A few years ago, social scientists Tom Hirschl and Mark Rank analyzed individual income trends in the US population and found that most American workers moved up the socioeconomic ladder as they got older. Based on their findings, Hirschl and Rank estimated that by age 60, almost 70 percent of the working population would experience at least one year in the top 20 percent of US income distribution and about half would spend a total of at least four years there. Wow – that’s a lot of social mobility.
Who are these people? One can assume that professionals and the highly educated are over-represented in the upper echelons, but how about folks without college degrees? Turns out that quite a few of these good people also reach the top 20 percent. Of course it takes time; most people don’t realize their peak earning potential until middle-age or later. But eventually individuals without a college degree will move up the socioeconomic ladder and if they live in a two-earner household, chances are good that they’ll get to at least the upper middle-class.
Check it out:
Brief explanation: the median is the halfway point in the earnings distribution and the 75th percentile is the point in the earnings distribution where 75% of the workers earn less.
The above table refers only to the earnings of individual workers, while terms like “middle-class’ typically refer to households. You have to look at household income to determine if someone has reached the middle-class. Although sometimes individual earnings and household income are the same, more often they’re not, because most households have more than one earner. Specifically, of the 92% of US households with at least one earner, two-thirds have two or more earners.
Per the US Census Bureau, the lower limit for the middle quintile (the middle 20%) of households was $50,000 in 2018, the lower limit for the next rung up - the fourth quintile - was almost $80,000 and the lower limit for the top quintile was $130,000. For the purpose of this post, I’m going to define middle-class as any household that has reached the middle quintile of income and the upper middle-class as any household that has reached the fourth quintile of income. And then I’m going to define the “American Dream” as reaching the middle-class or higher.
So how does education level impact one’s chances of achieving the American Dream? This chart tells much of the story:
Lessons: for those with no education or training past high school, the best chance to achieve the American Dream is to share the household with another earner (typically, a partner or spouse). People with some post-secondary education (college or vocational training) have a pretty good chance of eventually achieving the American Dream by themselves, provided they accumulate the standard raises and promotions. Most college graduates will achieve the American Dream, with or without a partner or spouse, even if they don’t quite reach median earnings for their education level.
Let’s zero in on workers at the 75th percentile of earnings for their education level. These are individuals making more than 75% of workers at the same level of education. They would be mostly middle-aged or older. If these workers lived in two-earner households and both earners had at least some post-secondary education, their household income would reach the top 20% of the US income distribution ($130,000 or higher in 2018 - that is, an average of at least $65,000 per earner).
Of course, education is only part of the story of what we earn over time: occupation, skills, work behaviors, ambition, and luck matter too.
References:
Bureau of Labor Statistics, Table 5. Quartiles and selected deciles of usual weekly earnings of full-time wage and salary workers by selected characteristics, fourth quarter 2019 averages, not seasonally adjusted. December 2019, 4th Quarter 2019. https://www.bls.gov/news.release/wkyeng.t05.htm
Hirschl, T. A. and M. R. Rank (2015) The life course dynamics of affluence. PLOS ONE 10, e0116370 DOI: 10.1371/journal.pone.0116370
U.S. Census Bureau, Current Population Survey, 2019 Annual Social and Economic Supplement. Table HINC-05. Percent Distribution of Households, by Selected Characteristics Within Income Quintile and Top 5 Percent in 2018 https://www2.census.gov/programs-surveys/cps/tables/hinc-05/2019/hinc05.xls