As it turns out, having a college degree really matters—for keeping you on the wealthy side of America’s K-shaped economy
America’s economy is growing increasingly split between haves and have-nots. Wealthier individuals are generally experiencing favorable economic conditions, while lower-income households face the impacts of inflation and . This pattern is called a K-shaped economy, and it has persisted for some time depending on the metrics used to measure it.
Over the past year, economists have identified multiple factors to conclude that today’s economy is largely defined by inequality—including rising stock prices and home values , or where inflation has been most prominent in .
However, the factor that has likely garnered the most attention is consumer spending, specifically how it differs across demographic groups. The Federal Reserve Bank of New York recently studied this topic through the lens of educational attainment, and its findings suggest that even as many young Americans consider careers not requiring a bachelor’s degree, the ability to keep up with the economy still depends at least partially on one’s education level.
In a released Tuesday, the New York Fed analyzed monthly consumer spending data for 200,000 Americans from January 2023 to December 2025. When adjusted for inflation, retail spending by those without a college degree rose by roughly 4% over that period. For college graduates, though, it increased by nearly 6%. Over the past three years, degree holders averaged a 0.14% monthly spending increase compared to the prior month, while non-degree holders only saw a 0.05% rise each month.
“Despite college graduates facing a relatively more challenging labor market in 2025, they continue to spend more than non-graduates at the same or higher rate than in recent years,” the Fed researchers wrote. “The gap in retail spending trends between college graduates and non-graduates aligns with the concept of a ‘K-shaped economy.’”
Educated spending
Spending has been a key driver of the K-shaped economy argument, as it helps explain why the economy continues to grow despite inflation and job market headwinds. According to Moody’s Analytics, the top 10% of Americans now account for around . But the New York Fed’s analysis is the first to examine consumer spending based on educational attainment.
Educational attainment has long been a major dividing line in the U.S. , their , and what their often boils down to whether or not someone holds a college degree. The finding that college graduates have greater spending power isn’t new either. Even a decade ago, Social Security Administration researchers showed that for degree holders could range from $630,000 to $1.5 million more than the lifetime earnings of high school graduates.
Yet the Fed’s new results come at a time when many young Americans are questioning whether college is still worth it. New college enrollments are declining, with reasons cited including , a , and fears that artificial intelligence could make some entry-level and white-collar jobs .
Many young Americans are choosing alternatives like community colleges, where new undergraduate enrollments those at four-year colleges last fall. Others are opting for , as some blue-collar positions are seen as well-paid and more insulated from AI.
For students deciding to skip college, recent research suggests the worst option may be dropping out entirely. Along with the Fed’s consumer spending findings, from the St. Louis Fed took a long-term look at the unemployment gap between high school and college graduates. Researchers found that high school graduates consistently face an unemployment rate at least 2.3 percentage points higher— a difference that becomes especially pronounced during economic downturns.
To be clear, while college attendees spend more than non-degree holders, this doesn’t always mean they can afford to—especially for younger graduates. With habits like “” and “,” Gen Zers overall seem more comfortable spending than saving compared to previous generations at the same age. Over the next few years, Gen Z is expected to become the , and over the next few decades, their combined income . Whatever role Gen Z college graduates play in sustaining the K-shaped economy today, it will likely grow in the years ahead.