Expert Who Warned of K-Shaped Recovery Says Americans are Becoming Poorer

Peter Atwater, the economist often credited with popularizing the idea of a K-shaped recovery — in which high earners thrive while lower-income Americans struggle — said one of his biggest concerns about the growing divide between upper- and lower-income households is that it could lead to a “caste system,” he told Jennifer Sor of Business Insider.

The economist often credited with popularizing the idea of a K-shaped recovery — in which high earners thrive while lower-income Americans struggle — said one of his biggest concerns about the growing divide between upper- and lower-income households is that it could lead to a “caste system.” 

“What sustains a caste system is the absence of rungs in the ladder of upward mobility in the U.S.,” Atwater said. “That could easily be reflected in job and educational opportunities.”

The U.S. is already seeing a “caste effect” in various aspects of the American dream, particularly in areas involving asset ownership.

Homeownership, for instance, has moved further out of reach for many Americans in recent years.

The average annual household income needed to afford a typical home is $116,986, according to a Bankrate study conducted last year.

That exceeds the median household income of $83,730 in 2024, according to U.S. Census data. Stock ownership is also heavily concentrated among high earners.

According to the Federal Reserve, the top 10% of Americans by wealth owned about $28 trillion in stocks and mutual fund shares in the third quarter — roughly half of all household wealth in those assets.

The bottom 50%, meanwhile, owned just 1%.

Atwater said one of his biggest concerns is the deteriorating confidence among lower-income Americans.

The consumer confidence index dropped sharply in January, with particularly steep declines among those earning less than $15,000 annually.

That group reported a consumer confidence reading of 55.4 in January, near a five-year low. By comparison, Americans earning more than $125,000 reported a reading of 94.9.