Classification situations: Life-chances in the neoliberal era

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Abstract

This article examines the stratifying effects of economic classifications. We argue that in the neoliberal era market institutions increasingly use actuarial techniques to split and sort individuals into classification situations that shape life-chances. While this is a general and increasingly pervasive process, our main empirical illustration comes from the transformation of the credit market in the United States. This market works as both as a leveling force and as a condenser of new forms of social difference. The U.S. banking and credit system has greatly broadened its scope over the past twenty years to incorporate previously excluded groups. We observe this leveling tendency in the expansion of credit amongst lower-income households, the systematization of overdraft protections, and the unexpected and rapid growth of the fringe banking sector. But while access to credit has democratized, it has also differentiated. Scoring technologies classify and price people according to credit risk. This has allowed multiple new distinctions to be made amongst the creditworthy, as scores get attached to different interest rates and loan structures. Scores have also expanded into markets beyond consumer credit, such as insurance, real estate, employment, and elsewhere. The result is a cumulative pattern of advantage and disadvantage with both objectively measured and subjectively experienced aspects. We argue these private classificatory tools are increasingly central to the generation of “market-situations”, and thus an important and overlooked force that structures individual life-chances. In short, classification situations may have become the engine of modern class situations.

Introduction

Academics often remind others that familiar categories are difficult to question, but they are hardly immune to the problem themselves. Consider the case of social class. In general, contemporary approaches see classes as rooted in production, specifically the employment relation. This view descends from Marx, who argued that the beginning of class is one’s relationship to the means of production. Notwithstanding the nuanced analysis of class relations in his political writings (e.g., in The 18th Brumaire and elsewhere), what stuck with sociologists was Marx and Engels’s insistence that class analysis is, at its core—or “in the last instance,” as people used to say—a matter of owning or not owning the means of production. Classes are defined antagonistically on that basis. Capitalists call the shots in the labor market and workers are forced to accept the terms on offer.

The core problem for later theorists has been to make sense of the rise of service and managerial occupations within this underlying relational structure. Scholars edged towards a Weberian view (Breen, 2005, Wright, 1985), eschewing a scheme of intrinsically antagonistic classes in favor of a more refined spectrum of class situations, or life chances, on various markets. People own (or do not own) different sorts of property, or they bring different skills to the market, or have different services to buy or sell.

In their efforts to build on Weber’s insights and to reconcile theory with data, contemporary formulations of class theory became more precise, and tableaux of class membership more complex. Sociology’s most influential statements on the subject, such as Wright, 1985, Erikson and Goldthorpe, 1993, and Grusky and Sørensen (1998), set out to operationalize the concept of class in a way that connected it to the process of socio-economic attainment. Largely framed by the methods and concerns of Anglo-American mobility research, the challenge was to develop a class-based analysis that could make sense of the elusive “middle” of the American occupational structure. But this meant that contemporary class analysis remained close to its origins in that it still began with an analysis of the structure of positions in occupations, firms, and labor markets. We shall argue that this has made it hard to connect these theories to processes of social stratification that originate outside the sphere of production, in settings such as consumer credit systems, education, health services, and housing.

Of course, research on inequality shows other forms of social division beside class structure shape people’s access to and experience of basic social institutions. Reliably, specific social groups—the poor, minorities, women, young people, and others, whether singularly or in various intersections and combinations—face a more restrictive set of choices, receive worse treatment, and experience worse outcomes than dominant groups in practically every institutional domain (Massey, 2008). The durability of these inequalities is explained, variously, by rational choices on the part of vendors trying to avoid catering to riskier individuals (Becker, 1971), the persistence of straightforward prejudice, or more subtle processes of symbolic violence, pragmatic disqualification, or systemic “über” discrimination (Reskin, 2012). In this view, modern markets reproduce inequalities that originate elsewhere in the social structure, in historical legacies, and in longstanding attitudes that differentiate between categories of people. The action of markets themselves does not contribute much to the formation of social hierarchies.

What if it did? What if we could make the recording, splitting and categorizing work done by markets and market technologies “good to think with” for the study of social inequality? The point is in some ways familiar. Occupational markets have long been structured by institutional devices such as licensing and credentialing systems, in addition to rules oriented to exclude certain kinds of people. But what makes the new market instruments so interesting is that they seem so much more democratic. Indeed, historically their appeal came, in part, from their purported ability to keep older forms of arbitrary or categorical discrimination at bay (Hyman, 2011, Poon, 2013). These new markets draw distinctions, too, but in a different way. Rather than protecting certain groups through the creation of rents and monopolies, they thrive on the market’s competitive logic, demanding that people be measured against one another, and then separating and recombining them into groups for efficiency and profit. As with class, the process of differentiation is endogenous to the market itself. But unlike class, the action happens on the consumption side of the economy, rather than on the production side.

In this article, we focus more particularly on how the emergence and expansion of methods of tracking and classifying consumer behavior affect stratification through the allocation of credit. On the supply side, scoring agencies slice consumers into behaviorally-defined risk groups, and price offerings to them accordingly. On the demand side, consumers find themselves more or less comfortably fitting into these categories—which, by design, are not constructed from standard demographic classifications such as race and gender. At the intersection of this supply and demand, the increasing sophistication of credit scoring generates what we call classification situations: positions in the credit market that are consequential for one’s life-chances, and that are associated with distinctive experiences of debt. These range from the exploitative to the dutiful, and from the dutiful to the almost liberating. Some feel weighed down or crushed by debt, others feel the pressure both to acquire and pay off certain sorts of loan, and still others embrace credit as a means of asset accumulation and mobility. These classification situations are not merely approximations to pre-existing social groups, though of course they may overlap substantially in specific cases. Rather, they are independently, even “artificially” generated classifications that can come to have distinctive and consequential class-like effects on life-chances and social identities.

Section snippets

The standard view

We begin with Weber and his concept of life chances. It is worth quoting his definition of “economic class” at length:

We may speak of a “class” when (1) a number of people have in common a specific causal component of their life chances (…). This is “class situation.” (…) Property or “lack of property” [are] the basic categories of all class situations. … Within these categories, however, class situations are further differentiated: on the one hand, according to the kind of property that is

Kinds of classification situations

There have been two historical forces behind the development of classification situations. The first is technology, namely the growing availability of individual-level data, on the one hand, and the development of statistical models of risk on the other. The second is the market economy. As representatives of the collective good, states tend to be politically oriented toward universal mandates. Under state rule, risks were collectivized, socialized, even though the management of such risks

The three worlds of credit in America

As is clear from the examples and data we have discussed so far, the institutional machinery for generating classification situations is to be found in its most developed form in the United States. The way the credit-scoring process erases circumstance seems an extraordinary irony in a country where people rely extensively on credit to compensate for the cover over holes in the welfare system (Prasad, 2013). A 2009 Federal Deposit Insurance Corporation survey of underbanked

Conclusion

“It is easy to understand how the power of the norm functions within a system of formal equality, since within a homogeneity that is the rule, the norm introduces … all the shading of individual differences.” (Foucault, 2012, p. 184)

Much of the theoretical debate on stratification in the twentieth century orbited around three attractors: big classes grounded in exploitative labor relations, individual returns to human capital or skill in the market, and occupational-level social closure, often

Acknowledgements

We thank Steven Barley, Irene Bloemraad, Bruce Carruthers, David Cooper, Eve Chiapello, Matthew Desmond, Marie-Laure Djelic, Derek Hoff, Andreas Kalyvas, Daniel Kluttz, Jeanne Lazarus, Roi Livne, Bruno Palier, Alex Roehrkasse, Matthias Thiemann, Loïc Wacquant, Erik Olin Wright, Valery Yakubovich, two anonymous AOS reviewers for helpful comments on an earlier version of this article or insights about its subject. This work was presented at the annual conferences of the American Sociological

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