Many people believe that poor decisions lead to poverty. A new study, however, finds that exactly the opposite might be true: that poverty leads to poor decision-making skills.
Published in the journal Science, the study concludes that those who live in poverty are so consumed with the worries that accompany with destitution that few mental resources are available to make decisions regarding other important activities such as education, job training, and time management.
“Previous views of poverty have blamed poverty on personal failings, or an environment that is not conducive to success. We’re arguing that the lack of financial resources itself can lead to impaired cognitive function. The very condition of not having enough can actually be a cause of poverty,” said University of British Columbia professor Jiaying Zhao, who co-authored the study as a Princeton University graduate student.
Conducted in a New Jersey mall with 400 subjects chosen at random, the first set of experiments divided participants into a “poor” and “rich” group, depending on their annual income. They were each given different financial problems to solve – such as handling a sudden car repair – that ranged from easy to hard. In addition to these trial scenarios, the subjects also performed regular intelligence and cognition tests.
The results showed that when given easy financial problems to solve, those in the low-income group performed just as well as the high-income participants. When given hard financial problems to think about, however, the “poor” group performed significantly worse on the cognitive tests compared to the “rich” group.
In order to carry out the experiment in a natural context, 464 sugarcane farmers in India were also tested for their cognitive abilities. Since at least 60 percent of their income comes from their annual harvest, the farmers were tested before the harvest, when they are considered “poor”, and after the harvest, when they are considered “rich”. The results indicated that the farmers performed significantly better on both cognition tests after the harvest compared to before the harvest.
These findings, concludes Zhao, indicate that pressing financial concerns have an immediate impact on a person’s cognitive capabilities. On average, a person preoccupied with money problems exhibited a drop of as much as 13-point dip in their IQ, the equivalent of losing an entire night’s sleep.
Co-author Eldar Shafir, Princeton professor of Psychology and Public Affairs, explains that the experiment was controlled in such a way that the difference in performance could not be attributed to time available, nutrition, work effort or stress.
If accurate, the paper’s findings would have profound implications for public policy and services to the poor. Eliminating confusing and time-consuming forms, providing flexibility in terms of absenteeism, and giving more assistance in training and educational programs could be some of the ways to begin modifying existing aid programs, suggested the researchers.
– Nayomi Chibana