Wealth Inequality Gaps Are Narrowing. Now the K-Shaped Economy is Losing Its Shape, New Data Shows

New data suggests the long-standing gap between lower-income and higher-income workers is narrowing in key areas, even if the broader wealth divide remains firmly in place, impacting the “k-shape” recovery of the economy as of late.

For years, economists have described the U.S. recovery as “K-shaped,” meaning higher-income households benefited disproportionately from rising asset values, stronger investment returns and housing appreciation, while many lower-income Americans struggled with higher living costs and limited wealth accumulation.

Now, new research from Bank of America Institute and PNC indicates that some aspects of that economic split, particularly wages and consumer spending, are becoming less pronounced.

According to an analysis from Bank of America Institute based on anonymized customer deposit account data, after-tax wage growth for lower-income households accelerated to 4.1% in June, up sharply from 2.9% in May.

That nearly matched the 4.2% wage growth recorded by higher-income households, while middle-income workers posted gains of 3.4%. Axios first highlighted the findings, noting that the wage gap between lower- and higher-income workers has narrowed to its smallest level in years.

The figures suggest that lower-income workers are seeing stronger income momentum than they have in recent years, a notable shift after a prolonged period in which wage gains often favored workers higher up the income ladder.

The convergence appears to reflect continued strength in the labor market. Bank of America researchers said stronger hiring activity and increased job switching among lower-income employees have helped boost pay growth.

Workers changing employers frequently secure larger raises than those who remain with the same company, making a healthy job market especially beneficial for lower-wage earners. Consumer spending patterns also appear to be moving in a similar direction.

PNC Financial Services, which analyzed its own customer spending data, found that the spending gap between lower-income and higher-income households has narrowed to its smallest level in three years.

Brian LeBlanc, the firm’s senior economist, said on social media that in June, “K-shaped spending narrowed further,” and that there was “Almost no difference now between upper-and lower-income spending in 2026. I think we’re learning that the weakening labor market in ’24-’25 was especially hard on lower-income households and now they’re benefiting from the rebound. Also: if you give people bigger tax refunds… they will spend them.”

However, Bank of America also cautioned that the recent acceleration in wage growth may not be driven entirely by underlying economic strength. Some of the increase could reflect changes in paycheck withholding following adjustments made under the One Big, Beautiful Bill Act.

If lower- and middle-income workers reduced the amount withheld for taxes, their take-home pay would increase even if underlying wages remained unchanged. The biggest source of inequality remains household wealth rather than income. Higher-income Americans continue to own the overwhelming majority of stocks, retirement investments, and high-value real estate, assets that have appreciated substantially over the past several years.

Those gains have dramatically increased net worth for affluent households, while many lower-income families have little exposure to the stock market or significant home equity.
As a result, although wage gains are becoming more evenly distributed, wealth accumulation remains highly concentrated.