The United States was built on the promise of equality of opportunity and on the belief that each generation could do better than the one that came before. Despite the Great Recession, public opinion polling shows that nearly seven in 10 Americans remain convinced of the existence of the American Dream and their ability to achieve it, according to a 2011 Pew Charitable Trusts study, Economic Mobility and the American Dream: Where Do We Stand in the Wake of the Great Recession.
Americans are also fairly united in their definition of that dream and consider access to a high-quality education, especially college, to be one of its most important elements. And the data suggest they are right: Although a variety of factors across a person’s lifetime promote movement up and down the income and wealth ladders, educational attainment, especially postsecondary education, is a key driver of economic mobility.
For much of the last decade, The Pew Charitable Trusts has studied the health and status of the American Dream, and the findings have been mixed. On the one hand, most (84 percent) working-age adults have higher family incomes than their parents did at the same age. On the other hand, those raised at the top and bottom of the income spectrum are highly likely to remain there as adults, and only 4 percent of those who start at the bottom make it all the way to the top. In other words, the American rags-to-riches story is found more often in Hollywood than in reality.
Mobility for All?
One factor that strongly increases upward mobility is postsecondary education. Ninety percent of people raised in the lowest income quintile who earn a college degree leave the bottom, compared with just half of their peers who have only a high school diploma, and 57 percent overall. In fact, having a four-year college degree more than triples a person’s likelihood of moving from the bottom rung of the family income ladder to the top, and more than quadruples his or her chances of rising to a similar level of the wealth ladder, notes a College Board study, Education Pays 2013: The Benefits of Higher Education for Individuals and Society.
Postsecondary education improves the mobility outcomes for middle- and upper-income students, too. Adults with a college degree are more likely to exceed their own parents’ income and wealth across all levels of the income ladder. And at the same time, a four-year college degree protects against downward mobility. Of those raised at the top of the income ladder who have a college degree, more than half remain at the top as adults, compared with only a quarter of their peers without a college degree, the College Board study notes.
Education matters for mobility, in particular, because it affects financial security; the wages of college-educated workers have been growing, and doing so at a much faster rate than those of workers with only a high school diploma. In 1971, young men with college or graduate degrees earned 25 percent more and young women earned 43 percent more at the median than their peers with high school diplomas, according to the College Board study. By 2012, those figures had jumped to 70 and 82 percent, respectively, and the median earnings gap between workers with a high school diploma and those with a college degree was more than $21,000 annually, according to an Urban Institute study, Higher Education Earnings Premium: Value, Variation, and Trends. Further, those with college degrees are more likely to have certain employer-sponsored benefits, including pension plans and health insurance, which boost economic security, says the College Board study.
Furthermore, despite repeated speculation over the past few years that, in the wake of the Great Recession, earning a degree was no longer a good investment, the data show that a college education remained beneficial during the economic downturn. Even those who graduated from college during the recession had lower unemployment rates and higher earnings, and were working more hours each week than their peers without a four-year degree.
Challenges Remain
Still, although higher education remains a good investment, today’s education-related challenges have become increasingly complex. Lifelong opportunity is not only the result of getting young people, especially those with the fewest resources, to college, but also getting them through to earn their degrees. Children raised at the bottom and the middle of the income ladder are less likely to go to college than those raised on the upper rungs, and less likely to graduate when they do enroll. Nearly 80 percent of children in the top income quintile go to college, and 53 percent eventually graduate. By contrast, just 34 percent of children at lower income levels enroll, and just 11 percent graduate.
And even among those who do graduate, mobility requires being able to build financially secure lives and families, which can be undermined by the cost of the same college degree that imparts so much opportunity in the first place. Unlike Americans generally, those in Generation X—born between 1965 and 1980—who have exceeded their parents’ income and have college degrees are less likely than those without degrees to surpass their parents’ wealth, mostly due to student loan debt, according to a Pew study, A New Financial Reality: The Balance Sheets and Economic Mobility of Generation X. And today, 49 percent of all Americans who say they worried about their finances in the past year—and have student loan debt—reported that their concerns included paying those loans.
Despite these challenges, college attainment supports financial security and remains a key element of the American Dream. Although many scholars have correctly noted that a four-year degree is not a necessity for engaging in meaningful work and earning family-supporting wages, it remains a critical goal in reducing the barriers to enrolling in, and completing college, and having a successful start to life. For many, achieving the American Dream depends on it.
ERIN CURRIER is director, financial security and mobility, The Pew Charitable Trusts.