if half of a population has a massive increase in wealth while the other half does not then then poorer half must compete for limited resources
You are not discussing an increase in wealth at all. You are discussing a situation of declining or fixed wealth and monetary inflation. They aren't the same thing.
I agree that we should try to avoid declines in wealth. Luckily wealth has only increased in the US and globally, for folks at the bottom and the top.
Everything I said is unchanged if you replace income with utility(income).