Financial Burdens and reference groups

As we step into adulthood, we begin to realise how financial burdens starts to weigh on us just at a point when there’s supposed to be more financial capacity and independence. You look around you and see what you have been working for: being in a good job, wearing the nice suit or dress, driving the car you always wanted, even living in an apartment location in the neighbourhood you want to be associated with.

Yet at the same time, there are concerns about the future: retirement, rising cost of living, cost of raising children if we ever have them, ageing parents who would be faced with high healthcare costs while not having been insured. These concerns will weigh on this ‘freedom’ we believe we have.

The reality is that the modern society we live in have hone its ability to generate wants and demand for goods and services. And that is causing the anxieties. What Juliet wrote in The Overspent America applies as much in Singapore: we live in societies where we are comparing ourselves within reference groups. If our classes were seggregated, the society will be even more divided but our social mixing can impose a huge cost on the mental health of the society as well.

And here is how: in every product we own, we probably have a clear sense of what is the product that is just a little better, faster, classier that we can pay a little more for. When we are in the same schools, camp, office as the people who are of higher income groups, we take reference off their consumption habits as well. We desire to go to the same restaurants, send our kids to the same schools, ensure our kids have the same branded stationery as their classmates.

That is where inequality can hurt our society more than we traditionally think. The middle class who are mixing with the upper clsss, able to get themselves into debt to match the consumption patterns of those in their reference groups suffers the most. So when we think about the issues of inequality, it is not just about the ones at the lower end of the spectrum suffering. Even the ones in upper classes are trying to catch up and move further up the ladder.

We need to sharpen our thinking about the true cost of inequality and the design of our societies, having already did such a terrific job designing the physical space of our country.