Socialism

It's not a moral condemnation.

Marx thought revolution was an inevitability in advanced industrialised societies because the workforce was concentrated in factories which could not function without them, and where they were able to organise because they had the numbers to organise. He thought that the inevitable crises of capitalism would lead to a takeover by the proletariat because they were in a position to take over. The lumpenproletariat consists of those individuals who, like the peasantry, were too isolated and atomised to be part of this revolutionary force.

Turns out, crises of capitalism lead to fascism because they happen when labour is at its weakest (when capitalists have bled the population so dry they have to blow up bubbles in the stock market to parasitise each other instead). And so-called 'Marxist' revolutions have only happened in agrarian societies, with a bit of Lenin or Mao tacked on to bridge the gap.

Marx is useful but treating his words like a theology is a mistake.

I am by no means an expert, and don't presume to know what they originally meant, and I wouldn't use the term myself, but not because I interpret it as condemnation, because I see it more as a (perhaps slightly misguided by modern standards) understanding that people in those groups, groups that are on the fringes of capitalism and "proper" society (by design, as a "warning" to those who don't/can't participate in the "proper" capitalist grind), often have greater and more urgent and pressing needs and concerns than organising, and less available resources to organise with, which makes them more vulnerable not only to further exploitation by capitalists, but also to manipulation by their propaganda.

This is of course a broad generalisation, and within these groups there are people who can and do organise, and within other groups are people who don't, which is why I don't think it's a good term to use, but what I think is an important take away from it is to recognise that those who are struggling the most and are facing the worst material conditions need support and solidarity before they have the time, energy, and resources (not just material, but physical and mental) to spare for the cause, rather than ire and hostility for potentially acting against their own interests (insert "we live in society" meme here).

some examples of the lumpenproletariat given are people in organized crime, sex workers, and the unemployed.

Yes, though I don’t think that was a moral judgment of them so much as a description. Marxists are generally amoral—not to be confused with immoral. (I recently posted a video on amorality in c/philosophy.)

I’m not qualified to say whether Marx & Engels were right about them not being very useful in the revolutionary struggle. Perhaps the historical record of successful communist revolutions can show us. I also don’t know whether their analysis of lumpenproletariat in their place during their time would necessarily map perfectly to our place in our time. For instance, sex workers in the modern day… it kind of depends on which country we’re talking about.

Marx' flaws caused him to hit some really fat Ls in certain aspects of his theory and this is absolutely one of them. He seems to near-consistently run into the need to unnecessarily tier stuff as being 'better' and 'worse' for reasons that are pretty much hipfires. It's the main reason I don't recommend capital as an introduction; as not only is it near-unreadable, but it's also deeply flawed in ways you won't notice if you're new. Like you don't tell your friend to start an RPG series at the first game where it's at its worst, you get them into the good one and let them come to it later once they're invested. That way they'll have tools to deal with the jank and the patience to actually stick around. Marx does have some amazing insight and learning it will practically give you future-sight, but it's insanely rough around the edges and you have to know what parts are god and what parts are god-awful in order to walk away with a complete picture.