Many decry rising inequality because it makes those who’ve fallen behind feel impoverished. But it’s done much more than that. It has also raised the real cost to middle-income families of achieving many basic goals.
It’s done that through a process that I’ve elsewhere called “expenditure cascades.” The process begins with the completely unremarkable fact that top earners have been spending at a substantially higher rate than before. They’ve been building bigger mansions, staging more elaborate weddings and coming-of-age parties for their kids, buying more and better of everything.
Many social critics wag their fingers at what they perceive to be frivolous luxury spending. But that misses the point that all consumption norms are local. It’s not just the rich who spend more when they get more money. Everyone else does, too. The mansions of the rich may seem over the top to people in the middle, but the same could be said of American middle-class houses as seen by most of the planet’s 7 billion people.
The important practical point is that when the rich build bigger, they shift the frame of reference that shapes the demands of the near rich, who travel in the same social circles. Perhaps it’s now the custom in those circles to host your daughter’s wedding reception at home rather than in a hotel or country club. So the near rich feel they too need a house with a ballroom. And when they build bigger, they shift the frame of reference for the group just below them, and so on, all the way down.
There’s no other way to explain why the median new house built in the United States in 2007 had more than 2,300 square feet, almost 50 percent more than its counterpart in 1980. Certainly, it’s not because the median earners are awash in cash. (The median real wage for American men was actually lower in 2007 than in 1980.) Nor is there any other way to explain why the inflation-adjusted average cost of an American wedding had grown almost threefold during the same period.
Middle-income families have also been struggling to meet sharply higher tuition bills and health insurance premiums. To make ends meet, they’ve taken on substantial debt, worked longer hours, and endured longer commutes to work. In the parts of the country where inequality has grown most, we’ve seen the biggest increases in bankruptcy filings and the biggest increases in divorce rates.
via www.slate.com
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