Ten years ago, the highest wage growth for any group of Americans was experienced by low-income workers. Conversely, the disparity is growing in the pace of wage increases for affluent and less affluent individuals in the U.S. Families.
TL;DR
- Lower-income Americans' wage growth has declined to its lowest point in ten years.
- The K-shaped economy shows affluent individuals experiencing greater pay increases than less affluent ones.
- Younger workers, millennials and Gen Z, are seeing significantly slowed wage growth.
- A stagnant labor market and tariffs are contributing factors to the K-shaped wage growth.
In a Monday blog post titled “K-shaped economy,” Apollo chief economist Torsten Slok warned the growing disparity is yet another sign of today’s economy continuing to serve the rich, while poor Americans continue to Difficulty.
“Before and during the pandemic, lower-income households experienced higher wage growth than other income groups,” he said. However, this situation has shifted during the last twelve months. Currently, the increase in pay for low-earning employees is considerably less than the pay increases received by those in the middle and upper income brackets.
Slok cited data from the Federal Reserve Bank of Atlanta indicating that for Americans in the lowest-wage quarter, nominal wage growth went from a high of 7.5% in 2022 to about 3.5% today, the lowest in about a Ten years.
Although wage increases across all income brackets have slowed recently, the top income quartile has experienced more resilient growth, falling from a high of approximately 5.5% in 2023 to over 4.5% currently, which remains one percent higher than the lowest-income group.
A JPMorganChase Institute report released last month also pointed out a deceleration in U.S. Wage increases, showing diminished income growth across all age demographics, but especially for millennials and Gen Z, whose age ranges are linked to lower accumulated wealth. Young people’s wage growth slowed to 5.2% last month, one of the lowest levels since 2011, when the bank began collecting data. This represents a decrease from approximately 14% in 2022 and a drop from nearly 10% recorded in early 2020, prior to the pandemic's onset.
These differences in how wages are increasing contribute to a growing body of proof regarding what economists are calling a K-shaped economy, suggesting that Americans' financial outcomes are splitting into two distinct paths, influenced by income brackets and other economic considerations.
While the U.S. For decades, the economy has been likened to a “K”, and the disparity between the rich and the poor has drawn increasing notice, as the middle class and individuals earning $100,000 annually are grouped with the lower half of the K. For example, wage growth for the middle two quartiles also slowed sharply and is below that of the wealthiest U.S. Consumers, according to the Atlanta Fed data.
Why has wage growth become K-shaped?
George Eckerd, wealth and markets research director for JPMorganChase Institute, attributes the changes in wage growth—particularly for younger, entry-level workers—to a stagnant low-fire, low-hire labor market. After companies hoarded workers during the pandemic-era labor shortage, hiring has slowed while firing has also been conservative to avoid replicating those earlier shortages.
“The key point there is that there’s been a slowdown in labor market dynamism, the gross hiring rate, the quits rate fall into relatively low levels, and that particularly impacts young people who rely more on job switching to advance in their careers,” Eckert told Coins2Day.
These workers usually rely on job hopping to work their way up the career ladder. But in a job-hugging era, many are missing the opportunities to climb the ranks and make more money, he said.
For those fortunate to be able to find new jobs, a bump in wages may not even be a guarantee. A Bank of America Institute report from August, citing Atlanta Fed data, found wage increases for job-hoppers have fallen from 20% in 2022 to just 7% as of July 2025. From May to July, wage growth for job-hoppers was the same as those for job-huggers.
Pantheon Macroeconomics analysts Samuel Tombs and Oliver Allen blame tariffs for the middling wage growth, arguing companies saddled with paying import taxes cut wages to buffer their margins.
“Data show wage growth has slowed more in the trade and transportation sector, and to a lower level, than any other major sector since the end of last year,” the analysts wrote in a note in September. “Fears workers would be able to secure larger wage increases in response to the tariffs look highly unlikely to be realized.”