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Good news! Massive investment in AI has made American households on average richer, and will continue to do so for years (if not the next decade). Bad news? The gains will only strengthen the K-shaped economy in the medium term; any improvement in the fortunes of medium to low income earners has been minimal.
AI has delivered a more than 7% increase in household wealth for US consumers, Oxford Economics CEO Innes McFee told the Global Economic Outlook conference in London this week. However, this “strong growth” has largely landed in the pockets of high-income Americans.
The “wealth effect” produced by blockbuster spending on AI (Households feel richer because the value of their assets increases, and thus increase their spending) will stabilize the K-shaped economy, probably until 2035, McFee later said luck in an exclusive interview. A K-shaped economy is a phenomenon where the fortunes of the rich are trending higher, while those at the lower end of the income spectrum are gradually sinking.
In 2025, the idea of this diverging economy is supported by research from the likes of Moody’s chief economist Mark Zandi, who notes that the economy is just around the corner. exclusively motivated by sentiments of “good to do.”
And while AI has the potential to one day help close the inequality gap, living standards will continue to face them.
Asked if the AI boom will strengthen the K-shaped economy in the coming decades, McFee replied: “Absolutely. In the long run, AI can be a driving force in bringing the two groups closer together but to see that, you have to see the productivity improvement at the lower level. standards of life.”
He added that the merger may not happen in the next five or even 10 years, “eventually it may bring things, but in the meantime, through the impact of wealth, through investment and all those things, it is unlikely that AI will help everyone in the K-shaped economy.”
Echoes of the K-shaped economy can be traced back decades: The Fed began monitoring the distribution of household wealth in Q3 2010, and reported that total wealth equaled $60.76 trillion. Of that, the top 0.1% own $6.53 trillion, and the top 99% to 99.9% own $10.75 trillion. In contrast, the bottom 50% shared only $330 billion.
Fast-forward to Q3 2025, the wealth of the bottom 50% grew by 1,189% to $4.25 trillion—though still significantly behind the wealth held by even the top 0.1% some 15 years ago. The top 0.1% saw their wealth grow 281% to $24.89 trillion, nearly six times the wealth held by the bottom 50% united.
‘Breaking’ middle skilled jobs
Modeling suggests that AI adoption by businesses is likely to be an S-curve, starting slowly and then rising rapidly before gradually leveling off. According to Oxford Economics modeling, there will be no full integration of AI in businesses, as it cannot be used to replace physical trade jobs.
As a report from the Penn Wharton Budget Model Observed last year, the adoption of AI will increase in the early 2030s due to the reduction of the remaining opportunities to use additional AI tools productively.
Protection from AI for trade jobs (and indeed, the potential boon data center represents for such as plumbers and electricians) means that a “vacuum” of some roles will occur in the coming years, McFee said.
“We saw that after the financial crisis for a variety of reasons,” McFee said luck. “You’re going to see a lot of employment growth at the lower end of the distribution and at the top, but in the middle, maybe a decline in job growth. That’s because the middle-skilled jobs are where you can replace tasks with something like AI. You need critical analysis, you need the ability to question things, which tends to come at the top of the skills distribution.
