Social Group

Throughout the world, societies are split into distinct, albeit sometimes overlapping, social groups.

While self-definition - and self-defined belonging to groups - widely varies over time and situations for even the same individual, there are several indicators and features along which the researcher can build clusters of people.

Indeed, the atomistic idea according to which everyone feels to be dissimilar from anybody else is a realistic picture only of very extreme social conditions. Networks of people linked by communication and emotional lines are very common, while their collapse into monistic units of disconnected individuals is more the result of crashes in the social texture than the standard state.

This is very important for economics since, for instance, social groups are important for consumption as visible behaviour can become a standard with which to compare your owns. Peer groups are often the reference for choosing whether a certain good is a "must have", engendering an imitation dynamics.

In this vein, another name for "social group" is "market segment", seen from the point of view of a seller or a mass medium, to which a differentiated product can be addressed.

Social groups defined along income and non-income axes

A basic axis of social differentiation is personal income. A three-category distinction among the poor, the middle class and the rich, as the one we proposed here, can be too rough to capture all the intermediate nuances but still help characterize different societies.

The unit of analysis can be - but not need to be only - the individual. A second element should be kept into account when judging the individual's position: the size and composition of the household to which he or she belongs. Larger families pay less per-person for certain shared expenditure (like housing) and they can have more than one income-bearer. If not, a large family with only one income-bearer would be much poorer than a one-component family.

A third consideration is linked to the stability of income over time, with people having larger fluctuations in income belonging to different social groups than people reaching systematically and without renegotiation similar levels of income.

Another crucial axis of social differentiation is the ownership of assets. Families that own their home - having already paid back any financial instruments to buy it - can devote more money to active savings and consumption than families with the same level of income but that have to pay the rent. The ownership of durable goods is an important status element aiding different aspects of life. Financial assets (as Treasury bonds, shares, controlling majorities in firms,...) can constitute elements of common material interests for certain social groups.

Employment is an extremely important element in defining identities and common interests, common languages and values. Equally important are culture and levels of education.