Middle-Income Americans Struggle in the E-Shaped Economy

Published 27 March 2026

Author
Nienke Creemers
2 min read

Since 2020, economists have warned that the US economy is becoming K‑shaped, with higher earners spending more, and lower‑income consumers pulling back. Now, they’ve identified an emerging E‑shaped economy, with three distinct pathways forming as middle‑income Americans radically reduce their outgoings due to mounting financial pressure.

  • K-Economy’s Growing Wealth Gap: The K‑shaped economy highlights the divergence between high‑ and low‑income households, with the wealthy benefiting from stock gains and rising property values, while lower earners struggle with inflation and slow wage growth. Emphasising the increasing wealth gap in the K-economy, in 2025, the top 1% of American earners held a record 32% of overall net worth, while the bottom 50% held just 2.5% (Federal Reserve, 2026). And the wealthiest 20% are responsible for nearly 60% of spending in the US (Moody’s Analytics, 2026).

 

  • E-Economy Sees Middle Incomes Struggle: Recent data now suggests a distinct third pathway is forming for middle earners, whose spending mirrored that of higher earners in the immediate post-pandemic years. But with the cost of living climbing due to tariffs and inflation – alongside rising oil prices caused by the US’s war with Iran – middle-income earners are under increasing economic strain. These households are increasingly trading down, prioritising essentials, and lowering their discretionary spending.

    Meanwhile, wage growth for high- and middle-income earners is increasing at different rates, widening the income gap. It’s now at its largest in five years – rising 3.7% year on year for higher-income households in January 2026, compared to just under 1.6% for middle-income earners (Bank of America, 2026).

 

  • Low-Income Earners Still Burdened Most: Unsurprisingly, those on lower salaries face the biggest squeeze. The shift for this group is marked by a rising reliance on credit and ‘buy now, pay later’ services (causing high debts). Between 2024 and 2025, 59% of US consumers earning $25,000-$49,999 annually reported having carried a credit card balance from month to month at least once, compared to 38% of those on $100,000 or more (Federal Reserve, 2025).

 

  • What the E-Economy Means for Brands: The emergence of the E‑shaped economy signals a more complex marketplace. While spending divergences across income groups are not new, the gap is widening significantly. High-income consumers are increasing their premium spend, while middle- and lower-income households are prioritising affordability, flexibility and value.

 

Stylus members can read 10 Consumer Finance Trends to Watch 25/26 for more on consumers’ reactions to economic uncertainty.