This story is part of our Map to the Middle Class project, where we ask readers what they want us to investigate about educational pathways to economic stability. This question comes from Kieran Hanrahan. He asks: What are the projections for the size of the middle class assuming current economic and demographic trends? How large or small will it be?
When I called Kieran Hanrahan to ask what motivated his question on the outlook for the middle class, he told me this: He’d graduated a few years ago from a small liberal arts college in Oregon, and while he was able to secure a good job, some of his peers have struggled.
Higher education has long been viewed as the key to higher earnings and financial security. But as college costs skyrocket, Hanrahan wonders: Will we reach a tipping point when a four-year degree is no longer worth it, when it stops serving as a ticket into the middle class?
First, it’s worth noting that talking about the middle class can be tricky because there’s no universal definition. But we know that, by most measures, there’s been serious shrinkage over the past four decades in the share of Americans in the economic middle. The Pew Research Center estimates that “middle income” families (whose annual earnings were about two thirds to double the national median) make up about 52 percent of the population, compared with 61 percent in 1970.
By Pew’s measure, roughly equal shares of Americans have been moving from middle to upper income status as have been falling into the lower income tier, but using a narrower definition of middle class paints a grimmer picture. The New York Times found that the proportion of households earning between $35,000 and $100,000 fell from 53 percent in 1967 to 43 percent in 2013. By this definition, the Times found that since 2000 more people have been exiting the middle class because they’re making too little to qualify, not too much.
No matter how it’s defined, we know the U.S. labor market is not working well for families in the middle. Real wages have hardly budged in four decades, and most of the wage growth that has occurred has gone to the highest earners, accentuating America’s economic polarization. The top 20 percent of earners saw their incomes rise by 95 percent in real terms between 1979 and 2014, whereas the middle three quintiles recorded just 28 percent growth, according to the Congressional Budget Office.
And as wages have flat lined, college costs have spiraled. Four-year institutions charged, on average, $26,120 in tuition, board and other fees in 2015-16, compared with $5,504 in 1985-86. Outstanding student loan debt now tops $1.5 trillion, according to the Federal Reserve, compared with less than $250 billion in 2003.
So what about that tipping point, when college stops being a reliable way to enter the middle class? It depends on how you look at the numbers and interpret the question.
Over at the Georgetown University Center on Education and the Workforce, director Anthony Carnevale says: “We don’t know if there’s a tipping point, but if there is, it’s pretty far off.” He adds: “The ability of college to generate a middle-class income has been growing by leaps and bounds and there’s no evidence that will it stop,” though he says the growth may slow.
The Georgetown center estimates that college graduates earn, on average, $1 million more over the course of a lifetime than high school graduates. While the Great Recession blunted some of the growth in college graduates’ incomes, Carnevale says, there is still a significant payoff from having a B.A. — and an unmet demand for these workers. His center projects that there will be at least 11 million good jobs requiring postsecondary education that will lack sufficiently skilled candidates over the next few years. Approximately 80 percent of college degrees — including in the humanities that Hanrahan’s peers majored in, such as English and History — have labor market value, Carnevale says.
But Lawrence Mishel, a labor market economist with the Economic Policy Institute, sees it much differently: “I think we’re way past that tipping point.”
Wages climbed for college grads in the 1970s and 80s, says Mishel, but since 2002 wage growth for people with a bachelors has been stagnant. In other words, if you’re a college grad entering the labor market today, “you are earning less than what your older brother or sister or cousin did when they graduated college.”
That doesn’t mean that people should be discouraged from getting four-year degrees, he says. But “jobs are really challenged in terms of the quality of them, for a wide array of the workforce, and college grads are not exempt.” A four-year degree isn’t guaranteed to land you in middle-class comfort, in other words.
With this in mind, more school districts and local governments are trying to identify lower-cost learning opportunities that can still vault students into well-paying careers. My colleague Jon Marcus has written about a push in Washington State to introduce more young people to careers in the trades. And last October, I reported from a school district in Wisconsin that’s trying to give students more information about well-paying blue-collar careers instead of blindly shipping them off to four-year colleges.
Bottom line: Until economists solve the wage stagnation puzzle, or policy makers embrace bold steps like free college, students will continue to face intense pressure to pick carefully when it comes to institution, financial aid package, college major and career path.
This story about middle class mobility was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for Hechinger’s newsletter.
It’s not a wage stagnation problem. It’s a problem of rapidly growing inequality. The rich are stealing an escalating share of national income. Look at Trump’s tax cut gift to the rich.