How big of a problem is income inequality? According to Robert H. Frank, economics professor at the Johnson Graduate School of Management at Cornell University it is a growing problem.
The rich have been spending more simply because they have so much extra money. Their spending shifts the frame of reference that shapes the demands of those just below them, who travel in overlapping social circles. So this second group, too, spends more, which shifts the frame of reference for the group just below it, and so on, all the way down the income ladder. These cascades have made it substantially more expensive for middle-class families to achieve basic financial goals.
The consequences of this isâ€¦
Divorce rates are another reliable indicator of financial distress, as marriage counsellors report that a high proportion of couples they see are experiencing significant financial problems. The counties with the biggest increases in inequality also reported the largest increases in divorce rates.
Another footprint of financial distress is long commute times, because families who are short on cash often try to make ends meet by moving to where housing is cheaper â€” in many cases, farther from work. The counties where long commute times had grown the most were again those with the largest increases in inequality.
The middle-class squeeze has also reduced votersâ€™ willingness to support even basic public services. Rich and poor alike endure crumbling roads, weak bridges, an unreliable rail system, and cargo containers that enter our ports without scrutiny. And many Americans live in the shadow of poorly maintained dams that could collapse at any moment.