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A Stronger Middle Class Leads to More Investment in Postsecondary Education

President Obama Ohio State

SOURCE: AP/Carolyn Kaster

President Barack Obama speaks at Ohio State University's spring commencement ceremony in the Ohio Stadium, May 5, 2013, in Columbus. He urged graduating students to be active citizens, to fight for causes they believe in, and to be better than generations before them. The rise in income inequality and the decline of the middle class have contributed to underinvestment in higher education.

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State spending on colleges and universities has dropped off sharply in recent years. Most people blame the Great Recession and its effect on state budgets for this decline, but this misses the larger story. We are underinvesting in education because the middle class has weakened and no longer has the political power necessary to translate its desires into actions. And this underinvestment threatens our economic competitiveness as more students are priced out of college and other countries surpass us in educational attainment.

Polling strongly suggests that the American public would prefer higher levels of spending on higher education. A Brookings Institution/Northeastern University poll conducted in October 2012, for example, found that 70 percent of the public felt that a college education is very or extremely important for achieving the American Dream, with an additional 24 percent saying it is somewhat important. Not surprisingly, the poll found that 81 percent of Americans believe the government needs to invest more in America’s higher education system. Other polls show similarly high figures: The General Social Survey, for example, a longstanding academic survey, finds that 72 percent of Americans support spending more on education.

So if the public wants more education spending, why hasn’t the government been more responsive and boosted spending?

Undoubtedly, increased pressure on state budgets has contributed to the 28 percent reduction in state spending on higher education since the Great Recession began in December 2007. But other factors are also at work.

States can choose what to spend money on and at what level to set taxes, and thus have some ability to prioritize higher education over other demands. Indeed, two states—North Dakota and Wyoming—have actually increased spending on higher education since the Great Recession began. And in states that have reduced spending on higher education, cuts range from a low of just 3 percent to a high of 50 percent.

There are many reasons for these differences, including state income levels and demographics, but one underappreciated reason is the declining political clout of the middle class and the growing influence of the affluent. As incomes for the middle class have stagnated and those for the top 1 percent of Americans have exploded over recent decades, the political power of the rich relative to the broad middle class has consequently increased. As a host of studies show, in an increasingly unequal America the voices of the rich carry great weight with politicians, but the desires of the middle class are often ignored.

When push comes to shove, education spending generally isn’t as important for the wealthy as it is for the middle class. As a result, the United States spends less than the general public—and the middle class—would prefer.

Certainly the wealthy often support spending on public education, but the intensity of their support for education spending is far less than that of the middle class. That’s because the rich have greater ability to send their children to private colleges, while the middle class depends more upon public universities.

And compared to the middle class, the rich are much more concerned with keeping taxes low than with paying for public education. Indeed, as Princeton University political scientist Martin Gilens found in his study of nearly 2,000 poll questions, the wealthy are “much less supportive of taxes and government spending” than the middle class.

A groundbreaking poll of very rich Americans, roughly the top 1 percent of wealth holders, highlighted how the preferences of the wealthy and the middle class diverge on education. The authors—political scientists Benjamin Page, Larry Bartels, and Jason Seawright from Northwestern University and Vanderbilt University—found that only 28 percent of the wealthy agreed that the government should “make sure that everyone who wants to go to college can do so,” compared to the 78 percent of the general public that agreed. Similarly, only 35 percent of the wealthy felt that the “government should spend whatever is necessary to ensure that all children have really good public schools they can go to,” compared to 87 percent of the general public.

When the wealthy have more power, their preferences are more likely to prevail. This is clear when analyzing spending on education across the 50 states.

A simple look at the data shows that states with strong middle classes spend more on higher education. Figures 1 and 2 show that the 10 states with the strongest middle classes—defined by the share of income going to the middle 60 percent of households—spent more on higher education, both as a share of the budget and gross domestic product, or GDP. In 2010 the 10 states with the strongest middle classes the year before spent, on average, 10.5 percent of their budget and 2.05 percent of their GDP on higher education. In contrast, the 10 states with the weakest middle classes averaged expenditures of 8.8 percent of their budget and 1.53 percent of their GDP.

Critically, these results hold even when controlling for other factors that influence education spending.

Specifically, in a regression analysis that controls for other factors that affect education spending, such as state income levels, the share of the population comprised of people of color, and the age distribution of the state, states with stronger middle classes spend more—as a share of their economy and of their budget—on education. We find that a 1 percentage-point increase in the share of income going to the middle 60 percent of income earners is associated with a 0.1 percentage-point increase in the share of the state’s budget spent on higher education and a 0.015 percentage-point increase in the share of the state’s GDP spent on higher education in the next year.

These results are consistent with a more detailed report we wrote in November 2011 on elementary and secondary education, “Middle-Class Societies Invest More in Public Education.” Those interested in on our methodology and data can consult the appendix of that report for more details.

The economic future of the United States is intrinsically tied to the future of American education. In the era of heightened global competition, the United States needs to make sure that all of its citizens are prepared to seize the economic opportunities of the future. Ensuring the American population is well educated is vital to that effort.

Just as the need for a well-educated workforce is highest, however, the United States appears to be failing in this effort. While other countries have worked to ensure that their citizens have become more educated, education levels in the United States have stagnated in recent decades, and part of that stagnation is because we are underinvesting in education.

As of 2010 about 41 percent of Americans between the ages of 55 and 64 had at least a college degree, while the college-educated share of Americans between the ages of 25 and 34 was only slightly higher at roughly 42 percent, according to data from the Organisation for Economic Co-operation and Development. This small difference means that the United States has not made significant increases in college attainment in recent decades.

Compare this stagnation in college attainment to the large gains made by our neighbor to the north, Canada, whose middle class has remained relatively strong. Similar to the American population, about 42 percent of Canadians between the ages of 55 and 64 had at least a college degree as of 2010. Fifty-six percent of Canadians between the ages of 25 and 34, however, had at least a college education—a gain of 14 percentage points. While the United States has stagnated in terms of college-graduation rates, Canada and others have succeeded in furthering the education of their citizens.

Increased access to higher education is often described as one of the remedies for the current historic level of income inequality. But as this analysis shows, the rise in income inequality and the decline of the middle class has skewed public policy toward the wishes of the rich and contributed to underinvestment in higher education. This suggests that strengthening the middle class will require not only policies that directly help the middle class—such as investments in education—but also political reforms to ensure that the voice of the middle class is heard.

David Madland is a Senior Fellow at the Center for American Progress. Nick Bunker is a Research Assistant with the Economic Policy team at the Center.

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