All about our K-shaped economy

A version of this article originally appeared in Quartz’s Obsession newsletter. Sign up here to share our Obsessions in your inbox.

OpenAI is paying its 4,000 employees an average of $1.5 million in stock compensation per year — significantly more than pre-IPO Alphabet $GOOGL or Meta $META ever did. It's a prime example of a tiny fraction of Americans growing dramatically richer while everyone else falls behind.

Economists call this the “K-shaped economy.” The phrase, popularized by economist Peter Atwater during the pandemic, originally described divergent recovery paths — white-collar workers kicking back in the comfort of their homes while Subway sandwich artists and other service workers struggled.

What started as a description of unequal recovery has become a description of the system itself. By traditional measures, the economy looks healthy right now. GDP is growing, stocks are near record highs, AI investment is surging. Yet nearly half of Americans say their financial security is worsening. The disconnect isn't perceptual — it's structural and material. Since the pandemic, higher-income Americans and asset owners have watched their wealth climb as stock and housing markets soared. Lower- and middle-income households, meanwhile, have faced persistent inflation, stagnant wage growth, and steep borrowing costs. The result is expansion that's real but far from universal. 

For more on the split, and why’s it proving impossible to close, scroll on down.

By the digits 

1.8%: Share of total U.S. household wealth held by the 19 richest U.S. households, as of April, 2025. (That’s not “the top 1%.” That’s 19 households.)

2.5%: Share of net worth held by the bottom 50% of Americans as of mid-2025. (A stat so stark it also almost reads like a typo.)

93%: Share of U.S. stocks owned by the top 10% of households, as of last year.

$100,000+ vs <$50,000: Income split where confidence diverges sharply, as of a recent poll conducted by Harris for the Guardian.

$18.9 million: Average CEO pay at S&P 500 companies in 2024, up 7% from the previous year.

Same system, less plausible deniability

In one sense, this split is familiar. Capitalism has never distributed gains evenly. Equity stakes create wealth, wealth compounds, and people feel more confident when they have more money — who knew?! Viewed through this lens, our current economic divide looks more like an intensification than an entirely new state of affairs.

What has changed is the rate of change, plus its scale, visibility, and political salience. New polling shows voters across party lines — Democrats, Republicans, and independents — increasingly pointing at the federal government rather than corporations for rising prices and financial stress. Bipartisan consensus at last, just not the kind anyone wanted.

This is where the Italian political thinker Antonio Gramsci feels oddly relevant. He argued that systems endure not simply through force or economics, but through consent — a shared belief that the order of things is natural, fair, or at least inevitable. When that belief frays, the system enters what he called an “interregnum,” in which the old rules still operate, but no longer feel legitimate.

And viewed in that light? The K-shaped economy may be less a structure itself than a historical moment when an old one becomes a lot harder to rationalize. Growth continues, wealth concentrates, but the story that once made that arrangement tolerable is wearing thin — and Americans may be increasingly unwilling to accept it as “just how the economy works.”

Quotable

“The economics are important… But it’s how people now feel that matters most. As we see so often in history, when people feel powerless and uncertain, it impacts their political and social choices, not just what and how much they buy.”   —Economist and adjunct professor Peter Atwater, speaking to W&M News.

Brief history

2020: The phrase “K-shaped recovery” enters common use after the pandemic triggers a historic economic shock; markets slide but recover quickly, while service-sector workers and renters face prolonged losses.

2021: Massive fiscal stimulus and near-zero interest rates fuel asset prices. Stocks and home values surge.

2022: Inflation spikes to multi-decade highs. The Federal Reserve launches its fastest rate-hiking cycle in decades. Borrowing costs rise sharply.

2023: Markets turn bullish again as inflation slows, but everyday costs stay high. The gap between those who own assets and those who rely on wages becomes harder to ignore.

2025: GDP growth remains solid and stocks hit new highs, driven by AI investment, even as nearly half of Americans say their financial security is worsening.

Fun fact

In the past five years, the top 10% of U.S. households gained more wealth than the bottom 90% combined—even after accounting for all those circa-2020 stimulus checks and wage gains.

Watch this! 

Watch as CNN uses a $12 burrito and some tube socks to explain the k-shaped economy to you in just one minute flat.