Which Part of the K-Shaped Economy Are You?
What side of the K-shaped economy are you on? Oh, perhaps you’ve never heard of the K-shaped economy? Well, read on to learn more and…Find out what to do if you don’t like what side you are on!
An off schedule post
This is an off-schedule post. That means something different or interesting is going on that warrants paying attention to. So, my friends, read on to find out more!
Introduction
It would be understandable if you did not know about the term “K-shaped economy (or recovery)” because it’s a rather recent term. And whether you recognize the term or not, you are somewhere on it. I hope the side you want to be. Even if you find yourself on the side you don’t want to be on, read to the end of this post because I’m going to tell you what you need to do to get where you really want to be. At the very minimum, you probably will learn a few things. I did!
What is a K-shaped economy?
The term K-shaped economy, often called a K-shaped recovery, was coined in 2020 by Peter Atwater, an economist and adjunct professor at The College of William & Mary in Virginia. Just a few weeks into the COVID-19 pandemic, Professor Atwater noticed a huge difference in the confidence of white and blue-collar workers.
As you may remember, those who were able to work from home (think tech workers) did so. Those who were required to work in person (think factory workers, grocery store employees, or medical staff), or were unable to work, perhaps due to layoffs caused by decreased demand for goods and services or social distancing requirements, did not share the same confidence in the economy. When this confidence was graphed, the white-collar workers’ confidence rose to the upper right, and the blue-collar workers’ confidence dipped toward the lower right. Said a little differently, the wealthy thrived while lower-wage earners struggled. This created a bifurcation (split), or “K” shaped recovery, causing different groups of people, industries or businesses to move in different directions. This did not conform to what typically looked like a “V” or “U” shaped recovery curve, with both sets of workers recovering in unison.
Now, a bit outside the general definition I just mentioned were some outliers. Some businesses that primarily employ what we consider blue-collar workers did quite well. For example:
Restaurants with drive-through service thrived. Think Chick-fil-a and McDonald’s. Those without drive-through windows suffered. Some restaurants adapted by adding drive-through windows, and some perhaps added curb pickup services. I must say, however, one of our favorite restaurants offered fantastic deals for curb pickup during this time. We tried them about two times, but the food freshness and overall experience of taking their type of food, in this case seafood, was nowhere near what the in-restaurant experience was, so we did not do it again.
E-Commerce and online retail. Again, not all retail businesses had an online presence, and those that did saw a massive increase in sales, while those that did not suffered.
Home improvement and do-it-yourself businesses.
Grocery and warehouse retailers. Geez, remember how many things were sold out? Seems everyone was baking and making banana nut bread.
Delivery services
And of course, not all businesses that we typically think of as white-collar thrived as well as work-from-home folks. Some of these businesses continue to suffer today. Some examples include:
Airlines
Commercial real estate
And it’s the divergence between the winners and losers in an economy, such as during the pandemic and post-pandemic periods, that causes what is known as a K-shaped economy.
Benefits and consequences of K-shaped economies
The K-shaped recovery of the pandemic era morphed into a K-shaped economy that describes not so much the shock of a pandemic as perhaps a new reality. One that we are experiencing in 2026. We’ll get into what that looks like in tangible terms for people in a bit, but for now, let’s discuss the fact that there are pros and cons of a K-shaped economy. And for people or businesses, where you reside on the K, will determine if it’s good for you or bad. Let’s see:
Benefits of a K-shaped economy
Accelerated innovation-High-performing industries attract talent (workers) and investment (capital) quickly. These industries include Tech, AI, advanced manufacturing, and healthcare. The results include rapid increases in productivity and efficiency, as well as the introduction of new products and services. Think NVIDIA and Microsoft.
Creates strong financial markets-When these industries expand, profits do as well. The stock market rises, retirement and investment accounts grow, and capital becomes more available. The result is increased spending among upper-income groups, greater availability of venture capital, and increased entrepreneurship.
Restructuring of the economy-Automation increases, replacing less efficient processes. Remote work technologies improve flexibility, and e-commerce transforms retail (think Amazon).
Increased demand for education and skills: Those with advanced education, technical skills, leadership abilities, or other specialized expertise can earn higher salaries, enjoy greater job security, and have more career opportunities.
Consequences of a K-shaped economy
Growing wealth inequality-Higher income households experience rising stock prices, appreciating home values, and the benefits of flexible work arrangements (work-from-home, hybrid, etc.). On the other hand, lower-income households can experience layoffs, inflationary pressures, limited upward mobility, and stagnant wages. All these negative effects, the most visible consequences, can widen the gap between the rich and the poor over time.
Social issues-Cultural and political divisions, class tensions, and reduced trust in organizations. People often feel that the system only works for some or that opportunity is limited or nonexistent.
Reduction in economic mobility-Increased cost of education, housing affordability, reduced access to healthcare, or job opportunities.
Geographic differences-Technology hubs can expand while rural or manufacturing areas can experience population loss or slower growth.
Consumer weakness-Overall consumer demand can weaken because middle and lower-income households spend a larger percentage of their income on basics. In fact, an economy can actually become more dependent on affluent consumers who tend to “carry” the economy. I keep hearing this is what we are experiencing in 2026.
Long-term risks of a K-shaped economy
There are long-term risks associated with a K-shaped economy. These include reduced intergroup socialization, political instability, lower birth rates, declining trust, and stagnation among large parts of the population. All of this leads to differences in prosperity among groups, concentrated opportunity, and strikingly different economic realities among groups of people.
Fast forward to today. The K-shaped
There used to be a term to describe an improving economy: “A rising tide lifts all boats.” This would be what we associate with the “V”- or “U”- shaped economic recovery described above. Many feel that, in 2026, we are in a “K”- shaped recovery that affects people differently. This is broadly broken down into six different categories:
High-income professionals versus wage earners-The high-income folks can experience strong investment returns, appreciation in home prices, flexible work, and higher salaries. Lower wage workers face higher housing and insurance costs, inflation, less job security, slower wage growth, and generally reduced purchasing power. We hear a lot today about people being unable to buy their first home, or the lack of wealth growth due to low personal investment levels
AI winners and losers-We’ll see where this ends up over time, but for now, this is how AI is perceived.
Those on the downward side of the K-Includes support staff, entry-level office workers, data processing, customer service, and some HR functions. Some of these jobs are simply going away.
Homeowners versus renters-In particular, the inability to save for a down payment on a home. Note: Diane and I both owned homes when we were married in 2002. When we sold our homes, both sets of buyers were unable to come up with a down payment. In turn, this required, let me just say, creative financing to get them into the houses. So, this inability to save enough for a down payment is not necessarily due to the K-shaped economy. It’s my opinion, and simply that, but it does seem to be true. But, a K-shaped economy exacerbates the problem for the folks on the lower leg of the K.”
Large corporations versus small businesses-Again, typically in a K-shaped economy, one is a winner, one is not.
Market investors versus non-investors-To me, this seems like the biggest area of disparity
Geographical differences-Think tech hubs that attract investment, high wages, and skilled workers versus regions where there may be population stagnation and reduced opportunities. On a personal note, both my parents grew up in small towns, and I’ve visited many small towns on my travels. I’d be lying if I did not tell you, on occasion, I’ve said to myself, “What will happen to these towns in the future?”
We’ve all been hearing about or experiencing these issues in the past few years, and I think we both realize the differences between the two sides of the K. If you are on the lower side and desire to rise to the upper side, what can you do? For now, continue reading to the end.
Explaining the graph
I’d like to interpret the data on the graph for you. Here is the disclaimer: The graph is AI-generated using data from the World Bank and International Monetary Fund (IMF). I typically don’t use AI-generated information without checking it against a known reputable source. In this case, I’m comfortable presenting this to you because (1) I wanted to superimpose the US K-shaped economy onto the other major economies of the world, and I really don’t know of a way to do that, (2) the data pretty much represents what I believe to be true and (3), the point is to show trends and not to be taken for any purpose other than that. Here’s the point: All you are really seeing in this chart is what, if you watch and read the news, is what you know to be true. It’s just all in one place now.
The graph is indexed on the left-hand vertical axis, with 100 as the starting point for the United States in 2020. This is just a scale and not represented in percentages (Use it only to show trends). 0 represents the starting point for the combined economies of China, Europe, Australia, and major South American and Latin American countries, and denotes the combined growth since that time (purple line). It’s difficult to see because the combined growth is small overall over the period 2020-2026.
Let me give you the highlights by country:
The US upper K leg experienced significant growth during this period (blue line). The US lower K leg (orange line) experienced somewhat negative growth during this period. The US GDP growth during this period (combined K legs) was 2.1% overall
Europe’s GDP growth during this period was 1.9%
China’s GDP growth during this period was 4.5%
Australia’s GDP growth during this period was 2.3%
South/Latin American GDP growth during this period was 2.5%
All these non-US economies are combined and shown in the bottom line of the graph, and some have experienced negative growth over the past six years. Hence, the curve shows little net change over this period.
What is your initial reaction when you see this graph? Probably the same as mine.
Here’s what that means to you and me: If you are on the upper leg of the “K” (blue line), you have had a fantastic ride over the past 6 years, pandemic or no pandemic. If you are on the lower leg of the “K” (orange line), you’ve probably, for all intents and purposes, actually lost a little ground as noted in the discussion above. I don’t think I’m telling you anything that we don’t already know or feel. The purple line is representative of the world economy and is better than the lower leg of the K, but nowhere near as good as the upper leg of the K.
Time to make a few changes?
Through my substitute teaching and volunteer work, I see people weekly who are perhaps on the lower end of the K, or a bit higher. Some maybe just had a bad week and will recover. These folks are desiring to rise to the upper side of the K, and they are actually doing something about it. Hurrah for them, I say. Anyone can do the same if they have the desire and willpower. And that’s your takeaway for today:
The power to improve yourself is in your hands.
Here’s my suggestion: I developed Afterburner Success Partners, not because I saw a K-shaped economy coming, but for anyone who wishes to get ahead. The course, the book, or simply the 106 Tuesday blog posts will give you the tools to develop your own plan. Yes, I did all this just for you!
Summary
So, K-shaped economy or not, the basic formula for getting ahead remains the same. I’ve discussed this often in my various writings. What I say to you today is, if you are not happy with where you are in today’s K-shaped economy, you have a path forward right at your fingertips. Remember what I always say about this: It’s simple, maybe just not easy. What that means is the formula is simple and straightforward, but executing it may be quite difficult. But you can still do it.
If you don’t like where you are today, it’s as simple as developing a well-thought-out plan and executing it. And, before you say you can’t, yes, you can!
That’s all for today!
Let’s help our friends and loved ones, shall we?
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The US K-shaped economy versus the world
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What’s in it for Me
If we want to get what we want from life, we need to accumulate as much knowledge and experience as we can. Then we must take that knowledge and experience and act with determination. Doing so will ensure we get what we want, and that’s what’s in it for me.
Call to Action
Honestly consider if you need to make some changes. Or, perhaps you must want to learn a few things. Purchase any of the books noted below. Take the Afterburner Success Partners course. Tell a friend.
Recommended Resources
Buy and read any of the books mentioned in the notes below.
Up Next
Back to regular posting schedule.
Notes
Please note that as an Amazon Affiliate, I may earn a small commission on the sale of any of these recommended resources.
Everyday Cooking for Everyday People Like Us, by David Giustozzi: https://amzn.to/437OhVQ
Achieve Your Dreams: A Complete Guide to Live Your Best Life by David Giustozzi: https://amzn.to/3IxEFgy