Serious Money Discussion: Why the K-Shaped Economy is not OK?

by Jeffery A. Keill, CFP, CIM, FMA, FCSI, CEA

Keill & Associate- Senior Wealth Advisor/ Portfolio Manager

When people talk about the economy, they often imagine one big trend line- either green in colour and slopping upwards displaying better times or they view a red line sloping downwards showing things getting worse. In reality, economic recoveries don’t always move in one direction for every one. That’s where the idea of a “K-shaped economy” comes in.

“The rich get richer and the poor get poorer” is a famous aphorism that is often attributed to poet Percy Bysshe Shelley in 1821. The K-shaped economy displays this in graphical terms. Lately I have been witnessing the realities of the K-shaped economy with clients and it has become a popular discussion among advisors.

Where is the shape of a K come from?

Well if you can imagine a line graph with Years along the bottom axis and economic expansion and contraction on the vertical axis you can draw a vertical line through 2020. This is arguably when the K economy started and forms the spine or vertical line in the letter K. It is the period of Covid and the shutdown of many industries and closures for small businesses. From this vertical line in the year 2020 you have two distinct lines coming off it- one trending upward and one trending downward. This forms the shape of the K.

That’s the story of an economy where different groups of people experience completely different outcomes over the same time. In our case today that would be the period between covid and today. There might be an average between the two diverging lines, but the people don’t live in the averages.

Let’s break the K-Shape down. 

A K-shaped economy describes a situation where:

• Some people, industries, or regions see their incomes, opportunities, and financial security rise (the upper arm of the K)

• Others see their financial situation decline (the lower arm of the K)

Instead of everyone recovering together, the economy splits- creating winners and losers- or people succeeding and people falling behind.

Why does this happen?

A K-shaped pattern emerges after a major economic shock- like a recession, a pandemic, or rapid technological changes. These events don’t hit everyone equally.

Here are a few reasons why I believe the economy split after Covid:

1. Job or Career Type

• People in knowledge-based, remote-friendly jobs (technology, finance, consulting, Government, those deemed “Essential Workers”, and many white-collar professions) often kept working and earning through Covid with earnings increasing while experiencing less expenses during the shutdown.

• People in “in‑person” jobs such as direct service industries (hospitality, food services, retail, travel, entertainment) faced layoffs or reduced hours at best. These people had increased costs with little income. 

2. Uneven Access to Resources

• Those with savings from working with less expenses were able to invest, which allowed them to bounce back faster.

• Those living paycheck to paycheck had a harder time recovering due to the fact of less income and increasing debt levels.

3. Technology Accelerates Inequality

• Technology during this period allowed those who engaged its benefits to transform their industries, allowing them and their employees to grow while making others less competitive.

What Does this K-shape Feel Like in Real Life?

Here’s a simple snapshot of how the two sides of the “K” might experience the same economy;

Upper Arm of the K (Rising) 

• Remote workers thrived

• Saved and invested in a stock market that rose

• Homeowners gained and paid down debt

• Felt the advancement of their wealth and growing confidence in the future

Lower Arm of the K (Falling)

• Service workers losing hours

• Households struggling with increasing debt

• Small retail-based businesses closing 

• Living with uncertainty and feeling left behind

• Strangely, both groups live in the same country, maybe even on the same street, but their economic realities look nothing alike.

That’s the K‑shape in action.

Why Should We Care?

A K‑shaped economy isn’t just an academic idea that might show up in sensational articles or podcasts — it affects:

• Household financial stress

• Social mobility

• Small business survival

• Housing affordability

• Long‑term economic stability

When the gap between the “upper arm” and “lower arm” widens, it could create tension, reduce trust, and make it harder for our communities to thrive together.

Final Thoughts

The K‑shaped economy is a reminder that economic averages don’t tell the whole story. Even when headlines say “the economy is improving”, many people may still be struggling and just can’t see the truth in that statement. The K-Shaped economy is not an OK shaped economy! Rest assured that if you feel like you are falling behind economically, you are not alone. 

Has your family felt the effects of the K-Shaped economy? Let us know. 

Disclaimer and Notice to Reader: This Serious Money Paper should not be construed as financial, legal or tax advice but rather only as a general statement and explanation of the topic matter. Professional financial, tax and legal advice should be obtained for the readers own personal situation. For more information on this topic or how it applies to your family. please contact our Wealth Advisory Team.

Posted March 2026