College Grads and the Middle Class
Depending on who you ask, the definition of “middle class” can vary wildly. For some, it means that you’re hardworking, thrifty, and humble. For others, it means earning a substantial enough salary to support a comfortable lifestyle but not so much that you’d be considered rich.
New data from Northwestern Mutual’s 2018 Planning & Progress Study found that 68 percent of Americans consider themselves middle class. However, because of the fuzziness of the definition, far more Americans consider themselves middle class than technically qualify, based on income. In reality, the middle class now makes up just over 50 percent of the total U.S. population, according to a recent report from the Pew Research Center.
One of the most long-standing and trusted methods of entering the middle class has been to earn a college degree. Typically, it means higher pay, stronger job security, greater home ownership, and comparatively stable households. Those benefits have long been seen as worth the sacrifices often required, from deferred income to student debt.
And after the nearly decade-long U.S. economic expansion post the Great Recession, is now on the verge of becoming the longest on record, and unemployment is an ultra-low 3.8 percent.
But do the numbers add up? 2018 Student Loan Debt Statistics show that 44.5 million student loan borrowers in the U.S. owe a total of $1.5 trillion. The average college graduate with a bachelor's degree left school with $28,446 in student debt in 2016. [3]
And these financial stresses that afflict many college graduates today could point to a widening gap between the richest Americans and everyone else if those graduates don’t enter the job market with high enough salaries to support a middle-class lifestyle and pay off those debts.
This may indicate a shrinking middle class. In fact, the middle class is shrinking if you go by data which shows that in 1971, the middle class constituted 61 percent of the population, compared with the aforementioned 50 percent. [4]
However, the labor market is showing signs of being one of the best hiring seasons for college grads in recent years. Data shows that the rate of hiring of college graduates in 2019 is up 11% from last year. And after several years of economic growth, wages are finally starting to rise too.
In 2018, wages increased nearly $1 per hour across all industries, according to research, which analyzed payroll data from nearly 1 in 6 U.S. workers. Job switchers saw an average wage increase of 5.8 percent, or $1.90, while job stayers saw a 4.7 percent increase, or $1.34.
All this data paints a picture of a ripe job market with employers who are hiring and willing to pay well for qualified workers. That’s very good news for graduates with large college loans to pay off.
Looking forward, in the era of the “shared economy,” college graduates will most likely fine-tune their spending to become the most capital-efficient generation of all time, and the traditional view of a “middle class” economy may shift with it.
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