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How the Mental Drain of Poverty Undermines Economic Opportunity

This post continues our new blog series on poverty. As our nation reflects on its progress in fighting poverty over the last 50 years, this blog series will highlight how psychology can contribute further to this discussion.

By Lisa A. Gennetian, PhD (Senior Researcher at National Bureau of Economic Research & Associate Research Scientist at NYU’s Institute for Human Development and Social Change)

Why people in the U.S. remain poor is hotly debated.  One view is that individuals have choices and they either “pick themselves up by their bootstraps” or engage in behaviors that increase the risk of becoming or staying poor.  Other views point to low human capital (with income gaps starting as early as age two), structural barriers such as inadequate transportation or services, and personal impediments such as domestic and drug abuse.

However, some of the most innovative research in poverty suggests a different view; one that turns these prior views on their heads.  Whereas choices, education, and personal circumstances, may each or in combination explain why Americans fall into poverty, this alternative view proposes that the context of poverty alone, whether born into it or not, creates a psychological trap.

The argument follows that if you are poor, you are constantly juggling time and money. Small financial mishaps quickly transform into a long term abyss, and this financial tightrope contributes to a mental tightrope.  The attention you have to pay to bills, to showing up to a job on time and performing on task, being a responsive parent, reading to your children, remembering and then following through with taking your medicine easily, often unintentionally gets cast aside to focus on the immediate crisis at hand.  These decisions and actions, doing them deliberately and consistently, are a challenge for any human being; who wants to spend the day sorting through and paying bills?

It is not only harder for the poor to do these things because money is tight but also because having the mental room to proactively think, act and follow through is even tighter.  As colleagues Sendhil Mullainathan and Eldar Shafir describe in Scarcity, attention and self-control are limited resources, and the context of poverty drains them further.  How else could one explain that IQ—most commonly characterized as a hereditary trait—shifts when primed to consider financial dilemmas depending on whether you are rich or poor as shown in a recent set of clever lab and field experiments?

Now consider that people living in poverty are not only living on very low incomes, but the income they rely upon is often erratic, and almost always unpredictable.  The slow growing global economy implies more part-time shift work with unpredictable schedules.  Monthly, predictable public assistance payments are under political and budgetary pressure or contingent on work which is hard to come by these days.

As my colleagues and I show in our recent research, it turns out that overall income instability is highest among both the poorest families and the highest income families. However, the stakes are markedly different. First, the experience of income instability has increased more dramatically over time for the poor as compared to the rich, with the gaps increasing nearly fourfold since the 1980s. Further, whereas earnings are the source of income instability for the poor, interest and property income is the source of instability for the highest income families. For the poor, the consequences of such income instability may mean skipping a meal and forgetting to submit the form for their children’s free or reduced lunch or not turning in a slip required to receive a benefit. For the rich, it may mean delaying the purchase of an aspirational second home.

The great irony is that even though money and mental bandwidth is tighter for the poor, we ask more from them. Information pamphlets are dense with words and numbers, social services are often physically not co-located, and determining eligibility almost always requires multiple types of formal documentation. This not only has implications for direct investments in children, such as universal early education, but also for today’s political and policy emphasis on economic opportunity and mobility. To assume that parents struggling with poverty can deliver their children to school on time every morning, show up to parent-teacher meetings, read a handbook, and say at least 100 words a day out loud to their infant (as many well intended early childhood interventions are designed to do) is unrealistic.

As we learn more about how the poor fall or slip into financial traps and that the experience of poverty itself creates cognitive traps, we would do well to understand that following through on the actions needed to climb out of poverty are even more difficult.  They may need assistance with prompts, structuring decisions so that the default weighs in favor of the outcome, feeling positive as compared to victimized, or making these tasks fluidly fit into the day-to-day realities of their lives.

We do not have a very good understanding as to why parents and their children who can benefit the most from anti-poverty programs, often do not experience the full dose that they were designed to offer. Even when we pay parents to show up, or tie dollars to behavior like school attendance as they tested in NYC, follow through is mixed, as are impacts on outcomes. Prevailing theories oriented around choices, education and barriers help chip away at some of the dilemmas of less than full engagement, but only get us part of the way there.

As I argue with colleague Eldar Shafir, a perspective on poverty that recognizes the psychological context of being poor and of experiencing income instability starts to shed light on ways to redesign promising programs to help them achieve their intended effects.  Whether called a behavioral view or a behavioral economics view, this type of interdisciplinary blending of psychology and economics offers a new framework to tease apart the decisions and interactions between poor individuals and the programs designed to help them.

Solutions arising from behavioral economics have shown surprisingly remarkable success on financial behavior, nutrition, exercise, and smoking, to name a few.  Efforts to do so, including a project funded by the Administration for Children and Families and a recent collaboration in the School Reform and Beyond Project, are steps in the right direction.  It is time to start building the evidence needed about the potential power of bringing both the best principles of psychology and of economics into the domain of American poverty.


Dr. Gennetian is an Associate Research Scientist at New York University’s Institute for Human Development and Social Change, and Senior Researcher at National Bureau of Economic Research. Dr. Gennetian also currently serves as an Associate Editor for the journal Child Development and priority area investigator for the federally funded National Center for Research on Hispanic Families and Children. Her current work focuses on the impact of income instability on the lives of poor families and their children, and implications for the design of social policies and programs. She has served as Principal Investigator on several large multi-year federal and state funded initiatives including most recently the National Study of Early Care and Education; the Moving to Opportunity study examining the long-term effects of housing vouchers and neighborhood poverty on adult and youth well-being; and, the Behavioral Interventions to Advance Self-Sufficiency project applying and piloting behavioral economic informed design in social programs. Dr. Gennetian’s early research on the causal effects of income, employment, and child care on the development of children and youth, as a Senior Associate at the social policy research organization MDRC, set the foundation for MDRC’s current division of Family and Child Well-Being. Her research is published in leading peer-reviewed journals in developmental psychology, economics, public policy and social work, and her research has directly informed state and federal policymaking through a variety of legislative and congressional testimonies. Gennetian previously held positions as Managing Director, Poverty and Economic Mobility at ideas42, an applied behavioral economics social impact laboratory; Senior Research Director, Economic Studies, The Brookings Institution; and Senior Research Associate, MDRC. She holds a PhD in Economics from Cornell University.

Image Source: Flickr user Colin Harris via Creative Commons

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