Lower-income wages are rising faster than the ‘K’ economy

Wage growth for lower-income households may be turning a corner, according to Bank of America.

Lower-income households saw 4.7% annual growth in wages last month, compared with 3.5% for higher-income households, based on the bank's consumer deposit account data. The gains come even as the labor market cooled slightly, with annual overall payroll growth around 1.5%, down from 1.8% in July, it said.

Whether the reversal will last is uncertain, but after years of lagging wages and falling further behind, it seems lower-earning workers are gaining some ground, the bank said.

"The long-standing 'K' shape between higher- and lower-income households' after-tax wage growth has reversed," wrote David Michael Tinsley, senior economist at Bank of American Institute, in a report.

A K-shaped economy represents a persistent economic divide in which higher-income Americans pull further ahead of many lower-income households that struggle to keep up due to slow wage growth and inflation.

Lower tax withholding following the One Big Beautiful Bill Act (OBBBA) may explain part of the shift, but a strongerlabor market for lower-paid workers also could play an important role, Tinsley said.

Bank of America's deposit account data shows the rate of job switching in July was significantly higher than…

Original source: https://www.usatoday.com/money/