Wealth inequality and the 'K-shaped' economy are more striking than ever, data shows

• The Gini coefficient measuring wealth inequality reached 60-year highs, and worker compensation as a share of GDP fell to its lowest level in over 75 years of recorded history
• The top 20% of consumers hit multidecade highs in spending outlays while the other 80% fell to new lows, with lower-income households spending less on discretionary items than in 2019
• Economists trace the K-shape's origins to the dot-com crash and Great Recession, warning that proposed federal budget cuts to Medicaid and SNAP will further intensify inequality

Summary: U.S. Wealth Inequality Reaches Historic Levels

Key Findings:

America's "K-shaped" economy has become a permanent structural feature rather than a temporary phenomenon, with wealth inequality reaching 60-year highs according to economists.

Critical Data Points:

• The Gini coefficient (wealth concentration measure) sits at 60-year highs
• Top 1% of Americans hold record net worth, while bottom 50% control just 2.5% of total wealth
• Worker compensation as portion of GDP hit lowest level in 75+ year history
• S&P 500 has climbed 130%+ since March 2020, disproportionately benefiting wealthy stock owners
• Total spending outlays by top 20% of consumers reached multidecade highs in 2024, while bottom 80% hit new lows
• Consumer confidence gap between highest and lowest earners reached widest point in over a decade in 2025

Market Implications:

The divergence explains contradictory business trends: airlines expanding premium offerings while fast-food chains promote value meals. Households earning under $75,000 are spending less on discretionary items versus 2019 levels, while those above $150,000 are spending more.

For 80% of Americans, spending hasn't outpaced inflation over six years, meaning no improvement in living standards since the pandemic.

Economic Outlook:

Economists warn inequality will intensify, citing Trump's "DOGE" budget cuts to social programs and potential tariff impacts. The economy's reliance on narrow strength areas—healthcare jobs, AI-driven stocks, high-earner consumption—creates vulnerability. Experts caution this concentration represents a fragile foundation where disruption to any single pillar could destabilize broader growth.

This structural inequality helps explain the political success of affordability-focused campaigns across the spectrum.