A surprising trend has been showing up in Bank of America accounts over the past few months: the gap between America’s wealthy and poor appears to be narrowing.
That’s counter to the narrative we’ve been hearing for years: that America’s rich are getting richer, leaving the less-well-off behind and the American Dream out of reach. That wealth gap, often called the “K-shaped economy,” has been blamed for many of the economy’s ills and a chief source of Americans’ angst about their financial situations.
But what if that K-shaped narrative isn’t true anymore?
The ‘K’ Appears to Be Narrowing
For the “K” theory to hold, income and spending growth for the rich needs to outpace the growth in paychecks and expenses for the poor. In other words, the upward- and downward-pointing lines of the “K” diverge.
Instead, by some measures, those lines seem to be getting closer together.
The difference in spending growth between higher- and lower-income Americans is the narrowest it has been in three years, according to a June report from PNC. Spending growth for lower-income Americans outpaced high-income Americans’ in June, according to Bank of America Institute. And the gap in discretionary spending growth shrank to its narrowest point in June since July 2025.
There was basically no difference in earnings growth between rich and poor last month, according to Bank of America.
The Optimistic View
Larger tax refunds from President Donald Trump’s One Big Beautiful Bill Act, consumer spending during the World Cup, and a reasonably stable job market could all help explain why the K is narrowing in 2026. But these last few months of data also build on a trend we’ve seen for years.
The “K” has narrowed considerably since 2019, as pay for lower-income workers increased to keep pace with surging inflation. Over the past seven years, the net worth of America’s poorest grew much faster than that of the upper middle class. And middle-class folks’ wealth grew at a higher rate than the top 1%.
Treasury Secretary Scott Bessent declared in a CNBC interview: “I got sick of hearing about this K-shaped economy. I can say here, definitively, the K-shaped economy is over.”
Where the ‘K’ Is Widening
Enter a huge asterisk to the “dead-K” argument.
David Woodyard runs Catholic Charities Dallas, which served over 240,000 people in the last year. His organization provided around 9 million meals from summer 2024 to mid-2025. Since then, more than 15 million. “We’re busier than ever,” he said.
The K has been widening as the cost of living soared and pandemic-era stimulus fizzled. It shows up clearly in the data if we shift our starting point to 2023 instead of 2019, when many of the economy’s biggest challenges weighed heaviest on low-income families.
Heather Black, vice president of the 211 System Strategy, sees the bottom arm of the “K” getting even bigger. In 2025, the 211 network made 6 million referrals for housing assistance, plus another 3 million for utilities. The trends are on a similar track this year.
Javier Casillas, owner of Live Well Mattress in New Mexico, said his store was profitable at the start of the year. But sales slowed significantly starting in March. He’s still selling premium mattresses to wealthier shoppers, but his discounted merchandise sits idle.
The Bottom Line
New data suggests America’s K-shaped economy may be narrowing as lower-income spending catches up to wealthy spending. However, critics point to food bank demand, housing assistance referrals, and struggling small businesses as evidence that the wealth gap remains real. While Treasury Secretary Scott Bessent has declared the “K-shaped economy is over,” many Americans still feel the strain of rising costs and economic uncertainty. The truth is that a single letter can never capture everyone’s experience in a $31 trillion economy.
