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Tuesday
Sep112012

The Pauperization Of America

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.

On the lighter side, Big Like: Cascade into an Odyssey—a “funny as hell non-fiction book about wanderlust and traveling abroad,” a reader tweeted—dives into how I lost my moorings in Tokyo. Check it out at Amazon.

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Reader Comments (8)

"more Americans doubt that hard work brings success"

Really?

Has nothing to do with the idea that success comes from available teets to suckle.

Or no one understands how to do something for someone else?

Or that this article is pushing an agenda?

There are hard working people having success out there.

How many of em just depends on who is counting them and if success is only measured in irredeemable promises acquired by pushing agendas that get to determine what is and is not success?
September 12, 2012 | Unregistered CommenterIAMSLATTERY
Umm, re previous post: success is meant in a sense of financial success. Work as hard as you may in a low-paying job and you are not going to "succeed". In an age of open labor markets, you have to compete with a whole lot of people whose wages are much lower than yours. And, as nearly all economists agree, this will bring prosperity... to all, in aggregate. One day the equilibrium will be reached and your wages will meet those in China half way: hooray! What are you to do? Why, get a college degree of course (take a student loan if necessary). With a college degree you can become a professional and a success is just around the corner.
September 12, 2012 | Unregistered Commenterblah
A phenomenon that I have noticed is that there are fewer and fewer young people who know how to actually work. I don't mean they are necessarily lazy but they have no practical skills. They can't change a broken faucet or a broken light switch or fix a lawn mower. They don't know how to prune a tree much less grow something as simple as tomatoes.

It doesn't seem to be a total lack of aptitude as much as a belief in the technocrat lifestyle where they never saw themselves doing any real work.

On another note, we have ten thousand classic and antique cars around here. The owners are all 55+. They buy and sell to each other. From what I see, when they finally become to decrepit to tinker with their beauties, there will be absolutely NO market for them. Similar to the McMansion syndrome where people bought thinking it was an great investment and they could always sell to the next generation.. Where is that next generation? Do they even care about McMansion in an exclusive subdivision? It just doesn't seem to be their lifestyle.
September 12, 2012 | Unregistered Commentereconomicminor
White Americans must permit ALL INCOME to a person - regardless of source - to be taxed as if it were wages. The last 6yrs. have shown the Free Market is not FREE, elections are not FAIR and a bribed cop on every beat means you'r got a bribed cop! White Amercians must get it through their thick skulls that maintaining a Free Market and Fair Elections in a just Republic is expensive. Those who BENEFIT MOST must logically PAY MOST. For it is clear the Wealthiest in this nation come from a long line of venal Sociopaths who cannot be trusted with their kids' allowance much less a 401K to invest.
Soon, only GUNS will regulate markets & ensure the WHITE WEALTHY behave justly. We are but hours away from Chaos...
September 12, 2012 | Unregistered CommenterJosephConrad
"more Americans doubt that hard work brings success"
...because in my experience, it doesn't. Work and actual merit now seen almost independent of financial success. It's easier to just sell out. Or to whine about it and find some other group to blame for keeping you down (men [if you're not a man], the corporate world in general, Democrats [if you're a Republican], Republicans [if you're a Democrat], white people [if you're not a white person... or maybe you are....]) What's profitable isn't necessarily what's "hard work." Look at the music industry. Or all the major news broadcast networks.
September 12, 2012 | Unregistered CommenterRJ
This is really about vast ignorance of money and how business actually works, so getting paid less, working harder, losing employment, and pointlessly blaming the rich, rather than getting educated about money and business, and working smarter like the rich do.

Yes, there are psychopaths, and the irrationally fearful and greedy among the rich who have corrupted things, but this can be fixed if all the those who are clueless about money (most people) get educated so that they take responsibility, stopped stopped being bribed by corrupt and stupid politicians' socialist dependency, and give the politicians the choice to behave or be left behind. When the politicians behave, the crony Capitalists will also lose their crutches, and reform or fail.
September 16, 2012 | Unregistered CommenterInfnordz
Keynesianism is simply borrowing consumption from the future.
We have had thirty years of it.
This is now the future that was borrowed from.
The consumption that people borrowed now has to be paid back.
It will be done by people consuming less.
People need to consume less.
People who cannot consume are poor.
Keynes causes one generation to behave as if they are rich and the next generation to be genuinely poor.
The U.S. is poor now.
September 18, 2012 | Unregistered Commenterbill jones
If you work hard for a large company or corporation, you will see nothing.

If you work hard in a small business run under the 'old' honesty system, you will see a difference if it has not been killed by the above mentioned.

If you work hard onto something that is directly benefiting you, you will see a difference.

Conclusion? Work for yourself and no one else.

There is no need for a long dissertation to arrive to this simple observation.

I tried to get a 17 year old out of his situation by hiring him to do simple jobs in our property ($10.00/h). I also told him that he could use the tools I had to setup a small business for himself doing yard work around our neighborhood. He never showed up. His loss and soon one more of the poor around here (Low grade average, no vision of the future). To replace him (who had never done anything) I hired a young woman (25) at the same wage and same offer. In less than a month she was power cleaning driveways and replacing the usual over priced yard-care companies. She has very little education but she helps herself and works hard. If she keeps going that way. she will have her own employees - She already has her younger brother with her from time to time. There is still a place for young entrepreneurs, she is the local, living example, of that. Poverty does not seem to be in vocabulary.
December 8, 2012 | Unregistered CommenterEnglish_Wolf

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