Some groups loom larger in the national imagination than others. It has become a shibboleth that economically left, socially conservative ex-Labour voters in the “red wall” are the UK’s political kingmakers and therefore must be wooed. Yet there is little mention of the graduate without a future, a group that first emerged after the 2010 student protests and continues to grow in numbers.

Across the UK there are nearly 5 million graduates working in non-graduate roles. The much-vaunted graduate premium – the idea that graduates earn more than non-graduates over their lifetime – is in drastic decline. New research from the Resolution Foundation shows that new graduate salaries have fallen sharply in real terms over the past two decades, while the minimum wage has risen slightly. With the exception of Stem, law, finance and management, university is no longer a guaranteed ticket to social mobility and a better life.

The collapse of the graduate premium is part of a bigger story. The British middle-class dream is falling apart as new graduates are unable to join its ranks. There exists a shrinking core – Mike Savage’s “ordinary elite”, or Guy Standing’s “salariat” – who came of age when the graduate premium was still high and enjoy high wages, own their homes and remain insulated from the worst effects of government policy. But large swaths of young people, born in the 1980s and after, have been “proletarianised” and are experiencing the jarring shock of downward social mobility. Today’s graduates, facing stagnating wages and saddled with enormous debts and an exorbitant marginal rate of tax, are far less likely to have savings or to own assets than their parents.

Hundreds of thousands of young people are either renting a tiny room in a city or living back home in their regional town with Mum and Dad. Many of these young people will gradually realise that their dream career is a mirage: all that work for a life of permanent debt and struggle.

Of course, history tells us that a desperate, falling middle class has enormous political implications. The middle classes function as a stabilising rod for society, and the crumbling of this pillar has driven the febrility of modern politics. As Phil Burton-Cartledge, a lecturer in sociology at the University of Derby, has outlined, through its ruinous economic programme the Conservative party ultimately ended up decimating its own base, digging its own political grave. If Labour does not change anything soon, it will do the same.

It is clear that many in government do not understand the material conditions that drove young people to leftwing politics, as seen during the Jeremy Corbyn years. They feel that this group is not electorally significant and is worth losing. But much like Peter Mandelson’s hubristic quip that Labour could afford to abandon the working class because it had nowhere else to go, this underestimates a potent political force. While Reform UK’s appeal to the white working class dominates the news cycles, it is these young, downwardly mobile graduates who have driven the rise in the Green vote and the collapse of the Labour vote in places such as Bristol.

Ironically, as well as shedding Corbynite graduates, Labour has also failed to win over its traditional voters in the red wall. Labour may well end up losing its old and new base. Here in Wales, I drive past the hulking shape of Port Talbot steelworks, where my father and grandfather worked, on a daily basis. The blast furnace has now closed, with the loss of more than 2,000 jobs, devastating the local economy. Schoolchildren growing up in its shadow can no longer aspire to skilled, secure work, because there will be none. They can’t be funnelled into an apprenticeship, because the Welsh Labour government has made deep cuts to the apprenticeship programme.

As industrial, productive capitalism is abandoned and Britain embraces an economic model based on finance and rentierism rather than making things, graduates and non-graduates will soon end up working alongside one another in call centres, Amazon warehouses or hospitality – the reality behind Britain’s Potemkin “knowledge economy”.

But this also presents a political opportunity. A recent briefing by the World Economic Forum stated that if this new generation of devastated white-collar workers can link up with the blue-collar workers gutted by the first wave of deindustrialisation in the 1980s and 90s, we could have a political revolution on our hands.

There is a huge opening here for a progressive party that can address these issues, but it needs to emerge soon – otherwise, popular anger will be funnelled into the right.

• Dan Evans is a sociologist and author. His latest book is A Nation of Shopkeepers: The Unstoppable Rise of the Petite Bourgeoisie