People who are poor expend so much mental energy on the immediate problems of paying bills or cutting costs that they are left with less capacity to deal with other complex, but important tasks, including education, training or managing their time, suggests research published on Thursday last week.
The cognitive deficit of being preoccupied with money problems was equivalent to a loss of 13 IQ points, losing an entire night’s sleep or being a chronic alcoholic, according to the study. The authors say this could explain why poorer people are more likely to make mistakes or bad decisions that exacerbate their financial difficulties.
Anandi Mani, a -research fellow at the Centre for Competitive Advantage in the Global Economy at the University of Warwick, England, who led the study, said the findings also suggest how small interventions or “nudges” at appropriate moments to help poor people access services and resources could help them break out of the poverty trap.
Writing in the journal Science, Mani said previous research has found that poor people use less preventive healthcare, do not stick to drug regimens, are tardier and less likely to keep appointments, are less productive workers, less attentive parents and worse managers of their finances.
“The question we therefore wanted to address is, is that a cause of poverty or a consequence of poverty?” Mani said.
She said her team of researchers, which included economists and psychologists in the UK and the US, tested a hypothesis: “The state of worrying where your next meal is going to come from — you have uncertain income or you have more expenses than you can manage and you have to juggle all these things and constantly being preoccupied about putting out these fires — takes up so much of your mental bandwidth, that you have less in terms of cognitive capacity to deal with things which may not be as urgent as your immediate emergency, but which are, nevertheless, important for your benefit in the medium or longer term.”
To test their idea, the team carried out two sets of studies. In the first, they approached about 400 people at random in a shopping mall in New Jersey and asked them to think about how they might solve a financial problem.
Volunteers were given an “easy” scenario — where the cost of a car repair was about US$150, and a “hard” scenario, where the repair would cost more like US$1,500. While they thought about this, the volunteers took part in puzzle-based IQ tests and tasks that measured their attention. The researchers compared the change in performance in the tests for rich and poor people across the two scenarios, with rich and poor defined as being either side of the median US household income of US$70,000 per year.
In the second study, Mani’s team carried out IQ and attention tests on 464 sugar cane farmers in Tamil Nadu, India, during cyclic conditions of relative wealth and poverty. Because of the long crop cycle for sugar cane, farmers tend to be poor just before a harvest and relatively well off a few weeks after the harvest, when they have received their annual crop earnings.
In the shopping mall experiment, rich and poor people performed equally well on the “easy” scenario, but poorer people performed much worse on the “hard” scenario — their average IQ was 13 points lower when they were thinking about serious financial troubles.