How technology consumption exacerbates income inequality

Income inequality has become an ever-widening chasm in the modern world, and technology consumption significantly exacerbates this disparity. While technology has brought about countless benefits, it has also contributed to deepening the divide between the “haves” and the “have-nots”. 

It is no surprise that our world today is entirely hyper-connected. Such a digitally-saturated society brings about a phenomenon of wealthier individuals being content with their current technological devices while those with lower economic status tend to overspend on new technology. This can be attributed to various factors, including psychological, social, and economic influences.

In Applied Economic Letters (a companion journal of Applied Economics) Volume 28, 2021 - Issue 16, a research article was published entitled “Financialization, digital technology and income inequality”. The paper “investigates the impact of digital technology on the relationship between financialization and income inequality in 54 countries from 2010 to 2015. The results show that financialization and digital technology widen the income inequality gap.”

In other words, for wealthier individuals, the ability to afford high-end technological devices allows them to access cutting-edge features, performance, and aesthetics without prejudice. They may have the financial means to purchase top-tier smartphones, laptops, or other gadgets, which often have a longer lifespan and can fulfill their needs for an extended period. Additionally, affluent people may have a greater sense of financial security, reducing their desire for frequent upgrades or the latest tech trends. Their satisfaction with their current devices might also stem from a lower perceived need for validation through material possessions.

On the other hand, people with lower economic status may face social pressures and a desire to keep up with the latest technological trends despite their limited resources. The appeal of having the latest gadgets can be intensified by societal expectations, as possessing new technology may be seen as a symbol of success or social status. Advertisements and peer influence play a significant role, fueling the belief that newer devices are superior and necessary for a better quality of life. As a result, individuals with limited means might prioritize acquiring new technology over other essential expenses, potentially leading to financial strain and debt.

For this group of the population, the relentless pace of technological advancements can create a sense of obsolescence, making them feel left behind if they do not possess the latest devices. This fear of falling behind in a technology-driven society may drive some individuals to overspend, even if it means sacrificing their financial well-being in the long run.

So how do we address this issue? Best-selling author and financial guru Dave Ramsey has famously said “personal finance is 80% behavior and only 20% head knowledge”. That is, there is a need for better financial education to help individuals make informed decisions about their purchases and prioritize their spending. Promoting more sustainable and long-lasting technological products could reduce the pressure to upgrade constantly. Ultimately, a more conscious and responsible approach towards technology usage and consumption can contribute to a more balanced and inclusive society.

FOOD FOR THOUGHT

What do your spending habits say about your mindset when it comes to technology? Are there behaviors or priorities that you need to re-evaluate?