     The Negative Points

Patients have to find doctors willing to treat Medicaid patients. Often this involves going to what Farley (2000:323-24) calls a Medicaid mill. Treatment is often unneeded, costly, and potentially dangerous.

In Medicaid mills, many patients are treated in an assembly line fashion. The goal is to give as much treatment to as many people as quickly as possible. A common problem associated with them is that patients receive superficial examinations, they are asked to take many unnecessary lab tests, and they are referred to many "specialists."

All of this is profitable for the doctor who is paid for each service they perform. Part of the explanation for Medicaid problems is that it retains the fee for service philosophy that characterizes much of America's health care system. It encourages doctors to perform as many services as possible.

G.     American Health Care as an Institution

Farley (2000:324-25) contends the U.S. health care system benefits doctors more than patients. He argues that the conflict perspective best describes the character of the American health care system. Social institutions serve the interests of the dominant and powerful elite who control them.

The AMA is an organization that has resisted for decades government efforts to regulate and control fees. The power the medical establishment has can be seen in the fact that the United States nearly stands alone as the only industrial country that has neither socialized medicine nor national health care plans.  (South Africa is the only other industrial country that has a health care system based solely on the ability to pay).

The health care system in the U.S. is stratified because:

• Poor people in the U.S. have limited access to medical care.
• Medical care for the poor is often fragmented, rushed, and less holistic.
• The health care system is such that it meets the needs of physicians more than the needs of the patients.

Bibliography

Domhoff, G. William

1974 The Bohemian Grove and Other Retreats. New York: Harper & Row.

Farley, John E.

2000 Majority - Minority Relations. (4th Ed.)  Upper Saddle River, NJ: Prentice Hall

2005 Majority - Minority Relations. (5th Ed.)  Upper Saddle River, NJ: Prentice Hall

Mills, C. Wright

1956 The Power Elite. New York: Oxford University Press.

Parenti, Michael

1978  Power and the Powerless.  (2nd Ed.)  New York:  St. Martin's Press.