Conor Sen, a columnist for Bloomberg, argues that a “two-tier economy” is profoundly shaping affordability by creating vastly different financial realities for different income levels. In recent analyses, including during his appearance on the podcast Real Estate Conversations, Sen highlights how high earners continue to thrive and spend, while lower- and middle-income families are increasingly feeling a tight squeeze on their finances.

Key insights on the two-tier economy

According to Sen and other analysts, the two-tier economy is characterized by a “K-shaped” divergence, where wealthy consumers with high assets are seeing their fortunes rise, while the rest of the population faces increased financial pressure. This split is driven by several factors

For high-income consumers (“the haves”):

Strong spending power: Wealthy consumers are buoyed by high asset prices in stocks and real estate. The market melt-up, fueled by investments in areas like artificial intelligence, has increased their net worth.
Insulation from interest rates: These individuals are less affected by higher interest rates, allowing them to continue spending on both luxury items and daily goods.
Confidence in the economy: Their financial confidence remains strong, leading to continued investment and consumption.
For lower- and middle-income consumers (“the have-nots”):

Erosion of purchasing power: Many in this group have exhausted their pandemic-era savings. They are now hit hardest by high inflation, especially on essential expenses like food, housing, and insurance.

Shift in spending habits: This is leading to a dramatic shift in spending, with these consumers often prioritizing needs over wants. For example, some may skip meals or choose to eat at home, as highlighted by a McDonald’s CEO who noted a significant drop in traffic from lower-income customers.
Declining real wages: Wage growth in lower-income jobs is not keeping pace with inflation, further reducing real income.
Increased borrowing costs: Many of these consumers are more dependent on borrowing, making them highly vulnerable to increased interest rates.

Updated: Boston condo for sale blog 2025