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The psychology of poverty
Halima Tinson scrapes by well below the poverty line but owns two big-screen TVs. Is it bad decision making or is there something more behind it? Jolie Puidokas/Marketplace
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Sendhil Mullainathan is a professor of economics at Harvard University.
Imagine this: You’re at your child’s baseball game. You’ve got a deadline coming up tomorrow and its been a hard day. You want to focus on your child’s game, but you can’t. To some, you may seem like a bad parent, but you can’t shake the fact that you have things to do. This is something we can all relate to. Harvard professor Sendhil Mullainathan claims that poverty has a similar effect on people’s minds.
“When faced with financial scarcity, people’s minds keep coming back to concerns such as -- how will I pay rent this month,” Mullainathan said.
But doesn’t this apply to everyone? If you have to make a bunch of decisions, aren’t you going to be somewhat distracted? What’s so different about poor people being psychologically affected? Mullainathan said the difference is in the magnitude and intensity of that effect.
“You and I can be busy and we take a vacation from work. You can’t take a break from being poor. You can't say, 'Hey I've had enough of worrying about money, I'm just going to be rich for a couple of weeks until I've recovered,'" Mullainathan said.
However, some poor families do spend their money on things they don't especially need sometimes, like televisions. Mullainathan said a big part of this is happiness, which he claims is a scarcity for a poor household. And the things people look for to provide that happiness are individualistic.
"If someone who is poor says, 'I may not have much money, but for me what's really important is to have a good television so my family can enjoy and watch,' we should be a little careful and recognize that just like we all have individual liberty to make the choices we want, that we not judge too much on that," Mullainathan said.
He also said that poor people have less room for error when making bad financial decisions.
"Think of yourself when you're very busy. Even in those busiest moments you spent an hour procrastinating, when you knew full well you should be working," Mullainathan said.
He said we all make mistakes, the only difference is that some people have the slack to make them and not suffer the consequences.
Mullainathan said that a lot of the psychological problems poor people face come from lack of planning.
“Organizations talk about spending their lives firefighting -- dealing with the next problem without having the bandwidth to deal with what is down the pipeline. I think most of the poor have that problem,” Mullainathan said.
Mullainathan claims that although planning is a central part of poverty, poor people are better at making financial decisions than the rich and middle class.
“If you go and stop people at a supermarket and ask them for their receipt and say, ‘Hey how much did you just spend,' middle class shoppers have no idea. The poor know what they just spent," he said.
I have worked with a fair number of people who were poor and many of your points are spot on. What I found is that poverty definitely places one in a very short-term mindset. Getting through today, or next week or next month is about as far as a poor person can get. Which then helps make sense of what might seem a paradox to a middle-class person - finding happiness through treats or smallish (or even rather biggish) luxuries is for right now. That happiness is tangible and often not just for themselves but their families. So it might make eminent sense for a parent working two jobs and getting food stamps to get the big TV but not the tutoring for their child - tutoring is for a relatively far off future. The TV is for right now.
The other thing I noticed was that there was so little "room for error" or any other minor calamity in most of my clients' lives. I don't think it was a lack of planning so much as it was just plain - a lack of resources and support systems, whether those are in the form of family/friends, or a bank account or a credit card. If something happens to your beater car and you don't have a credit card, you might end up on the bus permanently. And if that happens, you might lose your "not that great a job but at least you had one in this economy" job. Basically, there's no wiggle room for crap to happen, so when it does, the poor person is affected disproportionately.
If I were the queen of this world one thing I'd love to see happen is this - we ASK what a particular person needs in terms of social safety net help and programs. I don't believe it's one size fits all. I do believe we can creatively find ways to support people in figuring out their lives, and transition them effectively to complete independence, as long as it's not too premature. Often when someone is denied all social support once they hit a certain income level, etc., they are more vulnerable to falling down the rabbit hole and not being able to crawl their way out of it.
"You and I can be busy and we take a vacation from work. You can’t take a break from being poor. You can't say, 'Hey I've had enough of worrying about money, I'm just going to be rich for a couple of weeks until I've recovered,'" Mullainathan said.
But you can take a "vacation from being poor", that is how it feels when you drop that $250 (three days pay) on that 42" LCD TV. Or order the deliver pizza for $25 (two and half hours of pay), or lease that new sofa set for a low monthly rate of $125...for five years with the ballon payment of $400 at the end to own it.
By spending on these things, you get a vacation from being poor. It feels good to buy something nice, and if you don't see the money (credit card) it feels real good.
When working with the financially troubled in my church, we tend to see a lot of little "spending leaks" on things that are luxury items. When you talk with the person you find they bought the items because they just wanted something nice for a change. Which sounds like a vacation to me.
I listen to your program on 91.7 fm radio, and although I find many of the topics informational, However, in regards to understanding welfare and poverty, omg!!! you are barely scratching the surface on all the factors, circumstances, and situations involved, I on the other hand have jaw dropping personal accounts that will shock your audience, and present a perspective not realized before, please contact me.
