Prominent economist Justin Wolfers has pushed back against Treasury Secretary Scott Bessent’s declaration that America’s “K-shaped” economy is dead, calling on the official to “be a little more honest” about inflation and overall income distribution.
Challenging the Wage Data
Bessent recently cited data showing that weekly earnings for lower-wage workers grew by 5.5% to argue that the economic divide is closing. However, Wolfers, on his YouTube channel, pointed out that these figures fail to account for price increases.
“Scott, next time be a little more honest. Adjust the numbers for inflation. When you do that, you’ll see that folks are barely keeping up,” Wolfers stated.
He added that evaluating economic division requires looking beyond wage distributions to examine how national income is divided between workers and capital owners.
Paychecks vs. Portfolios
According to Wolfers, focusing solely on paychecks misses the primary driver of inequality: capital income. While the top 10% of families receive two-fifths of labor income, they claim four-fifths of all positive capital income, including dividends and capital gains.
“Both paychecks and portfolios are real, but they’re not the same economy,” Wolfers explained, emphasizing that ownership income has grown dramatically while labor income lags behind.
For most families, economic well-being depends entirely on wages, whereas the wealthy gain primarily from asset ownership.
Record Low Labor Share
Underlying this structural divide is a historic drop in labor’s share of national income. Out of every dollar produced by the U.S. economy, only 54.4 cents currently go to workers as wages and benefits—the lowest share on record.
Historically, workers received closer to two-thirds. Wolfers calculated that a five-percentage-point decline translates to roughly $10,000 less in annual wage income for the average worker relative to historical norms.
“The economy grew, companies grew, the pie grew, but the share of that success… that arrived as paychecks… shrank,” Wolfers concluded.
How Have Markets Performed In 2026?
The S&P 500 index has advanced 13.71% year-to-date. Similarly, the Nasdaq Composite index was up 15.35%, and the Dow Jones gained 11.28% YTD.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq 100, respectively, closed higher on Thursday. The SPY was up 0.70% to $777.88, while the QQQ advanced 1.16% to $732.07.
Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), also ended 0.14% higher at $537.91 on Thursday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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