Learning Objectives
- Describe economy and the labor force.
- Distinguish between major economic systems and identify their strengths and weaknesses and how they may overlap.
- Summarize the three sociological theoretical perspectives on work and economy problems.
- Describe various forms of employment discrimination, particularly related to gender, race, and age.
- Outline recent trends in jobs, wages, and unions.
- List adverse effects of unemployment.
- Describe forms of workplace crime, violence, and injury.
- Identify several types of approaches to improving problems of work and economy.
When we hear the term economy, it's often in the context of how the economy “is doing”: Is the economy growing or shrinking? Is inflation soaring or under control? Is unemployment rising, declining, or remaining stable? Are new college graduates finding jobs easily or not? All these questions concern the economy, but sociologists define economy more broadly as the social institution that organizes the production, distribution, and consumption of a society’s goods and services. Defined in this way, we all interact with this institution, as well all use society's goods and services.
The economy is composed of three sectors. The primary sector is the part of the economy that takes and uses raw materials directly from the natural environment. Its activities include agriculture, fishing, forestry, and mining. The secondary sector of the economy transforms raw materials into finished products and is essentially the manufacturing industry. Finally, the tertiary sector is the part of the economy that provides services rather than products; its activities include clerical work, health care, teaching, information technology services, and so on.
Clerical work and other occupations that provide services rather than products constitute the tertiary sector in the economy.
Wikimedia Commons – CC BY 2.0
All societies have to produce, distribute, and consume goods and services, in one way or another. How this happens depends on which sectors of the economy are most important. In some societies the primary sector is most important, and in others the tertiary sector is most important. As Western societies like the US developed economically over the centuries, the primary sector became less important and the tertiary sector became more important. The primary sector was the only sector in hunting-and-gathering societies, while the tertiary sector dominates much of the economy in today’s wealthiest democracies.
The social institution in which we produce and distribute goods and services is called the institution of work. In this institution, societal members of working age and ability are assigned jobs based on their knowledge, skills, education level, and experience. In societies like the US, individuals' and families' ability to survive and thrive typically depends their job, as they provide income and other benefits such as healthcare insurance and retirement savings. This institution involves all levels of employers – from large corporations and state or federal governments that employ thousands of people to small businesses than employ only a few people. The work we engage in in part defines our social class, which is based on occupation and income (as well as on education and wealth).
In this chapter, we cover examples of social problems related to the institution of work in the US, which is connected to the type of economy we have. First, we introduce two types of economies – capitalism and socialism – providing examples of their strengths and weaknesses, and noting how they can be combined. We then turn attention to the institution of work, focusing on the US labor force.
Types of Economic Systems
Two major economic systems in modern societies are capitalism and socialism. In practice, no one society is purely capitalist or socialist, so it is helpful to think of capitalism and socialism as existing on a continuum. Economies often mix elements of both capitalism and socialism but do so in varying degrees, so that some societies lean toward the capitalist end of the continuum, while other societies lean toward the socialist end. For example, the US has a capitalist economy, but the government still regulates many industries to varying degrees. The industries usually would prefer less regulation, while their critics usually prefer more regulation. The degree of such regulation was the point of controversy after the failure of banks and other financial institutions in 2008 and 2009. During the New Deal era, the US has also had a form of capitalism that offered socialist policies, to help distribute wealth more evenly across the population and supports its poor – welfare capitalism, which overlaps with democratic socialism, discussed below. We'll now define and discuss the main differences between capitalism and socialism.
Capitalism
Capitalism is an economic system in which the means of production are privately owned. By means of production, we mean everything that is needed to produce goods and services such as land, tools, technology, and so on. As outlined by famed Scottish philosopher Adam Smith (1723–1790), widely considered the founder of modern economics, the most important goal of capitalism is the pursuit of personal profit (Smith, [1776] 1910). As individuals seek to maximize their own wealth, society as a whole is said to benefit. Goods get produced, services are rendered, people pay for the goods and services they need and desire, and the economy and society as a whole prosper.
One important hallmark of capitalism is competition for profit. This competition is thought to help ensure the best products at the lowest prices, as companies will ordinarily try to keep their prices as low as possible to attract buyers and maximize their sales.
© Thinkstock
As people pursue personal profit under capitalism, they compete with each other for the greatest profits. Businesses try to attract more demand for their products in many ways, including lowering prices, creating better products, and advertising how wonderful their products are. In capitalist theory, such competition helps ensure the best products at the lowest prices, again benefiting society as a whole. Such competition also helps ensure that no single party controls an entire market. According to Smith, the competition that characterizes capitalism should be left to operate on its own, free of government intervention or control. For this reason, capitalism is sometimes referred to as laissez-faire (French for “leave alone”), and terms to describe this type of capitalism include the free-enterprise system and free market capitalism.
The hallmarks of capitalism are private ownership of the means of production, the pursuit of profit, competition for profit, and the lack of government intervention in this competition.
Socialism
The features of socialism are quite different from those for capitalism, and were spelled out most famously by Karl Marx (of sociology's conflict theory). Socialism is an economic system in which the means of production are collectively owned rather than privately owned. Whereas the US has several airlines that are owned by corporations, a socialist society might have one government-owned airline.
The most important goal of socialism is not the pursuit of personal profit but rather work for the collective good: The needs of society are considered more important than the needs of the individual. Because of this view, individuals do not compete with each other for profit. Instead, they work together for the good of everyone. If under capitalism the government is supposed to let the economy alone, under socialism the government may control the economy.
The ideal outcome of socialism, said Marx, would be a truly classless society – one without a social class hierarchy. In such a society all members are equal, and stratification does not exist. (Imagine a society not only without the extreme economic inequality we have today, but without a social class hierarchy at all!) Marx imagined this to be a communist society, in which the government owns and controls all goods and services. Marx’s vision of a communist society was never fulfilled, and nations that called themselves 'communist' departed drastically from his vision of communism.
Comparing Capitalism and Socialism
People have debated the relative merits of capitalism and socialism at least since the time of Marx (Bowles 2012; Cohen 2009). Compared to socialism, capitalism has several advantages. It produces greater economic growth and productivity, at least in part because it provides more incentives (i.e., profit) for economic innovation. It also is often characterized by greater political freedom in the form of civil rights and liberties. As an economic system, capitalism seems to lend itself to personal freedom: Because its hallmarks include the private ownership of the means of production and the individual pursuit of profit, there is much more emphasis in capitalist societies on the needs and desires of the individual and less emphasis on the need for government intervention in economic and social affairs.
Yet capitalism also has many drawbacks. There is far more economic inequality in capitalism than in socialism. Although capitalism produces economic growth, not all segments of capitalism share this growth equally, and there is a much greater difference between the rich and poor than under socialism. People can become very rich in capitalist nations, but they can also remain quite poor. Recall our discussion of the extreme economic inequality we see today from the Poverty and Economic Inequality chapter.
Another possible drawback rests on the tension between competition or cooperation. Values of US culture include competition and individualism, both of which arguably reflect this nation’s capitalist system. Children in the US are raised with more of an individual orientation than children in socialist societies, who learn that the needs of their society are more important than the needs of any individual. Whereas US children learn to compete with each other for good grades, success in sports, and other goals, children in socialist societies learn to cooperate to achieve tasks.
More generally, capitalism is said by its critics to encourage selfish and even greedy behavior: Attempts to maximize profit come at the expense of others. In competition, someone has to lose. A company’s ultimate aim is to maximize its profits, which can involve exploiting its workers or driving another company out of the market altogether. For instance, small family-owned (often called 'mom and pop') grocery stores, drugstores, and hardware stores are almost a thing of the past, as large corporations (often called 'big-box') stores open their doors and drive their competition out of business. To its critics, then, capitalism encourages harmful behavior, and there are many losers in capitalism. Yet it is precisely this type of behavior that is taught in business schools.
As a business columnist summarized these problems of capitalism:
"Like most Americans, I am OK with the notion that free-market capitalism produces winners and losers. What I don’t like is that it also produces liars, cheaters, swindlers, self-dealing narcissists, overleveraged idiots and reckless egomaniacs out to abuse their economic power and take unfair advantage of hard-working people.
I don’t complain about fraud, abuse and folly because I am antibusiness or anticapitalist… What free-market capitalism hasn’t yet figured out is what to do with all its losers. At this point in the economic cycle, they are piling up like used tires: debt-sacked college kids who can’t get jobs, foreclosed homeowners, failed small-business owners, pink-slipped employees, [and] millions suddenly ejected from the middle class" (Lewis 2012).
Lessons from Other Societies
Democratic Socialism in Scandinavia
The five Scandinavian nations, also called the Nordic nations, are Denmark, Finland, Iceland, Norway, and Sweden. These nations differ in many ways, but they also share many similarities. In particular, they are all social democracies, as their governments own important industries while their citizens enjoy much political freedom. Each nation has the three branches of government with which most people are familiar – executive, judicial, and legislative – and each nation has a national parliament to which people are elected by proportional representation.
Social democracies like the Scandinavian nations are often called controlled capitalist market economies. The word 'controlled' here conveys the idea that their governments either own industries or heavily regulate industries they do not own. A key feature of these social democracies’ economies is that inequality in wealth and income is not generally tolerated. Employers, employees, and political officials are accustomed to working closely to ensure that poverty and its related problems are addressed as much as possible and in as cooperative a manner as possible.
Underlying this so-called social welfare model is a commitment to universalism. All citizens, regardless of their socioeconomic status or family situation, receive various services, such as childcare and universal healthcare, that are free or heavily subsidized. To support this provision of benefits, the Scandinavian nations have very high taxes that their citizens generally accept as normal and necessary.
The Scandinavian nations rank at or near the top in international comparisons of health, education, economic well-being, and other measures of quality of life. The Scandinavian experience of social democracy teaches us that it is possible to have a political and economic model that combines the best features of capitalism and socialism while retaining the political freedom that citizens expect in a democracy.
Sources: Russell 2011; Sejersted 2011
Democratic Socialism
Some nations combine elements of capitalism and socialism, which is called democratic socialism (those societies are sometimes and are called social democracies). In these nations, which include Denmark, Sweden, and several other Western European nations, the government owns several important industries, but much property remains in private hands, and political freedom is widespread. The governments in these nations have extensive programs to help the poor and other people in need. Although these nations have high tax rates to help finance their social programs, their experience indicates that it is possible to combine the best features of capitalism and socialism while avoiding their faults (Russell 2011).
The economies of Denmark (pictured here) and several other Western European nations feature a combination of capitalism and socialism that is called democratic socialism. In these economies, the government owns important industries, but private property and political freedom remain widespread.
© Thinkstock
The Institution of Work
We now turn from a general discussion of economic systems to some basic facts on the labor force in the US, which is a capitalist society. The civilian labor force in the US consists of all noninstitutionalized civilians 16 years of age or older who work for pay or are looking for work. The civilian labor force (hereafter labor force) consists of about 170 million people, slightly under two-thirds of the population (62.5%) as of summer 2025 (Bureau of Labor Statistics 2025a; Federal Reserve Bank of St. Louis 2025a).
This chart displays the civilian labor force level, in thousands of persons and seasonally adjusted, from 1948 to 2025, with recessions noted in gray. What was occurring when the level dipped so dramatically in 2020?
Source: Federal Reserve Bank of St. Louis (FRED) 2025a
Of those in the workforce, about 134.5 million work full time, just over 29 million work part time, and over 7 million are unemployed, meaning that they are actively looking for paid work. We will discuss unemployment as a social problem on the Patterns of Work and Economy page. Women are far more likely to work part time, whereas men are more likely to work full time (Bureau of Labor Statistics 2025c). Nearly 103 million people are not in the labor force – those not working nor looking for work. Of those, approximately 94% do not currently want a job, whereas the others are unavailable to work currently due to responsibilities such as family or school or a concern such as health or disability (Bureau of Labor Statistics 2025d). Many who do work struggle with balancing those responsibilities or their health with work expectations, a phenomenon called work-life conflict.
Recall that economies are comprised of primary, secondary, and tertiary sectors. In the US today, the tertiary sector has become central to the institution of work, as more and more people are employed in services rather than in the production of goods. This trend is expected to continue, with healthcare and social assistance services estimated to experience the fastest growth followed by professional, scientific, and technical services, then information services (Bureau of Labor Statistics 2025b). Within the tertiary sector, there has also been a rise of service positions that are unstable and low-wage, contributing to the high degree of economic inequality we have in the US today, as discussed in the Poverty and Economic Inequality chapter.
Women’s labor force participation soared in the second half of the twentieth century. In summer 1950, approximately one-third of women (33.6%) were working or actively working for work. Half a century later in early 2000, the figure rose to 60%, before leveling off and falling somewhat after. In summer 2025, slightly over 57% of women were in the labor force, compared with nearly 68% of men (Federal Reserve Bank of St. Louis 2025b).
This chart displays labor force participation rates, the proportion of the civilian noninstitutionalized population that is either working or actively looking for work. What cultural changes coincided with women's increased labor force participation rate?
Source: Federal Reserve Bank of St. Louis (FRED) 2025b
Despite women's presence in the labor force today, they continue to experience a unique set of challenges including obstacles to promotion, lower pay, and other forms of discrimination, in comparison to men. As we will see, however, women are not the only group to face these challenges, as people in other marginalized groups also face systemic workplace discrimination. Before turning to problems such as these within the institution of work, we summarize how the three classical sociological paradigms frame problems of work and economy.
