It’s a bifurcated time in the American economy.
Billionaires are hitting the vacation and social circuit, showing up everywhere from fashion week to the Super Bowl. Other high earners are doing well: They’re booking increasingly snazzy premium seats on airplanes and spending thousands on their pets’ grooming.
Meanwhile, America’s lower- and middle-income earners are cutting back on their economy airplane seats, buying cheaper groceries, and getting worried about maxing out their credit cards.
For the past few years, and in a variety of ways, the country has been sliding into what’s called a K-shaped economy: Earners and consumers at the top of the K are doing OK; they’re able to plug along, make good money, and easily spend on both everyday necessities and leisure activities. The lower-earners at the bottom of the K, though, are cutting back and pulling away from unnecessary spending. It’s on companies’ radar: Both executives and analysts are increasingly talking about the K on earnings calls.
We dug into the multiple factors that make up the macro K. From groceries to Broadway shows, here’s how the various Ks are shaping the economy we’re experiencing today.
A K among workers in different places in their careers
The unemployment rate of recent college graduates, defined as 22- to 27-year-olds, has consistently outpaced the rate of all workers since 2021. Before the 2020 COVID-19 pandemic, those young grads typically enjoyed lower unemployment than the broader workforce. The gap between the two has mostly widened, with a 1.3 percentage point difference at the end of last year.
There are also divisions among the various sectors where Americans work. While healthcare payrolls declined in February, the sector is still far more robust than white-collar fields and pretty much everywhere else in the job market.
An income divide
For years, lower earners had seen their wages grow faster than higher earners, peaking during the Great Resignation. However, come 2024, the highest earners started seeing their wage growth outpace their lower-income peers.
The wage growth divide between the top and bottom thirds of the income spectrum reached its largest point since at least 2015 in February, according to an analysis from the Bank of America Institute based on the bank’s internal data on its customers. Wage growth cooled for lower- and middle-income households, unlike higher-income households. The report said “weaker pay raises when changing jobs” could be an explanation.
Seemingly robust economic markers — like a growing GDP — don’t benefit all earners. Atsi Sheth, the chief credit officer at Moody’s Ratings, told Business Insider that GDP gains have disproportionately accrued to higher-income groups over the last few years, and that divide has grown starker in the post-pandemic era; for households that get at least some of their income from investments and capital gains, strong financial markets have had more of an impact.
There’s also the added layer of the changing tax landscape, which will show up in some consumers’ pockets come refund season. Larger refunds could be a boon across income groups, but, overall, new tax policy might still end up benefiting higher earners more.
“Tax changes passed in the One Big Beautiful Bill Act will partly also contribute to that K dynamic,” Ksenia Bushmeneva, an economist at TD Bank Group, said, adding “research has shown that benefits from lower taxes are expected to flow disproportionately primarily to the middle- and higher-income households.”
Spending and groceries
If you’re toward the bottom of the K, you might have bid organic produce goodbye — or thought twice before buying theater tickets.
Some of the divide in consumer spending comes from cost-of-living pressures: Even as wages went up, so, too, did prices. Lower-income Americans have been hit harder by price increases.
Consumers are also splitting the K at the grocery store. Higher-earning consumers — those with household incomes over $150,000 — are spending more on meat, vegetables, and beverages, per data from NielsenIQ (NIQ). Meanwhile, those earning under $50,000 are paring back their spending on things like baking supplies.
“When there is a level of cost consciousness, consumers will begin to think about calories for their dollar to some extent,” Jack O’Leary, an e-commerce thought leader at NIQ, said. That means more cash-strapped consumers will cut back on spending in what he calls the “perimeter categories” of grocery stores — produce, fresh meat, and fresh bakery goods. Those foods, while nutritious, don’t have the most favorable price-to-calorie ratios.
“Perishability factors in there as well,” O’Leary said. “There’s a lot more assurance that you’ll have what you’ve stocked up on for longer when it’s a shelf-stable, non-perishable product.”
Bushmeneva said the spending divide is driven by financial well-being and has been “top-heavy,” with higher-income households supporting it. Bushmeneva noted that the pandemic-era wage trends highlighted above helped support spending among lower-income households, but those trends have now reversed.
Peter Atwater, an adjunct lecturer of economics at William & Mary, thinks there’s also unequal opportunity in how people can experience dining, travel, education, and entertainment.
“If you are at the top, you have the wherewithal and the opportunity to see things in person,” Atwater told Business Insider. “You can go to the Super Bowl, you can go see Taylor Swift, you can go see in person a Broadway show. Those are opportunities that are no longer affordable to many people at the bottom. If you aren’t able to see it in person, you may then have to see it live-stream or on rerun.”
Credit stress
On the whole, credit card debt is up across the country. Quarterly balances increased by $44 billion to hit a total of $1.28 trillion in the fourth quarter of 2025, per data from the Federal Reserve Bank of New York. But while balances are up, Americans at the lower end are feeling more strain in paying down their debt.
Sheth said that the lower end of the wage spectrum is under more credit stress.
“We’re seeing greater credit stress in subprime auto, for instance, some parts of borrowing, but again at the lower end of the spectrum,” Sheth said. “But overall, if you compare household balance sheets today to, say, the pre-global financial crisis era, they’re generally stronger — much stronger at middle- and upper-income levels, of course, but generally stronger.”
A 2025 analysis from the Federal Reserve Bank of St. Louis found that credit card debt held by Americans in the lowest-income 10% of zip codes was much more likely to end up in delinquency than that owed by people in the top 10% of zip codes.
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