The more extreme income inequality becomes, the more pressure people feel to create the impression that they’ve climbed up the social ladder.
I like to think that despite being wealthier than most Americans, I remain immune to materialistic desires. I drive a 17-year-old Honda Accord and wouldn’t know designer clothes if you wrapped me in them, head to toe. But it turns out that I’m wrong. I’m not above materialism despite my wealth and social status. I’m immune because of it. Since I don’t need to signal my social value, I can save my money for other purposes.
In places with great income inequality, those people with lower incomes live under great social stress. Their low position in the social hierarchy is more obvious and more consequential. In response, some poor people purchase the kinds of good that create the impression that they have social resources to spare, even when they are cash-strapped. And people living in low-income neighborhoods–the ones who are relatively well-off compared to their neighbors–are nevertheless worried that they’ll be misperceived as resource-poor. So they purchase expensive and conspicuous goods, to make sure their resources are visible to outsiders.