What is K-Shaped economic recovery and how it relates to our emotional financial journey?
The world will at some point in 2021 try to recover from the COVID-19 recession of 2020. Already the economic analysts are predicting that this is going to be a K-shaped recovery. This is what happens when different sections of the economy experience different recovery rates, times, or levels. The opposite would be an even recovery across sectors or groups of people. What this means is we are in for more than just “getting back on our feet” together. The K-shaped recovery has an impact on economic structure of the broader society, fundamentally changing how we see ourselves as a society. It depicts the path that some parts of the economy will take, heading up, and then it also predicts different economic sections to experience and even greater downturn.
Image by Sabrina Jiang © Investopedia 2020
What you can see from this chart is that the recovering industries will create a disparity between those who work for them and those who work for the industries that are still in need of assistance. Friends who once were at the same economic level in different industries may suddenly find themselves at different financial levels than previously equal friends. The lower half of the K represents the decimation of not only entire industries, food and dining, events, hospitality, but the financial security they offered to millions of people.
My client who has worked in the fashion and clothing industry for the past 20+ years is dejected. Even prior to COVID19 that industry was barely surviving. Now with the pandemic, the company is practically on life support. Staff have been laid off, entire orders have been lost, and they are left wondering what will happen next. There is no sense of security a director’s position would normally offer you. Because of this work uncertainty, she has been struggling to keep her perspective and has been experiencing a whirlwind of emotions. On the one hand she considers herself to be lucky that she is still employed. If it wasn’t for a fluke that a major distributor was required to accept an order that then sold in record time, her department would have gone under. In her case, even though she is on the bottom stroke of the K, she has a sense of financial survivors guilt because she still has a job, while struggling with emotions that it may not last until retirement. While she had to take a major pay cut to help the company survive, she understands that she is one of the lucky ones to still have a job. Having conversations with colleagues about still being employed has been extremely difficult. Meanwhile she is grateful her children work in technology and as essential workers.
How is the uneven economic recovery felt at the individual level?
What this example shows us is that just because you are on the bottom of the K in your work area, you can still suffer from survivor’s guilt and celebrate your family’s or friends’ position in the recovering industries but still fear for your own position. In other words: It is going to create a huge fluctuation in personal emotions.
Originally this pandemic created a fight, flight or freeze stress response and now, with a ½ recovery predicted “just around the corner” many are unfortunately settling into the next phase of financial PTSD, with little sign of a quick fix. Even worse, it will widen the socioeconomic gap all the while increasing the emotional toll of the depressing economy. Managing those difficult emotions will fall to the individual’s responsibility to process, accept and pivot away from the ones that don’t serve them Being able to be aware of your own feelings and your overall financial psychology will help you in the coming phase keep a more balanced perspective and be less reactionary to the difficult and negative emotions evoked by the K-Shaped recovery.