C is for C-shaped economy

**SPEAKER_1** (0:01)
NPR.

**Wailin Wong** (0:06)
This is The Indicator from Planet Money. I'm Wayland Wong.

**Adrian Ma** (0:09)
And I'm Patty Hirsch. We're always looking for clean and simple ways to describe the economy, to make it easier for all of us to understand what's going on. And recently, that's extended to using the alphabet.

**Mike Strain** (0:20)
The big theme here is the so-called K-shaped economy. The results highlight what some observers have called the K-shaped economy.

**Wailin Wong** (0:28)
Why the letter K?

**Adrian Ma** (0:30)
What do you mean by that?

**Mike Strain** (0:31)
I know. Sounds like Sesame Street.

**Wailin Wong** (0:33)
Sesame Street, the platonic ideal of explainers.
The K described an economy that was diverging, with the rich getting richer and the poor getting poorer. Not the kind of thing an administration likes to hear with the midterms coming up. Not even a Republican administration.

**Scott Bessent** (0:49)
I got sick of hearing about this K-shaped economy.

**Adrian Ma** (0:52)
This is Scott Besant, Secretary of the Treasury, speaking to CNBC last week.

**Scott Bessent** (0:57)
I can say here definitively, the K-shaped economy is over, and we're seeing more of a C-economy.

**Adrian Ma** (1:07)
Ooh, a C-economy. What's a C-economy?
Like the top going down and the bottom coming up? That's got a rather socialist whiff, wouldn't you say, Will?

**Wailin Wong** (1:17)
I'm wafting it. And is it even accurate? On today's show, we'll look at the Sesame Streeting of the US economy to ask what all that lettering tells us, if anything, about the state of things. And if we were going to choose a letter to describe the economy of today, what would it be?

**Adrian Ma** (1:34)
That's coming up after the break.

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**Adrian Ma** (2:42)
Describing the US economy as K-shaped really kind of broke I as a buzz term about a year or so ago, but it's been a rhyme since at least 2020, and the early stages of the fallout from the COVID-19 pandemic.

**Mike Strain** (2:54)
There was a period where, I think, describing the economy as looking like a K was a reasonable description.

**Wailin Wong** (3:00)
Mike Strain is an economist at the right-leaning American Enterprise Institute.

**Mike Strain** (3:05)
The original usage of the term K-shaped meant that the poor were getting poorer at the same time that the rich were getting richer.

**Wailin Wong** (3:13)
Mike says there's no doubt that happened during the pandemic, but he says the definition of the K economy has shifted since then.

**Mike Strain** (3:20)
Over the last few years, different people are using the term in different ways, and some people are using it as just another way of describing inequality, which is different than its original usage, because inequality can be increasing even if both more affluent and less affluent Americans are seeing their outcomes improve in an absolute sense.

**Adrian Ma** (3:41)
Let me break that down for you. It is possible for poor people to acquire more wealth and for the gap between rich and poor to widen at the same time, which would mean that wasn't really a K shape at all. And this is kind of the thrust of what Scott Bessent was driving at last week in that interview with CNBC.

**Scott Bessent** (3:58)
For working Americans, real wage gains, we can see that the bottom 25% of workers had a 2% wage gain.

**Mike Strain** (4:08)
I think he's trying to say that inequality is narrowing. And by some measures, I think that that is happening.
You know, I think if you look at continuing workers and you look at the average wage of a worker whose highest degree was a high school diploma and the average wage of a worker whose highest degree was a college degree, I think you do see their wage growth converging. And so you see wage inequality narrowing.