The New Poor — how secure are you from this emerging American class?


The financial crisis of 2007-2008 triggered the most ominous economic emergency since the Great Depression nearly 80 years before. During this calamity, a number of new terms and phrases began to enter the general American lexicon.

Such terms included credit default swaps, collateralized debt obligations, mortgage backed securities, over-leveraging, pricing of risk, deregulation, predatory lending, subprime and adjustable rate loans, increased debt burden, the housing bubble, hedge funds, and the shadow banking system. In addition, financial analysts identified the emergence of a new class in America, a group that they dubbed “The New Poor.”

The concept of a “shrinking middle-class” or a “middle-class squeeze” is not a particularly new idea and has been part of our economic dialogue for some time now. Large-scale trends such as outsourcing, massive layoffs, plant closings, downsizing, and corporate mergers have put many middle-class Americans at risk for several years.

However, the precipitous increase in poverty since 2007 and the soaring gap in income equality have wrought despair and desperation unequalled in recent times. It should be noted that income inequality in America was near its highest point ever just prior to the financial crisis of 2007-2008. The only time previous to 2007 when the income gap in America was wider was just before the stock market crash of 1929, which brought about the Great Depression.

Following the recent financial crisis, the poverty rates in Minnesota increased significantly each of the next five years. Today in Ramsey County, for example, one in six residents or a total of more than 88,000 people live below the federal poverty line.

Since 2000, the poverty rate in Washington County has increased by approximately 70 percent, and during a recent four-year period the number of Minnesota children classified as poor nearly doubled. Much of this data represents the emergence of the newly poor in America. What is increasingly alarming is how close so many more Americans are to joining the ranks of the poor.

In the last decade-and-a-half, approximately 20 million Americans have fallen into poverty, resulting in 46 million poor people, the largest number of American poor in our nation’s history. A July 2013 story from the Associated Press notes that 79 percent of American adults are at risk of economic insecurity, meaning that four out of five American men and women are in danger of falling into poverty at any given time.

Furthermore, a recent New York Times study illustrates that the American middle class has fallen behind the middle-class populations of several western nations. The report notes that even “the poor in much of Europe earn more than poor Americans,” a clear measure that escalating income inequality is affecting nearly every strata of American society.

In considering these disturbing trends, my mind turns to the story of a client I just learned about at Community Action Partnership of Ramsey & Washington Counties. Out of loyalty to his family, this gentleman deferred his own dreams and returned to the Twin Cities years ago at the behest of his father. Like his father and grandfather before him, he took great pride in running the family business in St. Paul’s Lowertown.

Unfortunately, he met the same fate as so many small business owners have in recent years and was forced to close the company. Sometime later, his devotion to family brought him back to the St. Paul home he grew up in to be the sole caregiver for his ailing mother. After his mother passed away, he decided to remain in the home although he had nearly depleted his life savings. In desperate need of help, he applied to Community Action’s Energy Assistance Program.

A home inspection revealed that his furnace was generating unsafe levels of carbon monoxide and would have to be replaced immediately. The client’s first notion was that he would not have made it safely through the winter without a new furnace. However, his second thought was that he would lose his childhood home as he couldn’t afford to replace the furnace.

Of course, that was before Energy Assistance staff informed him that Community Action would replace the furnace at no cost to him. The client’s response was, “Community Action not only enabled me to keep my home, but likely saved my life. To continue to live in the home of my youth has granted me a sense of security I could never adequately express in words.”

This gentleman’s story underscores the fact that most Americans, in spite of their previous lot in life, are still susceptible to the clutches of poverty. It also reinforces the importance of agencies like Community Action and other anti-poverty programs.

Finally, this story, coupled with current economic trends, demonstrates that the greatest threat to the health and well-being of each of us is poverty. We must continue to do everything within our power to set our fellow citizens on a course toward financial independence and eliminate poverty forever.


Clarence Hightower is executive director of Community Action Partnership of Ramsey & Washington Counties. He welcomes reader responses to 450 Syndicate Street, St. Paul, MN 55104.