Rising rates of inequality undermine people’s health and well-being, as well as their civic engagement and trust in democracy. Despite the severity of these effects, little is known about the psychological processes that transmit macro levels of inequality into individual-level outcomes. We argue in the current chapter that these harmful effects emerge because inequality fosters feelings of relative deprivation – even among those who are objectively well-off. We begin by reviewing distinct measures of inequality and people’s corresponding views towards, and (mis)perceptions of, inequality, as well as the ideologies used to justify the rising rates of inequality. We then examine the impact inequality has on both well-being and social cohesion, noting that people’s tendency to make upward social comparisons leaves even the wealthy feeling relatively deprived. We conclude with a discussion on the prospects for change, noting that, although the COVID-19 pandemic has increased awareness of economic-based injustices, the psychological and sociostructural barriers discussed in this chapter constitute major challenges for social change.