Additionally we are learning more that psychological effects of poverty translate to material outcomes, like higher mortality rates, even after controlling for baseline access to material benefits like health care or nutrition or education.

For example, Last Place Aversion is a real psychological effect that motivates people in their voting habits, e.g. minimum wage laws. Status signalling effects in medical outcomes are also an area of active research (e.g. the richest person in a poor neighborhood can end up having significantly better longevity outcomes than a wealthier person who happens to be the poorest person in a rich neighborhood).

Relative wealth has material effects on health, mortality, etc., which look to be driven by psychological effects and persist even when controlling for material benefits.

In other words, if you're in the middle class and your perspective is that you have to work harder to be less relatively well off, this psychological factor can be a cause for genuine material harm.

I think we are only just beginning to understand these types of inequality effects.