From The Washington Post:

The concept of “keeping up with the Joneses” has been around for more than a century. But in an era of high inequality, the pressure to match the lavish lifestyles of one’s neighbors has become all the more salient.

A new paper from a Federal Reserve economist explores a potentially alarming way these pressures affects people’s financial lives. The paper from Fed economist Jeffrey Thompson suggests that Americans are borrowing more to keep up with wealthier members of society — particularly when it comes to buying and financing homes.

Thompson’s study offers a window into a less widely understood aspect of rising inequality. It’s not only that rising wealth at the top might make people lower down the income scale feel inadequate. It’s also that people who are aiming to live in the town they always have might have to pay more for housing because the wealthiest there have managed to boost property values for other top-percenters, but income gains among the less well-off have lagged.

Indeed, overall, the growth in housing prices has eclipsed income gains nationwide, making even maintaining a similar quality of life more challenging for many people. You can see that on the chart on the below, by Cornell economist Robert Frank, which shows how median wages have failed to keep up with the prices of homes.

“One potential consequence of rising concentration of income at the top of the distribution is increased borrowing, as less affluent households attempt to maintain standards of living with less income,” Thompson writes. He notes that in areas where upper-income people have seen higher levels of wage growth — more inequality — people are paying even more for mortgages. “Payments on mortgage debt are higher in states where the high-income thresholds are higher.”

This chart from Thompson’s study shows how the top income percentiles have changed since 1989 in each state. For example, …

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