I came across a new economic concept called the K-shaped economy recently, which explains a lot about what’s going on today.

Picture the letter K, one arm pointing up, the other downward. There’s supposed to be a nice symmetry when the two arms cancel each other out. But the real impact of this economy on human lives is not symmetrical at all, quantitatively or qualitatively.

The economic recovery after the Covid-19 pandemic was K-shaped. Some parts of the economy, like high-tech sectors, came out firing on rocket fuel, vastly enriching a small number of people. That recovery is the upward-pointing arm of the K.

But other more traditional parts of the economy such as retail and small businesses didn’t quite recover as well. That’s the downward-pointing arm.

The two arms don’t balance each other. The K-shaped economy is one where economic recovery is unequal – a small number come out roaring, while most others limp along or fall by the wayside.

Thriving during Covid

I noticed something strange during the Covid-19 shutdowns. Many people suffered – jobs were lost, profits disappeared and many businesses folded.

Not everybody suffered, of course. Some thrived because they’re critical parts of the healthcare systems producing hospital supplies, medical equipment and pharmaceuticals to fight Covid. That’s to be expected.

But others who thrived were the high-tech, digital and social media companies.

So while the broader society was suffering, many businesses that weren’t directly helping society to recover were making record profits. This happened all over the world, and is still happening.

Except now we have another exacerbating factor – the artificial intelligence (AI) gold rush, except not everybody can play. The gold mine has been ring fenced for the elites, which are a small number of increasingly powerful companies.

These companies are being massively aided and abetted by an increasingly dysfunctional political system that’s seen the emergence of the likes of Donald Trump being given the key to their nation’s treasury.

Dilemma of the young

That’s the big picture. The smaller picture, however, is that we see all around us, and that picture looks bleak, with stories everywhere about those not winning. Many are the stories of the young starting out on their first job, while other stories are about those in their middle age trying to restart their career.

The young ones already face an increasingly tough dilemma – what subject to study and where to find a job once they graduate. Having a university degree alone is not worth much nowadays.

I remember hiring many fresh engineers 30 years ago for good jobs in a growing industry. We paid decent salaries that allowed them a good start to their life as working adults. Today, starting salaries for many of these jobs haven’t changed much, but the cost of living, especially after Covid-19, has shot up into the stratosphere.

I always wonder how young working people today survive. This is even before factoring in those who are jobless either because of an oversupply of job-seekers or because of the poor quality of their education.

Few jobs in data centres

All the recent economic investments being touted about in AI-related areas such as data centres don’t create many jobs. Just a handful is needed to keep the data centres running while the real highly-paid brainwork is being done elsewhere or increasingly by AI itself.

Much has been written recently about some business leaders urging young people to forget about university degrees but to focus instead on the trades – electricians, plumbers etc. Really?

True, we probably do have a shortage of such tradesmen because of the trend over the last few decades of choosing a university degree over a trade qualification.

Will the oversupply of millions of young people take the advice of these big business tycoons and start tinkering with pipes and wires? It’s brilliant if you’re already a licensed and qualified tradesman, but if you are only just starting out now, then good luck.

Shut out by tech revolution

Calls for this major shift towards the trades come from the people upending the world by abolishing the need for highly educated young people in the first place, the very people replacing humans with computer codes and robots.

It’s a little bit like advising people to exercise and walk more because you’re planning to buy and retire all the passenger buses currently plying the roads.

I know of a few mid-career friends who’ve been laid off and are struggling to find a suitable job. Many lost their jobs because their company and industry aren’t doing well. That unfortunately means job opportunities for which they’re qualified are also few and far between.

Disappearing jobs

Many are also being replaced by new technologies driven by AI. Such jobs are disappearing everywhere else too, and are not likely to ever come back.

A shrinking number of people are doing well in the upward arm of the K-shaped economy, even as their wealth is exploding. It’s been said that almost the entire gain in the US economy nowadays is being driven by these rich people trading and dealing with each other.

An Elon Musk or a Sam Altman or a Jensen Huang – gurus of today’s AI revolution – no longer has an impact on just their own company or industry but on the entire world as well.

Many of these people are wealthier and more powerful than some nations, while also being increasingly unrestrained by any rules or boundaries because they’re literally playing games with the economy, games that they themselves invented.

Runaway capitalism

Wealth inequality between the small number of the haves versus the rest is becoming a gaping chasm. At the same time, the generational divide among us is also increasing.

Our own younger generations are struggling to have a life like that of older generations, let alone better what we achieved.

Something is very wrong with a runaway capitalist system that allows this to happen. If this continues, the two arms of the K will just keep diverging until the inequality becomes so great that something will break.

Perhaps it’s not surprising at all that the few on the upward arm are already thinking of escaping Earth to colonise the Moon and nearby planets. They want to be as far away as possible from those on the downward arm of the K, even if it means they have to be elsewhere in the solar system.

They know when the K-shaped economy finally breaks, they wouldn’t want to be around to face the consequences.

The views expressed are those of the writer and do not necessarily reflect those of FMT.