The Pauperization Of America

Wolf Richter's picture

Wolf Richter

It’s been an unrelenting process. Survey after survey—most recently “The Lost Decade of the Middle Class“—has shown that wages haven’t kept up with inflation since the wage peak in 2000. Periods when real wages rose, for example during the deflationary stretch between March and October 2009, a godsend for struggling workers, were stepped out by the Fed, like nasty brushfires. So, families ended up making less at the end of the decade than at the beginning, a phenomenon not seen in the US since World War II. And the middle-income tier actually shrank in size—the process of hollowing out the American middle class.

But there is a new phenomenon: a ballooning lower class. It now engulfs 32% of all adults. In America! Where lower class is the unmentionable class, the class that doesn’t exist, just like the upper class doesn’t exist, but for different reasons.

Political candidates trip all over each other to promise debt-funded goodies and tax cuts—real or imaginary—to the “middle class.” They all claim that a thriving middle class is the foundation of the American economy. The middle class rules! “Everyone is in the middle class,” I was told in high school by the dad of the chick I was dating. That was in the seventies. Now 32% of all American adults find themselves in the unmentionable lower class, according to a survey by the Pew Research Center. Up from 25% in 2008. And none of the presidential candidates has even mentioned them.

A similar phenomenon is playing out in Europe, with more acute overtones. “Poverty is returning to Europe,” said Jan Zijderveld, head of Unilever’s European operations. The world’s third largest consumer products company was adjusting its commercial strategy to this new reality, he said, by redeploying to Europe what worked in poor countries of the developing world. Other stars of the industry affirmed it. “The logic of pauperization,” L’Oréal CEO Jean-Paul Agon called it [read.... The “Pauperization of Europe”].

In America, the hardest hit were young adults, of whom a stunning 39% considered themselves in the lower class, up from 25% in 2008. If trends hold for the next few years, the lower class, the politically unmentionable entity, will ensnare half of all young adults.

Education does matter but isn’t a guarantee: 41% of those with a high school education or less ended up in the lower class. But even among college grads, the trend is grim: 17% considered themselves in the lower class, up from 12% in 2008.

While upward mobility survived, despite the headwinds, there has been a pernicious economic maelstrom: “downward mobility.” The middle class has shrunk from 53% to 49% since 2008, and the upper-middle class from 19% to 15%. Only the upper class has remained stable at 2%. These movements resulted in an awful number: 38% of the people in the lower classes were new arrivals.

Political persuasion didn’t matter, however. Of those in the lower classes, 32% were conservatives, 30% moderates, and 33% liberals.

The system, it seems, has succeeded in wringing out any excess enthusiasm from those who are struggling to climb the hurdles in front of them, though that very enthusiasm is a vital ingredient in economic success:

Americans in the lower class are more negative about their current financial standing and more pessimistic about their economic future than adults who place themselves in the middle or upper classes. Those in the lower classes also are significantly more likely than other Americans to doubt that hard work brings success.

And it has had a harsh impact on the economy: 84% of the people in the lower classes cut back on spending last year. But then, 62% of the lucky ones, those that remained in the middle class, and 41% of the even luckier ones, those in the upper classes, also cut back. A sign that the tough times have left skid marks.

Yet hope has been swirling around the financial markets. The Fed keeps dangling QE3 out in front of them, and the European Central Bank has come up with its own juicy carrot. Then, just as markets reached multi-year highs, there was an ugly dose of reality. Read.... The Calamity Economy Strikes Again, But Hope Is Back In Vogue.

And here is China. Read.... China’s New Stimulus Will Unleash Inflation, by hard-hitting Chriss Street.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Bam_Man's picture

"I can hire half the working class to kill the other half."

                                - Jay Gould (American Financier)

ebworthen's picture

What did they think was going to happen when they sent entire industries and a generation's worth of career employment overseas while importing foreign labor at the top and the bottom with no concern for the CITIZENS of the nation?

Fries with that?

How would you like your steak?

The deficit can be paid down from $16 Trillion to zero?


Snakeeyes's picture

Here is a map of the counties where borrowers got screwed by the housing bubble. This is a good measure of pauperization.

Shizzmoney's picture

Things won't change until Baby Boomers' 401K are destroyed.

Young people screamed about it.  Our older leaders didn't care. 

Economists charted it.  The Big Banks who paid them, didn't care.

Politicans campaigned on it.  They were paid to say that, and not care.

Just remember, TPTB: Shit is really fun........until someone gets their eye poked out. 

The thing in Libya today is an example.   That bigger than some Muslim people mad at a really shitty and hack film made by some Jew provocateur.  People are poor.  People are hungry.  Taxes, rent, living is too high.

Life is a game of tag.  And guess what, motherfucker. it. 

Dirt Rat's picture

When the Boomers' 401ks are destroyed, we'll dust off our SDS cards and we'll all go back to our roots of radical change to the system. Tip: it won't be pretty.

Snakeeyes's picture

At least the housing market is slowly turning the corner (like the Titantic). Here is a county map of negative equity so you can see WHERE borrowers really got screwed.

imbtween's picture

and people dismissed OWS for shitting on police cars. lolz.

swamp's picture

We already saw hyperinflation with the housing market. All those families that didn't make any more on income from jobs sure made out if they owned a home and extracted all the equity which was in full tilt in California -- everyone lived on equity for 10+ years, frothing out the door of Starbucks with the whippie coffee drinks swooshing away in their SUV's. No time for civics, everything was good and they were rich rich rich spending all that money on boob jobs, jet skiis, Hawaii condos and luxury Louis Vuitton handbags all from home equity. THAT was hyperinflation of housing. The housing hyperinflation crisis is past, for renters, and it has eased up. Now the other side is feeling the pain and I have no sympathy.  As for the service I get from those who are still employed, well, let's just say on an international scale, it doesn't even rate.


Stuck on Zero's picture

The Democrats and Republicans have a solution: more impoverished immigrants with no job skills but extremely high societal costs.   That will put everyone to work.



“Rebellion to tyranny is obedience to God.”-ThomasJefferson's picture

Lower class flunkies, middle class wannabes:  Stop complaining about class warfare.  Get your pitchforks sharpened, your oil boiling, and get ready to hunt some banksters, crony capitalists, and all politicians.

Best of luck!

dannynewmexico's picture

a few years back we noticed what was coming and we adopted a

miminalist lifestyle...... much better!

No electric bill (off the grid)

no mortgage

we garden most of our food


yes we are all becoming paupers but some of us are OK with it

Quinvarius's picture

We are turning into North Korea.

Zero Govt's picture

just need a jack-boot march-by of the White House and Chairman Obumma off the golf course, into a uniform and to salute the soldiers on their way by

i think CNBC would break FastMoney to cover it live don't you think?

lynnybee's picture

i was driving the back way at the local mall last week & saw an older white woman begging with a cardboard sign.   she looked typical of  any older grandma-type woman that we all know.    she was thin with a sign in her hand begging for any food or cash.   there but for the grace of god go i.    it shook me to see it.    & yes, i did give $5, because i am fortunate, i have no debt & am frugal so i always have a little xtra cash in my purse.    my daughter tells me never to give to beggars, but, how can i not !?    i won't miss a couple of bucks here or there.   END THE  (GOD DAMN) FEDERAL RESERVE BANK, i've seen those photos of Bernanke riding in a limo, i've seen him outright lie on television, his voice quivering.   

AurorusBorealus's picture

I hope that your daughter learned from your example and has a less harsh attitude toward the poor in the future.  You did good.

Widowmaker's picture

... if your daughter is the future hopefully you won't need a sign, too.

Widowmaker's picture

Wolf, the only thing that matters is punishing terror and broken markets with suspending the rule of law, bailing out record bonuses, and fraud-secrecy.

The lower class will soon eat the upper.  Not like they can hide or are hard to find, just wait for the jester Tim Geithner coming out to say "no one saw it coming."  

What's the problem?  

Corporations are healthy -- FUCK THE PEOPLE!


swamp's picture

Lower class will eat the upper? Since when did those illiterate classes even know about the upper, consisting of the very well hidden Bilderberger types.

steve from virginia's picture


Hi folks!


This is what demand destruction looks like.


Few can buy if few have access to credit, without customers there is no business.


Managers focus on specific components of the economic cycle while ignoring the rest. They actively divert attention from the cost of inputs even as these are repriced to reflect the increased difficulty of accessing them. What is underway is 'conservation by other means' to paraphrase Clausewitz.


There is no way to finesse this process, it's entropy, a physical process, a Terminator: " It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever, until you are dead."


Until all your cars are dead, actually. America's middle class is following its supply of resources out the tailpipe. The question is what is totally destroyed first, the cars or everything else?


Sorry suckers. You've been had.

SoNH80's picture

We had a better (privately-owned, privately-financed) public transportation system in 1912 on this continent than we do today.  Just look up "interurban streetcars," "GM-Standard Oil conspiracy", etc.  BTW, who own(s) Standard Oil?  'n GM?  "Don't want to have clean, cheap private electric trolleys reaching every county seat in Indiana, Ohio, and every village in Mass. and Ct., now do we, it's bad for business..."

tip e. canoe's picture

is that analogous to the chicken & the egg question?

(btw, yr recent post on slums was most excellent)

Arnold Ziffel's picture

Poverty. Just one more reason why house prices will continue down in their inevitable correction to the mean.

Worse yet, I now hear commericals on the radio for "zero down mortgages"...."Get them while they last!" the announcer yells. As long as they hand out "stuff"---cars, houses, anything---to people who cannot afford it, the problems will only get worse and fail to stabilize.

orangegeek's picture

Reset folks.  Cntrl-Alt-Del for everyone including the top 1%.


Deflation Deflation Deflation.

Racer's picture


Bank of England’s Broadbent Says U.K. Demand Remains Weak. Central bankers demand more demand"


Stupid Bwanksters, they have hyperinflated necessities with all their queasing for PDs so the poor slaves can no longer afford stuff

Shevva's picture

Actually the problem with the UK at the moment is that the public sector workers do not want to end up where the private sector workers has been for the last few years......Working class.

They'll strike before they accept working class wages.

(O/T Does anyone know which US goverment DB I am put on when commenting here?)

Peter Pan's picture

I hate to tell you this but it's not just the pauperization of America but of the whole world.

AnAnonymous's picture

I hate to tell you this but it's not just the pauperization of America but of the whole world.

Result of 236 years of 'americanism' running...

Widowmaker's picture

There would be new banks in the last 4 years if "americanism" were true.


Metalredneck's picture

Your neighbour in Kanuckistan to the north feels the shift, and I have observed it in my peers.  Luckily for me, my home is nearly paid off, for I feel I would be unable to own a home if I had to start out now.


My gut tells me we are developing a new feudalism based on ownership of property & resources.  Scarcity mentality has been ingrained into us, and the sense that my kids will be better off than I am is long gone.


Back to tending my garden.  Thank God I like squash.

Sockeye's picture

You are a typical Canuck. Blissfully unaware that you really dont own anything in Canada. Elizabeth Windsor owns you and your "nearly paid off home". The only thing you own is the obligation to pay taxes on that albatross. There are no private property rights in Canada.
Also, the fact that you couldn't buy your own home means it ain't going to be worth what you think it is for very long. Sell it now and realize your gain or plan to become one of the unlucky ones.

Chuck Walla's picture

If you think you own your home, just don't pay your property tax. You'll find out what you own and don't own.



Metalredneck's picture

Wow.  Somebody needs to get out more.  I have a deed signed by the local Indian Chief's great  Grandfather for my property.  That, and I don't plan on using my home as a commodity, I use it to live in. If the house of Windsor wants my home, they are welcome to try.  You happy-go-lucky paranoid guys make me smile.


I love your bitter envy, though, so keep it coming!


falak pema's picture

First world blues, created by the great Ronnie-Maggie paradigm of deregulated supply side supremacy that led to outsourcing to slave labour surrogate economies; now creditor nations turning the tables on NWO's old democracies! 

Oh the irony...the Happy Few now wring their hands in panic mode with nobody to make money off once the corn of abundance goes up in hopium-dopium fake fiat consumerista smoke. Will Caymanista land become a vain pipe dream?

What was the genius of the post industrial age; the "can't lose" forever higher leveraging of the perpetual FIRE asset machine is now a millstone of derivative broke-back mountain debt that plunges Rome into dire decadence. 

Lets hope the robots of the neo-feudalista Oligarchy age do a better job ! 

I am Jobe's picture

More WMT and TT babies thru Welfare. Great Plan by Amerika. Inbred fuckers.

Zero Govt's picture

Wolfy, not sure what merit it serves trying to catagorise the working public into lower and middle classes. On this occasion your article does not show these demarcations provide any value or shining light, sorry!

This is a battle as it has been throughout history between the productive class and the unproductive (parasites). That does shine light on the situation.

AnAnonymous's picture

This is a battle as it has been throughout history between the productive class and the unproductive (parasites). That does shine light on the situation.

Throughout short history then. 236 years.

People consume. What 'Americans' call the productive class is the biggest consumer of all. And to make it worse, 'Americans' want to maintain the belief that one produces more than one consumes (infinite growth)

So here we go, actually, what 'Americans' call the productive class is closer to be the parasite than the others...

Such is the reality of US citizenism.

RKDS's picture

So here we go, actually, what 'Americans' call the productive class is closer to be the parasite than the others.


It all depends on how we're defining the word "productive."  I'm an American and I say the working man is the productive class, because he produces the products and services that are essential to our economy.  But I also know many Americans who believe it is the banker and other flippers of worthless imaginary paper without which life would go on just fine who are the productive class.

Popo's picture

Actually, I'm not even sure how Richter defines the "lower class".

What exactly constitutes "lower class" in America anyway?

AnAnonymous's picture

What exactly constitutes "lower class" in America anyway?

Their relationship and benefits from the direct environment.

Lines are clearly drawn but it is another 'American' trick to try to create an absolute level of poverty, with no regard to the direct environment.

Funnily enough, when it comes to rich level, 'Americans' jump in and suddenly, it is all relative, there is no absolute level to declare rich level.

US citizenism is as US citizen does.

Zero Govt's picture

a dustbin man gets $50,000 plus per annum in New York due to public-private-Union monopolisation (ie. regulation) of the industry

by Wolfy's gauge he's middle class but do we want to protect him from an $18,000 per annum 'working class' private sector competitior?

...not that free enterprise would get a look-in in rigged rotten New York

Widowmaker's picture

Rigged rotten New York is the understatement of the century.

joe6px's picture

Let's go Ron Paul crazy for a second (I'm a big RP supporter) and tell the truth.  The truth is that we all see the writing on the wall.  Therefore, TPTB have seen/written it for awhile.  The dollar will tank, the US will implode or decay, and the 'third world' we all wrote off while living it up will be bought up by said powers, or at least gained control of .  Those countries have become the new producers of the world.  The US is not capable of sustaining the standard of living we have become accustomed to.  Population has gone J-shaped.  There is only one way to achieve equilibrium at this point.  The economics are made public every day here on ZH.  The US will not only be marginalized, we will be made a slave/gladiator class if this is allowed to progress.  The U.S.S.R. did it.  How did that country fare?  Who will be OUR 'big brother'?  Prep now or forever forfeit your piece of whatever we become.

ElvisDog's picture

Your prediction might make sense except for the fact that every other major country or bloc of countries on Earth is just as poorly run, has leaders just as corrupt and incompetent, and is just as or even more fucked up than the U.S. of A. Why do you think there has been such a flight to safety into U.S. financial and real estate assets?

Freddie's picture

Hope and Changin - you dumb serfs.  If you watch TV or Hollywood's crap then you empowered your overlords.  Keep watchin stooges.  Idiots traded liberty for a clicker and HD.

TrumpXVI's picture

I like watchin' The Stooges.

nuck, nuck, nuck.

Ar-Pharazôn's picture

the worst thing is that you are so right.......