Henry George notes that existence of privileged classes tends to reduce economic growth, because the rich must spend nonproductive effort stealing from the poor and protecting their gains, while the poor spend nonproductive effort trying to defend themselves. And he noted that a large part of the labor force will comprise “idlers and those who minister to them.”
Something approximating the former category has recently been termed “guard labor” and some work has been done toward measuring it. A comparison of U S states indicates that the proportion is higher where inequality is greater. Cross-national comparison shows some correlation to polarization and political conflict. A proposal is even made for something like a “citizens dividend,” tho the funding source isn’t identified. Also, NYT column about costs of inequality here.
HT to Max Keiser (video).