I used to buy into PG’s “inequality is not a problem” argument.
More recently I’ve come around to embracing the notion that peoples’ emotional state regarding their relative place in society and their future prospects is as important as their absolute standard of living.
Sure, as it's been argued by PG and many others, in material terms even the poorest in modern western societies are far better off than wealthy people of hundreds of years ago.
But everyone still has some degree of need to better themselves, improve their circumstances, and aspire to live more comfortably and prosperously. And crucially, the ability of young people to find a partner and have a family is strongly influenced by their prospects for upward mobility.
So if societal inequality is such that a young person trying to make their way in the world sees no opportunity for meaningful improvement of their circumstances, and therefore no real prospects for finding a good partner, raising a healthy family and achieving a good level of status in society, then the motivation to remain part of mainstream, productive society can easily be lost. This is what leads to people "dropping out" and ending up in a life of unemployment, depression, substance abuse, crime, violence, etc.
So, sure, some level of inequality is inevitable and healthy, to the extent that it rewards people for effort and ingenuity and gives people something to aspire to. But too much inequality becomes more of a de-motivator and a source of resentment, and can cause societal breakdown, and I think this is what is happening to some degree across the western world.