New evidence suggests the K-shaped economic divide, which has characterized the post-pandemic recovery, may be starting to narrow. Data from the Bank of America Institute reveals that the wage-growth gap between lower- and middle-income workers has nearly vanished.
This shift matters because a resilient labor market is chipping away at one dimension of the K-shaped economy, even as the wealth divide remains firmly intact. The trend suggests that lower-income households are finally seeing meaningful wage acceleration.
According to Bank of America Institute, lower-income households saw after-tax wage growth accelerate to 4.1% in June, up from 2.9% in May. This compares with 3.4% for middle-income households and 4.2% for higher-income households — the narrowest divide between low-income and higher-earning workers in years.
Separately, PNC, using its own customer data, reports the spending gap between lower- and higher-income households is the smallest in three years. The firm's senior economist previewed the June data on X, noting the spending gap excluding certain categories has narrowed significantly.
However, the wealth divide remains stubbornly wide. Even with wage growth converging, lower-income households still hold a fraction of the assets held by wealthier Americans, suggesting the K-shaped recovery is far from over.