Everyone could be saved a lot of trouble in the above scenario if it were socially acceptable to simply wear a yellow sticky note stating your annual income on your forehead.
A signal doesn't have to be perfect to be useful. Breast implants and hair implants are also a thing. The fakes are for fooling people who don't know the difference between a $20k and a $200k watch and just see "Rolex". Many of the "expensive watch guys" I know used to own pawn or jewelry stores and know specific model years intimately. Fakes would be hard to pass off in those crowds, though I am sure they exist.
The rise of fake handbags (the modern female equivalent) and their explicit popularity (as fakes) is interesting and instructing, too.
I've come to learn that most normal people just want to be oriented about where they stand in the status hierarchy. It's not that being low or high status is the goal (although for many it is), but knowing the relative status of those around you makes people less anxious as they then understand how to behave to minimize their own distress. It's the uncertainty that causes people anxiety.
I agree with your basic premise that clear displays of metrics would save a lot of time and trouble, but we have decided as a society that that is both dangerous and tacky, so we use more coded signals instead.
I really think you may be overestimating how much the average person cares about 'status'. Or wants to advertise it, quite frankly. I wear pretty much the same stuff as I did when I earned a tenth what I do now.
Not saying that no-one cares about it, but I don't really buy that it's "most normal people".
Though, it may be somewhat regional and/or generational; my impression is that my approximate generation (late X, early millennial) may be less concerned with it that either early Xes or late millennials.
