There have been seemingly endless posts and headlines about the growing bifurcated economy that resembles the letter K: the rich getting richer and everyone else getting poorer.
But how do business reporters accurately cover this economic trend and capture its social reverberations?
A recent Society for Advancing Business Editing and Writing (SABEW) webinar grappled with that question in a panel discussion featuring the perspectives of academics and journalists. The panel featured Martha Gimbel of the Budget Lab at Yale University, Peter Atwater from The College of William & Mary and Catarina Saraiva, who covers the labor market for Bloomberg. Wall Street Journal reporter Rachel Louise Ensign moderated.
“We tend to silo our views of the K-shaped economy when it has tentacles, really, across society,” Atwater said.
The gap between aggregate economic data and individual experiences
According to Saraiva, while GDP and spending numbers looked like they were “roaring back” in the fall of 2020, what actually happened was that the wealthiest individuals began powering the consumer economy.
The K-shaped economy “described what a lot of people felt, even if the topline numbers weren’t showing that,” Saraiva said. “When you look under the hood, you know certain data was showing that it was really growing more bifurcated.”
Gimbel, the executive director of Yale’s Budget Lab, said that data varies on whether or not a K-shaped economy exists, with private sector data from JPMorgan and Bank of America clashing with the New York Federal Reserve’s insights. She emphasized that what matters is that it “feels really true to people.”
“There is certainly something in the air that is making people feel like things are not steady and that they can’t rely on these traditional parts of the economy that they’ve been able to really lean on,” she said. “It’s really important to distinguish between what we can tell about the K-shaped economy in the data as opposed to what the vibes around the K-shaped economy can tell us about how people are feeling.”
Atwater said that there is “something beyond just the economy” that is making them anxious about the future, dividing consumers into two categories: beneficiaries of asset inflation and victims of price inflation.
“We see that socioeconomically as being a true distinction in the experience of those at the top and the bottom,” he said.
Gimbel also pointed out that there’s a difference between how people and economists think about wages and growth.
“If you get a 5% wage increase, but prices have gone up by 3%, you aren’t thinking to yourself: 2% real earnings growth,” Gimbel said. “That’s how economists think about it. That is not how normal people think about this. They think my wages have gone up by 5%. I can buy 5% more, and then they go to the store, and that’s not true.”
Capturing K-shaped social tensions
This seemingly persisting gap between the haves and have-nots had electoral consequences, turning affordability into a major theme of the 2024 presidential election. Atwater said that this disparity is now extending beyond economics.
“We can look at it in terms of voice power representation, while those above have extraordinary abundance,” he said. “Meanwhile, those at the bottom can’t help but see the overabundance above them, and so that contrast and visibility creates a lot of social tension that moves beyond the economy into politics, into social movements.”
The challenge for reporters is to accurately represent those emerging tensions while also having data-backed stories. Saraiva’s suggestion is to talk to people and see what patterns appear, and then finding surveys or larger data elements to support those findings.
“I think it’s important to keep pressing this and to do so from a variety of ways,” she said. “I can do it from a more broad, national level, where I just find people in different places to talk to. Someone at a newspaper could do it like in their area to see what’s going on in their community.”
Perceptions about the United States’ social net being precarious – burdensome medical and higher education costs – and the erosion of the idea that the next generation will do better than their parents is also a contributing factor.
Gimbel said that she wants her toddler to “have flying cars and amazing cancer treatments” in the future and to think her mom lived in “the Dark Ages” by comparison, but noted that it’s no longer what people believe will happen to their children.
“I think part of that is people just feeling like they thought they were going to be able to do certain things, and that’s kind of stalled out,” she said.
Covering the future of the K-shaped economy
Now that more people are aware of the K-shaped economy, Atwater predicted that its shape will change as a result.
“We’re seeing signs of it in terms of the want to tax the rich, the want to elect more populous political figures,” he said. “We could pair that with a market downturn, but I think that the divide is going to end, and there are far more people at the bottom than the top.”
Saraiva emphasized the need to talk to individuals and get ahead of the curve with those stories before they show up in the aggregate data: “We have the stock market, but I think looking at what companies are doing to adjust for this is really interesting, so I’ve been really drawn to those stories.”
Gimbel warned against misinterpreting economic data and to keep in mind that it’s currently “really, really weird” due to policy swings. “It’s really important right now to be really, really careful with the data and making sure you’re digging into it before you go down a rabbit hole,” she said.
