The "K-shaped economy" describes an economic scenario where, following a recession or downturn, different parts of the economy recover at significantly different rates, leading to increased inequality. This divergence creates a "K" shape when charted, with one branch representing individuals or sectors that thrive and experience growth (the upper stroke of the K), while the other branch represents those that continue to struggle or decline (the lower stroke of the K). This phenomenon often manifests as higher-income households and certain industries experiencing rising incomes and output, while lower-income households face stagnating wages, increased financial strain, and difficulty keeping up with inflation. The term gained widespread use particularly in describing the economic recovery following the COVID-19 pandemic.
