Skip to content
Conor Sen

Inflation Is Bringing Back the K-Shaped Economy

The top end of the wealth scale won't need to curb spending thanks to soaring home equity and fattened savings, while higher prices squeeze renters at the bottom.

Inflation isn’t a problem for everybody.

Inflation isn’t a problem for everybody.

Photographer: Attila Kisbenedek/AFP

Remember back in 2020 when everyone was talking about a K-shaped economic recovery? White-collar workers who could do their jobs from home stayed employed, while lower-income service workers got laid off by the millions with uncertain prospects. Over time, a mix of fiscal relief, vaccines and other adaptive measures led to a strong rebound and helped close that gap.

Until now. Stagflationary trends in the housing market combined with the energy shock stemming from war in Ukraine has created a new kind of K-shaped economy. Homeowners, who tend to be wealthier to start with, are benefiting from surging home values. They also spend a proportionately smaller part of their incomes on food and energy, insulating them from inflationary shocks.