Education and the Dynamics of Middle-Class Status

BradleyL.HardyAmericanUniversityDaveE.MarcotteAmericanUniversity

June 2020

“Highereducationisessentialforathrivingsociety:itisthestrongest,sturdiestladdertoincreasedsocio-economicmobilityandthelocus,throughresearchuniversities,of

mostofthemajordiscoveriesofthelasttwocenturies.”

-DrewGilpinFaust

Introduction: Education as a Pathway to the American Dream TheeconomicsecurityofAmerica’sfamiliesisacentralconcernforpolicymakers.

Benchmarksforeconomicsecurityincludeemployment,homeownership,savingsand

retirementsecurity,andfinancialliteracy.Theseindicatorsbroadlycharacterizemiddle-

classstatusand,formany,attainingandsustainingalifeinthemiddle-classisamongthe

mostimportantmeasuresofeconomicsuccess.Indeed,arobustmiddleclassisbotha

hallmarkofaggregateeconomichealthandthemanifestationoftheAmericandream.

AccesstotheAmericanmiddleclasshasbeenmadepossiblebyexpandingeducational

attainmentoverthe20thCentury(GoldinandKatz,2001).Theroleofhighereducationin

economicmobilityiswellestablished.Presently,accesstopost-secondaryeducational

opportunities—especiallya4-yearcollegedegree—isincreasinglyseenasrequisitefor

successinaneconomythatrequiresadvancedanalyticalability,facilitywithcomputers,

andstrongerinter-culturalcommunicationskills(e.g.Haskinsetal.2009;Mazumder

2012).Moreopentoquestionishowequitableaccesstohighereducationis,particularly

duringaperiodofsharpincreasesincostofattendance.Manypolicyinterventions,

includingPellgrantsandsubsidizedstudentloans,havesoughttoreducesocioeconomic

gapsincollegeentranceandcompletion(BaileyandDynarski2012).Nonetheless,equityof

accesstocollegeandtheopportunitiesitprovidesisacentralconcerninpolicydiscussions

attheintersectionofeducationandtheeconomy(Haskinsetal.2009).Atthemoment,

collegesanduniversitiesarealsobeingroiledbytheCOVID-19pandemic,withworrying

prospectsforequityofaccessandeducationaloutcomes.

Inthisreport,weprovidesomerecenthistoricalcontextrelevantforconsideringthevalue

ofpost-secondaryeducationinprovidingaccesstothemiddleclass.Welookbackoverthe

past40yearstoassesstherolecollegeeducationhasplayedinshapingentryintoand

persistenceinthemiddleclassforAmericanhouseholds.UsingdatafromthePanelStudy

ofIncomeDynamics(PSID)between1980and2017,westudyentryintoandoutofthe

middleclass,andtheroleofeducationasdeterminantofamiddle-classstability.Wealso

examinehowdemographicfactorsinteractwitheducationtopredictentryintoandexitout

ofthemiddleclass.

Toassesshowtheroleofcollegeeducationasabridgetomiddle-classstatusmayhave

changedoverthisperiod,weformfivecohortsfromthePSID.First,weidentifyall

householdsheadedbyanadultbetweentheagesof25and64in1980.Wethenassessthe

roleofeducationandotherattributesofthehouseholdaspredictorsofmiddle-classstatus

in1980.Next,wefollowthesehouseholdsfor7yearstodeterminewhetherhouseholds

withcollege-educatedheadsaremorelikelytomaintaintheirstatusinthemiddleclass

overtime.Wethenrepeatthisprocesswithcohortsofhouseholdsbeginningin1989,1999,

2005and2011.

Wefindthatoverallmiddle-classstabilityfallsovertime,andthatcollegeeducationdoes

notnecessarilycushionagainstinstabilitywithinthemiddleclass.ShowninFigure2,the

proportionofmiddle-classfamilieswhoremaininthemiddleclassfallsfromroughly62

percentto49percent(1980–1986)throughthefirst7-yearintervalofouranalysis,and

morerecently(2011–2017)fallsfromroughly60percentto50percent.Thisstylizedfact

generallyholdsthroughoutthe1980s,1990s,and2000s.Importantly,somefamiliesleave

themiddleclassbecausetheirincomesfall,andaresubsequentlybelowmiddle-class

status,whereasothersexperienceincomegrowth,climbingupandoutofthemiddleclass.

Householdswithcollege-educatedheadsaremorelikelytohaveincomeatorabovethe

middle-class,whileheadswithlessthanacollegedegreeareincreasinglywithinthe

bottomquintileoftheincomedistribution.And,tothedegreethatcollegeeducation

securesamiddle-classlifestyle,itappearstobeattheexpenseofpositioninthetop

quintileoftheincomedistribution.Forexample,bythe2010s,theshareoffamilieswitha

college-educatedheadwhofalldownandoutofthemiddle-classrisesfrom18.6percentto

24percent.Concurrently,asimilarshareofmiddle-class,collegeeducatedfamilies

experienceincomegrowth,risingupandintothetopquintile.

Finally,wedocumentimportantdifferencesintheroleofcollegeattainmentformiddle-

classstabilityacrossrace.Namely,wefindthatcollegeeducationpositivelypredictsmiddle

classstatusamongBlackhouseholdsandtopquintilestatusamongnon-Blackhouseholds.

Also,whereascollegeattainmentoperatedasachannelforBlackhouseholdstomoveup

andoutofthemiddleclassinthe1980s,thisupwardchannelappearstohaveweakened

throughoutthe2010s.

Background on Education, Policy, and the Economy Economic Change and the Role of Education Taxandtransferpoliciesatthefederal,state,andlocallevelshavebeendedicatedto

supplementingtheeconomicstatusofAmerica’smiddle-classfamilies(e.g.Gale2019;

Slemrod&Bakija2017),andeconomicsecurityranksasadominantconcernamong

America’smiddle-classfamilies.DatafromtheSurveyofHouseholdEconomicsand

Decisionmaking(SHED)indicatethatroughly20percentofU.S.familiesearningbetween

$40,000and$100,000reportanxietyabouteconomicsecurity(SHED2019).Withinthe

samesurvey,almostaquarterofBlackcollege-graduatesreporteddifficultyinmeeting

monthlybills.Concernsovereconomicstabilitypersistinthemidstofaneconomic

expansionandlowunemployment,callingintoquestionthestrengthofthelinkbetween

measuresofmacroeconomicgrowthandtheabilitytosustainamiddle-classlifestyle.

Concernsoverthedeclineofthemiddleclasshavehingedonthedeclineofmanufacturing

andfactory-basedemployment;employmentwithinthemanufacturingsectorhistorically

requirednomorethanahigh-schooldegree(Autoretal.2008;JaimovichandSiu2020).

Collegeattainmenthas,accordingly,beenpromotedinthecontemporarypolicydiscourse

asameanstocounterstructuraleconomy-widechangesthreateningmiddle-classstability

andupwardeconomicmobility.Ourworksuggeststhatcollegeattainmentisincreasingly

necessaryformiddle-classstabilityandupwardmobility,thoughbynomeanssufficientto

guaranteeeconomicstability.

TheliteratureonincomevolatilityintheU.S.sincethe1980sprovidesadditionalevidence

corroboratingabroadincreaseineconomicinsecurityandexposuretorisk.Although

incomevolatilityishighestamongsocioeconomicallydisadvantagedgroups(Hardy2017;

HardyandZiliak2014;Keys2009),volatilityamongmanyAmericanfamilieshasbeenon

therise(Dynanetal.2012;GottschalkandMoffitt1994;Hardy2017;Ziliaketal.2011).

Thisincreasehasbeenattributed,atleastinpart,tostructuraleconomicandpolicy

changes.Policychangesincludediminishedearningsprotectionstraditionallyofferedby

long-termemploymentcontracts(Dahletal.2011;GottschalkandMoffitt2009)andfewer

insurancemechanismsthroughthesocialsafetynet(e.g.Hardy2017).Lowandmiddle-

incomefamiliesmaythereforeberelyinguponresourcesthatare,onaverage,alsomore

unpredictable.

Whilecommonplacetoday,theemphasisoneducationpolicyinterventionstomaintainand

buildeconomicsecurityisrootedinhumancapitaltheorydevelopedthroughouttheearly

20thcentury.Thistheorycharacterizesindividualsasengaginginaprocessofaccumulating

andbuildinghumancapital(Pigou1928;Schultz1961),akintothewayabusinesswould

accumulatecapitalintheformofcashonhand,savings,orequipmenttobeusedinthe

executionoffirm-relatedtasks.Mincer(1958)developedthefirstpredictivemodelsof

earningsdistributionsandreturnstoeducation—humancapital—byaccountingfor

schooling,alongwithageandlaborsupply,aspotentialdeterminantsofobservedearnings.

Today,itiscommonlyunderstoodthat,giventhedemandforskillsandthedynamicnature

ofthisdemandwithinmarketeconomies,educationoperatesasakeyfactorenabling

workerstoachievehigherearnings.

Onaverage,highereducatedworkersearnmore,andinturntransmitpositive

socioeconomicoutcomestotheirchildren(ErmishandPronzato2011;Hertz2007;

Polachek2008).Inadditiontohigherintra-generationalmobilityandearningsforhighly-

educatedworkers,parentaleducationdrivesinter-generationaltransmissionofeconomic

status—bettereconomicoutcomesforchildren—drivenbyrichereconomicresourcesand

socialadvantages,strongeremploymentandsocialnetworks,improvedparentingskills,

andassociatedspillovers(Checchi2006).

Equity: Barriers to Attendance, Attainment, and Rewards

Theincreasinglyimportantroleofpost-secondaryeducationasameanstoeconomic

securityhascoincidedwithaperiodofdecliningpublicsubsidyofhighereducation

(HemeltandMarcotte,2011).Thesubsequentincreasesinthecostsofhighereducation

havehelpedcontributetoincreasingaggregatelevelsofstudentdebt.Thishascalledinto

questiontheefficacyofpolicyprescriptionsrelyingsolelyordisproportionatelyon

education.ConcernsabouttherisingcostsofhighereducationareubiquitousintheUnited

States.Anumberofstudieshavedocumentedboththeextentandoriginsofthisrun-upin

costs(BaileyandDynarski,2012,andEhrenberg,2002).Otherstudieshaveassessedthe

extenttowhichtheseincreaseshaveplayedaroleinthedeclineincollegecompletionrates

overthepastseveraldecades(Bound,Lovenheim&Turner,2010).Thisisaspecial

concernforlow-incomefamilies,whohaveexperiencedarelativeincreaseintherateof

collegematriculationoverthelate20thcenturycomparedtotheratesofstudentsfrom

higherSESfamilies,forwhomcollegeaccesshaslongbeenassured.Manylow-income

familiesaresusceptibletobeingrecruitedbyprivate,for-profiteducationalprovidersthat

haveenteredthemarketplace,inmanyinstancesleavingstudentsholdinghighlevelsof

debtandwithmixedearningsreturns(Cottom2017).

Whileoverallcollegeaccesshasincreasedforstudentsfromlower-incomefamilies,

matriculationintothenation’sselectiveuniversitiesisstillstronglypredictedbyhigher

parentalincome(HalikiasandReeves2017;Turner2017).Relatedtothis,

socioeconomicallydisadvantagedstudentsmaynotreceivethesamereturnstoeducation.

Forexample,Rothstein(2019)presentsevidencethatcommutingzone-leveldifferencesin

intergenerationaleconomicoutcomesarenotexplainedbyhumancapitalaccumulation,

butinsteadaremorestronglylinkedtolocallaborandmarriagemarkets.Likewise,Bartik

andHershbein(2018)findthatlifetimeearningspremiafromcollegeattainmentdiffer

dependinguponfamilybackgroundandappeartobelowerforchildrenfromlow-income

backgrounds.

Measuring the Link Between College and Middle-Class MobilityTherelationshipbetweencollegeattendanceandeconomicsuccessiswellestablished(e.g.

Autor2014)andhasonlystrengthenedovertimeasthereturnstocollegehaveincreased

(Mazumder2012).Still,whatweknowismostlyaboutthelinkbetweenpost-secondary

educationandstaticmeasuresofeconomicsuccess,suchasemploymentstatusandannual

earnings.Weknowmuchlessabouttherelationshipbetweeneducationanddynamic

measuresofeconomicoutcomesandstability.Tohelpfillthisgapintheliterature,our

reportassessesthelinkbetweeneducationalattainmentandthedynamicsofmiddle-class

statusthroughouttheU.S.

Centraltothetasksathandisdefiningthemiddleclass,anunsettledquestiontobesure

(Reeves,Guyot,Krause2018).Itisatonceaneconomicandsocialconstruct,asmuch

dependentuponaccesstoincomeandwealthasitisareflectionofneighborhoodlocation,

socialnetworks,andthepositivespilloversthatderiveasaresult.Inthisreport,wedefine

middleclassusingthemiddle60percentoftheincomedistribution.Bydefiningmiddle

classfamiliesasthosebetweenthe20thand80thpercentilesoftheincomedistribution,we

employadefinitionthatisinherentlystableovertime.Thisisofvalueasweassesschanges

overtime.Anadditionaladvantageofusingarelativemeasureisthatitcanlimitproblems

associatedwithmeasurementerror,intheaggregate.Thatis,ifsomeproportionoffamilies

over(under)reportincomenearthe20thand80thincomepercentiles,ourmiddle-class

categorizationwillstillincludethemiddle60percentofreportedincome,evenifthe

densityatthebottom(top)ofthedistributionisproportionallylargerthananticipated.

MeyerandMittag(2019)provideevidencethatsurveydataunderreportstransferincome,

incomparisontowhatismeasuredusingadministrativedata.Sincewerelyonthemiddle

60percentofreportedincome,thiswouldimplythatthebottom-incomecut-offforour

measureofthemiddleclassmaybeabittoohigh.Bettermeasureswouldnotchangethe

absolutesizeofthemiddleclassbutcouldchangethecomposition(i.e.somewithunder-

reportedincomeswouldmoveintothemiddleclass,displacingotherswhodidnotunder-

report).

Alimitationofourrelativedefinitionisthatitignorespotentialrealchangesintheshapeof

theincomedistribution.However,theperiodweexaminecoincidedwithrelativelyslow

growthinrealincome,andnotablechangesintheincomedistributionwereconcentrated

inthetails(Autoretal.2008;Bollingeretal.2019;Piketty,Saez,andZuckman2018).

Inordertoimplementourstudy,weusethePanelStudyofIncomeDynamics(PSID)to

investigatemovementsintoandoutofthemiddleclass,andwhethereducationservesto

stabilizepositioninthemiddleclass.Wethenexaminehowdemographicattributes

enhanceorlimittheroleofeducationinstabilizingafamily’spositioninthemiddle-class.

Informedbytheliteraturesoneducationpolicy,labormarkets,andeconomicmobility,our

approachaccountsfortheimportanceofachanginglabormarketintheUnitedStatessince

the1980s,onewhichplacesanearningspremiumonpost-secondaryeducational

attainment.Weimportantlyalsodocumentthatnotallinstabilityisbad;movements“up”

andoutofthemiddle-classaredesirable.Finally,weaccountforseparateeducationand

labormarketprocessesandexperiencesbyseparatelyassessingmiddle-classstabilityfor

Blackandnon-Blackhouseholds.Bytracingthelinkbetweenmiddle-classstatusand

educationovera40-yearperiod,ourreportcanserveasausefulcomplementtorelated

studiesthatdocumenttheevolutionofeconomic,education,andsocialpolicychangesin

theU.S.,aswellaslargerstructuraleconomicchangesoccurringoverthesametimeperiod.

Inthenextsectionofthereport,weprovideamoredetaileddescriptionofPSIDanalysis

datasample.

Description of Data Inordertoestimatehouseholdmovementsintoandoutofthemiddle-class,ourstudy

drawsupondatafromthePanelStudyforIncomeDynamics(PSID),anationally

representativelongitudinalsurveythattracksindividualsandhouseholdsovertimeto

collecteconomic,health,family,anddemographicinformation.ThePSIDbeganwitha

sampleof18,000individualsand5,000familiesin1968andhasrecentlyreported

informationonover24,000individualsand10,000familiesasof2017.Thesurveyruns

annuallyuntil1997,andbienniallythereafter.

ThePSIDallowsustoaccountforawiderangeofimportantsociodemographicfactors

throughoutourreport.Werestrictourdatatohouseholdswheretheheadisbetween25

and65yearsoldanddefinemiddleclassasthosewithfamilyincomessituatedwithinthe

middle60thoftheincomedistribution—droppingthebottomandtop20percent.We

furtherrestrictourdatatoincludeinformationonemployment,income,maritalstatus

familystructure,educationalattainment,andarangeofdemographicvariablesincluding

gender,race,age,andnumberofdependentchildrenwithinthefamily.Thisinformationis

organizedwiththefamilyastheunitofobservation,andsubsequentlylinkedwith

individualfilesusingthe1968familyinterviewnumberandtheindividualsequence

number,whichindicateswhetherornottheindividuallivesinthefamilyhousehold.

Forourstudy,weconstructfivecohortsspanning1980-1986,1990-1996,1999-2005,

2005-2011,and2011-2017.Withintheseyearcohorts,wefurtherstratifyonagevia10-

yearintervalsbetween25and65.Forexample,for25-34yearoldswecalculatethe20th

and80thpointsoftheincomedistribution,restrictingtoindividualswhofallwithinthe

middle60ofthedistribution.Thisisimportanttolimitthepossibilitythatwithin-cohort

changesinmiddleclassstatusaredrivenbycompositionalaging.DuetothePSID’sshiftto

biennialreportinginthelate1990s,weelecttoincludedatafromeveryotheryear.In

ordertotrackheadshipchangesineachcohort,weselectfamilieswheretheindividual

respondentwaseithertheheadorspouse,conditionalonresidinginthefamilyhousehold,

usingthesequencenumbervariable.Weareabletodiscernfamilycompositionchanges

overtime—specifically,whetherornothouseholdshavethesameheadandspouseeach

year,andwhetherornotindividualsmoveinoroutofthehousehold.

Main Findings: Dynamics of Middle-Class Status Across Educational Attainment Ourresultscapturemiddle-classstabilityandhowitmayhavechangedovera40-year

period.Sincetheearly1980s,Americansocietyhasexperiencedshiftsinthestructureof

theeconomy,aswellastothedesignofeducation,workforce,andsocialsafetynetpolicy.

Studentstodayhavemoreaccesstopost-secondaryeducationalopportunities,though

generallywithlesspublicsubsidythaninpreviousyearsandwithpotentiallymore

varianceinquality—particularlygiventheexpansionoffor-profitinstitutions.Itiswithin

thiscontextthatourreportconsiderstheroleofeducationasapathwayintothemiddle

class,abufferagainstfallingout,andasalaunchingpadintoevenhigherincomegroups.

Collegeconfersamixofbenefits,includingtangibleskills,labormarketnetworksand

connections,aswellasasignalofabilityandcompetencyasafuturejob-seeker.Asthe

economyshiftstowardsincreasinglyrewardingcognitiveandanalyticalskillsgenerally

associatedwith“white-collar”employment,acollegedegreewouldseemtobearequired

credentialforeconomicsecurity.Accordingly,collegeattendanceacrosssocioeconomic

groupsisontherise,andwhileeconomicgapsinattendanceandgraduationremain,

collegeisamoreegalitarianinstitutionthanitwas40yearsago.Still,suchgrowthmay

haveunintendedconsequences.Forsomefirms,sector-widegrowthinhighereducation

couldweakenthevalueofacollegedegree;firmsmayrespondbyplacingincreased

premiumoninstitutions,degreeconcentrations,andcredentialswithgreaterperceived

rigor.Thismay,inturn,potentiallyexacerbateinequalityandlowerthereturnsto

educationforsomestudents.Asaresult,itisnotaltogetherclearwhethercollegeonits

ownwillconferthesamebenefitstoallstudents,andwhetherthosebenefitswillchange

overtime.

Descriptive Statistics

1980 1989 1999 2005 2011

Mean St.Dev. Mean St.Dev Mean St.Dev. Mean St.Dev. Mean St.Dev.

MiddleClass -Headmarried?(0/1) 0.68 0.46 0.62 0.48 0.59 0.49 0.56 0.495 0.49 0.5

-Num.ofChildren 1.32 1.36 1.09 1.2 1.09 1.24 0.99 1.19 0.95 1.23

-HeadHSGrad?(0/1) 0.368 0.482 0.37 0.48 0.36 0.48 0.379 0.485 0.32 0.467

-HeadhasSomeCollege?(0/1) 0.17 0.376 0.23 0.42 0.255 0.436 0.268 0.44 0.297 0.457

-HeadCollegeGrad?(0/1) 0.12 0.325 0.176 0.38 0.2 0.4 0.21 0.4 0.239 0.426

-AgeofHead? 39.8 12.1 39.8 11.1 41.7 10.0 42.3 10.9 42.9 11.7

-SpousesWages($2018) 9,003 13,420 12,223 16,98214,978 19,005 14,975 20,221 12,664 19,201

-Hoursworked(Head) 1,879 830 2,029 819 2,081 763 2,046 830 1,830 916

n=1,325 n=1,533 n=1,732 n=1,978 n=2,249

IncomeLessthanMiddleClass -Headmarried?(0/1) 0.2 0.4 0.187 0.39 0.2 0.4 0.16 0.369 0.138 0.345

-Num.ofChildren 1.118 1.436 1.096 1.41 1.23 1.537 1.01 1.355 0.91 1.377

-HeadHSGrad?(0/1) 0.3 0.458 0.348 0.476 0.318 0.466 0.36 0.48 0.356 0.479

-HeadhasSomeCollege?(0/1) 0.09 0.288 0.149 .357 0.21 0.4 0.21 0.408 0.21 0.409

-HeadCollegeGrad?(0/1) 0.0458 0.209 .034 .18 0.06 0.239 0.067 0.25 0.084 0.277

-AgeofHead? 39.8 12.7 39.8 11.4 41.4 10.4 42.3 11.3 42.7 11.9

-SpousesWages($2018) 660 3,044 957 3,660 1,284 5,078 1,198 4,564 514 2,490

-Hoursworked(Head) 924 892 923 978 1,323 1,070 1,018 987 683 864

n=438 n=507 n=575 n=658 n=746

Webeginourdescriptionofthereport’smainfindingsbyfirsttabulatinginformationon

thesociodemographiccharacteristicsofthePSIDdatasample.Thesesampledescriptive

statisticsarerevealingwithrespecttothedemographicandeducationalcharacteristicsof

themiddle-classintheUnitedStates.Interestingly,weobservewhatarealreadywell-

documentedseculartrendsamongthemiddle-class(e.g.Cancianetal.2011;Haskinsand

Sawhill2003;ReevesandPulliam2020).Marriagehasdeclinedamongthemiddle-class,

from68percentin1980to49percentby2011,whileheadswithatleastsomecollege

attainmenthasdoubledoverthesametimeperiod,from15to30percent.Headswith

collegedegreeshavelikewisedoubled,fromroughly10to20percent.Asasignofsocietal

bifurcation,marriageratesamongthoseintheincomebracketbelowthemiddle-classhave

fallenfrom20to13percent.

Main Results: Middle-Class Status and Stability Givenourbackgrounddiscussiononthelinkbetweeneducation,labormarket

preparedness,andmiddle-classstatus,ourmainresultsbeginwithanexaminationofthe

shareofhouseholdssituatedwithinthemiddle-class,byeducation,tabulatingmean

incomeovereach7-yearseries:1980,1989,1999,2005,and2011(Figure1).Here,we

distinguishbetweenhouseholdswheretheheaddroppedoutofhighschool,hadno

educationbeyondhighschool,orattendedcollege(regardlessofdegreeattainmentor

numberofyears.

Figure1confirmsseveralimportantstylizedfacts.First,foralleducationgroups,the

likelihoodofbeinginthetopincomequintileisfalling.Sincethetopquintileisafixed

proportion(illustratedinthefirstsetofbars),thisdeclineforallgroupsisbalancebya

compositionalshiftovertheperiodtowardmorehouseholdswithcollegeeducatedheads.

Thedeclineinthelikelihoodofhouseholdswithlessthanacollegeeducationtoearn

above-middle-classlevelincomesisconsistentwithageneraldeclineinlabormarket

opportunitiesforthisgroup.Thedeclineamongcollegeeducatedhouseholdsismore

consistentwithanincreaseinsupplyofcollegeeducatedworkers,alongwithaselection

story–ariseintheproportionofhighschoolstudentsattendingcollegehaschangedthe

averageprofileofcollegeeducatedworkers.Related,therehasbeenanincreaseinthe

likelihoodofearningincomesbelowthemiddleclassforworkerswithnocollege.Thisis

consistentwithourbackgrounddiscussiononthechangingnatureoftheU.S.economyand

skillpremium.

Figure1.

Havingestablishedaninitialsetoffactssurroundingmiddle-classstatusbyeducation,we

examinethelinkbetweenmiddle-classstabilityandeducationinFigure2.Here,weagain

followindividualsover7-yearperiods,startingin1980,1989,1999,2005,and2011–and

askthequestion:Doindividualsidentifiedasmiddleclassatthestartoftheperiod

maintaintheirposition?Wefindthat,inourdata,individualsmoveoutofthemiddleclass

overtime—forbetterandforworse.Wedocumentwhatisastrikingdeclineinmiddle

classstabilityovereachcohort,andacrossaroughly40-yearperiod.Still,thissnapshot

doesnotallowustodisentanglewhetherandtowhatdegreetheweightofthedeclinein

middleclassstabilityisdrivenbyless-educatedversuscollege-educatedworkers.

Figure 2.

Inordertobetterunderstandtheroleofeducation,inFigure3weillustratethestabilityof

themiddleclassforhouseholdswithhighschooleducatedheads.Here,wefindthat,for

thesehouseholds,membershipinthemiddleclassisshrinkingovertime.Overa6-year

period,itappearsthatindividualsarerising“up”andoutofthemiddle-class(intothetop

20thoftheincomedistribution)aswellasfalling“down”andoutofthemiddle-class(into

thebottom20thoftheincomedistribution).Forexample,middle-classstatusfalls,overa6-

yearperiod,from60.3to48.7percent(1980-1986),and58.3to48.6percent(2011-

2017).Thisistruethroughoutthe1980s,1990s,and2000s.Thisisdrivenbyexitintwo

separatedirections:middle-classfamiliesriseupandoutofthemiddleclass.Forexample,

inthe1980–1986interval,theshareoffamiliesabovethemiddle-classrisesfrom19.7to

24.7percent.Overthesametimeperiod,familiesarefallingdownandout,belowthe

middleclass,wherethesharerisesfrom19.8to24.6percent.

0

20

40

60

80

100

Perc

ent

1980 1989 1999 2005 20112 4 6 2 4 6 2 4 6 2 4 6 2 4 6

% of Families Still in Middle Class after 2, 4, and 6 years

Stability of the Middle Class: 1980 - 2011 Cohorts

Inc. < Middle Class Middle Class Inc. > Middle Class

Figure 3.

Givenwelldocumentedchangestothedemandforskillsintheeconomy(e.g.Autor2014;

JaimovichandSiu2018),thedocumenteddeclineinmiddle-classstabilityamonghigh

schooleducatedadultsistobeexpected.Anincreasinglybi-furcatedeconomy,thedecline

ofunionbargainingpowerandmanufacturingemployment,alongsidearisingskill-

premiumpredictablyyieldssuchresults.Moresurprisingisthefactthat,inFigure4,we

observeasimilarpatternamongfamiliesheadedbycollegeeducatedadults.Infact,while

thedeclineinmiddleclassstabilityisnotidentical,thepercentagepointchangesacross

educationgroupsarecomparabletooneanother.Atthebeginningofthe1980–1986

periodmorecollegeeducatedfamilies(22.6percent)livebelowthemiddle-classwithlow

incomesthanatthebeginningofthe2011–2017period(18.6percent),butinboth

instancesthesharerisesto25.7(1986)and24.1percent(2017),respectively.Inthe2011

–2017period,thereisevidenceofincomegrowthliftingfamiliesoutandabovethemiddle

class,astheshareabovemiddle-classrisesfrom19.1to25percentoverthe6-yearperiod.

Thus,thenarrativeofmiddle-classinstabilityisamixedone.Mostrecently,thedeclinein

theproportionoffamilieswithmiddle-classstatusovera6-yearperiodisontheorderof

0

20

40

60

80

100

Perc

ent

1980 1989 1999 2005 20112 4 6 2 4 6 2 4 6 2 4 6 2 4 6

% of Families Still in Middle Class after 2, 4, and 6 years

Heads with no more than HS EducationStability of the Middle Class: 1980 - 2011 Cohorts

Inc. < Middle Class Middle Class Inc. > Middle Class

10percentagepoints(2011-2017),from58downto48percent;thispatterngenerally

holdsfortheprevious6-yearintervals.

Figure4.

Falling Down or Rising Up? How College Predicts Upward and Downward

Transitions out of the Middle-Class

Toprovideadditionalinsightsintotheroleofcollegeeducationasakeytoaplaceinthe

Americanmiddleclass,wenextconsiderwhethermiddleclassfamiliesheadedbyacollege

graduatearelesslikelytofalldownandoutofthemiddleclassthanfamilieswithheads

whoseeducationendedwithhighschool.Thatis,amongfamilieswhostartaperiod

earningmiddleclassincomes,weestimatewhetheracollegeeducationreducesthe

likelihoodtheirincomewillfallbelowthelowerlimitofmiddleclassaftersevenyears.We

alsoestimatewhetheracollegeeducationincreasesthelikelihoodtheirincomewillrise

aboveupperlimitofthemiddleclassaftersevenyears.Herewedefinecollegegraduate

basedonnumberofyearsofcollegecompleted–Thosereportingfourormoreyearsof

post-secondaryeducationareassumedtobecollegegraduates.Further,weconductboth

oftheseexercisesforfamilieswithaBlackhouseholdhead,andfamilieswithanon-black

0

20

40

60

80

100

Perc

ent

1980 1989 1999 2005 20112 4 6 2 4 6 2 4 6 2 4 6 2 4 6

% of Families Still in Middle Class after 2, 4, and 6 years

Heads with College EducationStability of the Middle Class: 1980 - 2011 Cohorts

Inc. < Middle Class Middle Class Inc. > Middle Class

householdhead..Ideally,wewouldprefertoexaminepatternsforotherrace/ethnic

groups.However,thisissimplynotpossible,sincethePSIDhassmallsamplesofethnicand

racialgroupsotherthanBlacksandwhites.Nonetheless,focusingonBlackvs.non-Black

householdsisinstructivebecausestructuralracismislikelymostsubstantialforAfrican

Americans.Tocarryouttheseanalyses,weestimatelinearprobabilityregressionmodels

ofthelikelihoodoffalling(rising)outofthemiddleclass,conditionaloneitherremaining

inthemiddleclassafter7yearsorfalling(rising)out,andcontrollingforhouseholderage

andmaritalstatus,cohortfixedeffectsandtime.

Race and the Likelihood of Falling Down or Rising Up

InTable2wesummarizetheresultsoftheseanalyses.Inthetoppanel,weorientthe

readerbyillustratingthatBlackandwhitehouseholdshavesimilarchancesofbeinginthe

middleclassatanypointintime.Weestimatethatbetween1980and2011,among

householdswithprimeagedheads,56.9percentofBlackfamiliesearnedincomeswithin

themiddlethreeincomequintiles,comparedto61.8percentofwhitefamilies.

Thesecondpanelillustratesanimportantdifferenceintheroleofeducationinshaping

membershipinthemiddleclass.AmongBlackfamilies,weestimatethat,in1980,

householdswithcollegeeducatedheadsweremorelikelythantheirhighschooleducated

counterpartstobeinthemiddleclass–increasingthelikelihoodby0.118.Thisisa

sizeableeffect,givenameanof0.569overtheperiod.By2011,theimpactofcollegeon

middleclassmembershipforfamilieswithBlackhouseholdheadsdeclinedabit(0.086),

butthechangeovertheperiodisnotstatisticallysignificant.Amongnon-Blacks(mostof

whomarewhiteinoursample),inboth1980and2011,familieswithacollegeeducated

headarelesslikelythanthosehighschooleducatedheadstobeinthemiddleclass.Thisis

sobecauseforwhites,collegeeducatedfamiliesareespeciallylikelytoearnincomesinthe

topquintile.Forexample,in2011,weestimate38percentofhouseholdswithwhitecollege

educatedheadsearnedincomesinthetopquintile,comparedtoonly14percentof

householdswithBlackcollegeeducatedheads.

Table 2. The Impact of College on Attaining and Maintaining Middle Class Status By Race of Household Head Household Head Race Black Non-Black Likelihood of Being Middle Class 0.569 0.618

Impact of College on Likelihood of Being Middle Class In 1980 0.118 * -0.138 * In 2011 0.086 * -0.105 *

Impact of College on Likelihood of Leaving Middle Class By Falling Out In 1980 -0.033 -0.033 In 2011 0.023 -0.018 By Rising Out In 1980 0.096 * -0.01 In 2011 -0.009 a 0.03 * Statistically significant at the 5% level a. Statistically different from 1980, at 5% level

InthebottompanelofTable2,weillustratethat,in1980,collegeappearstohaveraised

thechancesthatfamilieswithBlackheadsofhouseholdwouldseetheirincomesgrowover

time–andjointhegroupwithincomesinthetopquintile.Weestimatethatinthe1980s,

amongmiddleclassfamilieswithBlackcollege-educatedheadsofhouseholdthelikelihood

ofrisingoutofthemiddleclasswas0.096pointshigherthanamongfamilieswithhigh

school-educatedheads.Duringthe2010s,collegeappearstohaveprovidednosimilar

opportunitiesforBlackhouseholds.

Conclusion and Policy Implications ForAmericanfamilies,itishardtooverstatetheprimacyofmiddle-classstatusasamarker

ofeconomicsuccess.Yet,formanyfamilies,themiddle-classstatusisnotstable.Forsome,

thisinstabilityresultsinasharpincomedecline,whileforothersitbeliesupwardmobility

aboveandbeyondthemiddle-class.Ourreportsuggeststhatcollegeremainsasastrong

predictoroffamilyincomesatorabovethemiddle-class—thuseducationmayoperateas

someinsuranceagainstlow-income.Still,ouranalysisalsosuggeststhatasubstantialshare

offamiliesheadedbyacollege-educatedadultfalldownandoutofthemiddle-classand

intolow-incomestatus.Forthesefamilies,manywhichholddebtfromhighereducation

investments,thevaluepropositionofhighereducationmaybecalledintoquestion.Asfor

perceptionsofwell-being,collegeeducatedadultsarelikelyawareoftheincreasingly

precarityofthemiddleclass,asevidencedbyincreasingincomevolatilityaswellasthe

chancesoffallingupandaboveordownandoutofthemiddleclass.Ourdatasuggestthat

thisphenomenonhaslongexisted.However,asmoreadultsseekouthighereducation,the

cumulativedownsiderisksoflow-incomeintheaftermathofalargehumancapital

investment—aspost-secondaryeducationalaccesshasincreasedsincethe1980s—may

bringunanticipatedconsequencesforfamilieswheretheinvestmenthasnotyielded

qualitativelylarge,positivereturns.

Still,thereturnstocollegeeducationarepositive.Yet,thesepositive,aggregatereturns

maskimportantsub-groupheterogeneity;theimpactofcollegeonthechancesofbeing

middleclassvariesacrossraceandovertime.WhereascollegeappearstohelpBlacks

achievemiddle-classstatus,thesamecredentialhelpsnon-Blacks—mostofwhomare

whiteinoursample—achieveplacementinthetopquintileoftheincomedistribution.

Coincidentwithlargeeconomy-wideandeducationpolicyshifts,thelinkbetweencollege

attainmentandthechancesofincomegrowthupandoutofthemiddle-classdiminishesfor

Blackhouseholdsovertime.Whilecollegeisassociatedwithamoveintothetopquintilein

the1980s,bythe2010s,itnolonger—onaverage—operatesasatransmissionmechanism

forupwardmobilitybeyondthemiddle-class.Still,givenpovertyratesofroughly1in4

amongBlackAmericans,theimportanceofattainingmiddle-classwell-beinghasserious

implicationsforarangeofpositive,long-termsocioeconomicoutcomes(Duncanetal.

2010).Nonetheless,thissuggeststhateducationalinvestmentsmayatoncefacilitate

middle-classentryandincreaseddebtloads(Hamiltonetal.2015).

Giventhateducationandhumancapitalaccumulationofferarangeofpositivesocietal

externalities,thereport’sfindingsreinforcetheimportanceoffederalandstate-level

investmentsthatcanlowerthecostsassociatedwithhighereducationalattainment,

especiallyforchildrenfromlowandmoderate-incomefamilies.Ourresultsshowthat

collegeeducationisincreasinglylinkedtohigherchancesofmiddleorupper-income

status.Asneed-basedfinancialaidhasbecomeincreasinglyimportantforaccesstopost-

secondaryeducationforlow-incomefamilies,policymakersmightalsoconsiderthatmany

middle-classfamiliesfaceanunstableeconomicsituationaswell.

Financialandpsychiccostsareimposeduponstudentsintheeventofshortandlonger-

termeconomicshocksthatfamiliesmayface,includingmanyinthemiddle-class.Onthe

decisiontoattend,helpfulinterventionsmayincludeaggressivefinancialcounselingto

helpstudentsconnectwithloanablefundsmarkets(e.g.Bettingeretal.2012).More

substantial,costlierinterventionscouldincludegeneroussupplementalschool-level

financialaidloansandgrantsdistributedtostudentsacrossabroaderrangeoftheincome

distribution,inclusiveofmiddle-classfamilies(HardyandMarcotte2019).Toimprove

completionrates,collegescanalsoexploretheefficacyofincreasingexpenditureson

academicandstudentsupportservices,whichmaydisproportionatelyhelpstudentswho

donotcomefromaffluentfamilybackgrounds(DemingandWalters2017).College

educationmaynotguaranteeentryintothemiddle-classandbeyond,butanythingless

thanacollegedegreeincreasinglyshutsoutthepossibility.Asaresult,collegecontinuesto

serveasagatewaytoeconomicwell-being,thoughnotwithoutsubstantialobstaclesalong

theway.

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