How The Psychology Of Income Inequality Benefits Luxury Brands

Basically, people living amidst greater income inequality are more interested in luxury goods.
Many low-income Americans can’t afford to appear like low-income Americans.


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.

As an example of this behavior, researchers recently examined Google search trends across the U.S. and found that people in states with relatively high income inequality were more likely to search for luxury brands than those in other states. Looking for the latest from Ralph Lauren (who, I discovered, manufactures overly expensive clothes)? The frequency of such Google searches is higher in Mississippi than Iowa (relative to more generic Google searches, like for “weather”) and in New York than Nebraska. Basically, people living amidst greater income inequality are more interested in luxury goods.


And here is a very similar looking map, showing the relative frequency of people searching on Google for Ralph Lauren:
Redder states had higher income inequality. This map shows the level of correlation for a search term that was positively associated with residual state income inequality. Redder states had greater positive associations. (Psychological Science)

This map shows the level of correlation for a search term that was positively associated with...
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When people criticize young African American men from poor neighborhoods for purchasing Air Jordan sneakers, or whatever overpriced athletic shoes are currently the rage, they might be right that such purchases are an economic burden for people already under financial stress. But such criticisms fail to recognize the utter humanity of visible luxury goods. I may pat myself on the back for eschewing visible signs of my wealth. But I can afford the luxury of foregoing luxury goods. My status in society is secure. In fact, my very avoidance of luxury goods probably furthers my status in my immediate social circle–“A well-known professor and he still drives a beater!”

Many low-income Americans can’t afford to appear like low-income Americans. It is hard to attract a romantic partner if you look like a loser. It is hard to get a good job if you show up at an interview looking like someone who’s never held down a job. And the more extreme income inequality becomes, the more pressure people feel to create the impression that they’ve climbed up the social ladder.