Research Paper on Poverty

Research Paper on Poverty: Introduction

Poverty can be described as not being able to afford the things that is accepted as basic needs in the place and time the person lives (Smith, 1937). Therefore, it is hard to give a clear and strict description of the context of poverty. Some things like tap water can be evaluated as luxurious at the time but could be accepted as one of the main basic needs today. Therefore poverty definition can change with time. Also, it is highly affected from the place where individuals live or the financial situation of other people around them. The basic needs that poor people don’t have are the things that you can actually live without them. However, because these needs are accepted as normal in our environment, we expect to have them such as clear tap water in our home or a shirt. Poverty is evaluated as a serious problem today. In the U.S., a hundred million people, nearly one third of the nation suffers from poverty (Shafir, 2017). Data suggest that 21.2 % of the population in Turkey live in the poverty line (TUIK, 2018). Unexpected issues and urgent needs like medical care are the most challenging part of the poverty. Low sales without insurance and not having any savings create an environment that the poor has to deal with monetary issues every day. This constant struggle of money leaves no space in the poor life for any other things and creates a cognitive load. In addition to these constant struggling, there are many other stressors in their life such as noisy and unsafe environment, insufficient health care, sub-standard housing systems. These situation creates a chronic stress and affect the behavior of the poor. When the poor manage scarcity constantly, their attentional resources are occupied with monetary problems and these affects their decision making processes. Concerns about money, comes to the mind of the poor spontaneously, and cannot be suppressed easily. These concerns can interfere with other experiences and may result in low cognitive performance.

The Effects of Poverty on Cognitive Functioning

Mani et al. (2013) suggested that poverty decreased the cognitive function of people. They proposed that since humans have a limited cognitive capacity and because the poor has a lot of monetary concerns that demands their cognitive resources, they have troubles in cognitive functioning which is deepen their poverty even more. In order to test their hypothesis they conducted series of laboratory studies. In all experiments, family income of participants were divided by the square root of family number in order to calculate a poverty index and split this variable into “rich” and “poor” through the median. In the first experiment, 101 participants were presented four different financial problem in order to create a monetary cognitive load. When participants were thinking these scenarios, they were asked to do the Raven's Progressive Matrices and spatial compatibility task (both are nonverbal tasks) in order to measure their cognitive capacity. Some of the scenarios were hard and some of them were easy. In hard scenarios, monetary problem was related to high cost of money and in easy scenarios vice versa. Results revealed that in easy scenarios, the performance between poor and rich was similar. On the other hand, in hard scenarios the performance of poor significantly decreased compared to rich. These results were consistent between Raven's Progressive Matrices and spatial compatibility task. In order to rule out the math anxiety effect, in experiment 2 they used the same set of numbers but with nonfinancial scenarios. In experiment 3, poor group receives $0.25 for each correct response. Finally in experiment 4, participants were conducted the task after they gave response to the relevant scenario in order to rule out the intervening effect. In all those experiments, the results were consistent. Poor performed worse after a hard monetary scenario. The laboratory manipulations do not correctly represent people's real monetary problems. In order to solve this issue researchers (Mani et al., 2013) conducted a field study with sugarcane farmers by comparing their cognitive function in pre-harvest (when they are poor) and post- harvest (when they are rich). Researchers controlled the calendar effect by recruiting farmers who have different harvest seasons. In order to measure cognitive performance, Raven's intelligence test and a numerical Stroop task was used. Results revealed that farmers showed a higher performance in post-harvest compared to pre-harvest condition. Results did not change when researchers controlled the physical exertion during harvest and stress levels.

Results of the experiments supports the suggested mechanism, which is attention is captured by monetary concerns and poverty cause decreased cognitive functioning. Even though stress is a good candidate to explain poverty related decreased cognitive functioning, the above- mentioned study shows that stress cannot explain the situation by itself. Overall, it looks like that the suggested attention mechanism by Mani et al. (2013) might be a better explanation of decreased cognitive functioning in poor.

Shah et al. (2018) suggested that monetary cognitive load does not only appear in certain situations that involve money-related problems but consistently. So poor people may be more likely to focus on the monetary aspects of every problem. In order to test their hypothesis researchers gave different scenarios to 495 participants. Scenarios involve situations like buying a lunch to a friend or taking a taxi when it is not planned etc. Participants were asked to rate how much they think about different aspects were given. Some of these aspects were money related such as "how much will I pay for this?" and some of them were not related to money such as "are the dishes that I order was healthy enough and not too fattening?" Results revealed that low- income participants were more likely to have higher rating on monetary aspects compared to high-income participants. Researchers argued that presentation of the monetary aspects could force low-income participants to think about it. They also wanted to see whether money-related thought occur spontaneously in low-income participants.

In their second study, researchers (Shah et al., 2018) presented a scenario, which says that your doctor calls you and says you have a serious illness but it is treatable, she sends your medicine to your pharmacy and you need to visit the doctor every week etc. At this point participants were asked to indicate how they feel and what would they think about. Researchers expected that in general, participants concerns would involve emotional-related thoughts such as anxiety, sadness etc. Also, they hypothesized that low-income participants' concerns would be money-related such as cost, payment etc. Results supported their hypothesis and revealed that cost related concerns occurs spontaneously even it is not prompted by the researchers in a situation where other prominent concerns such as health is present.

In a third study, they (Shah et al., 2018) revealed that low-income participants compared to high-income participants had difficulty when they were asked to suppress how much driving costs to them although no significant results were observed between two groups for suppressing how much they drive. These results indicate that monetary thoughts are hard to suppress for low- income individuals.

Finally, in their last experiment researchers used DRM list paradigm to reveal whether low-income participants falsely remembered the word money more often compared to high- income participants after they were asked to remember the words given "rent, loan, dollar, coin, bills, expense, groceries etc." They also used a control list that is related to man which was "male, uncle, son, woman, beard, etc." Results revealed that low-income participants had a higher false memory rate when money is the lure word. However, their performance on the control list did not significantly changed compared to high-income participants. Overall, Shah et al. (2018) suggests that concerns about money occurs spontaneously and are difficult to suppress. This cognitive load also affects the memory of the low-income participants. This study not only revealed that being poor affects the cognitive functioning of the individuals but also showed the mindset of the poor and helped us to understand how cognitive functioning; attention and memory resources can be affected by being poor.

Some behavior of the poor such as playing lotteries, failing to attend assistance programs, not saving and borrowing excessively may reinforce poverty. There are different suggestions in order to explain the underlying mechanism of such behavior of the poor. One of the view suggests that circumstances of the poverty may result in increasing these behaviors. Education (Bernheim et al., 2001), health (Johnson et al., 2007), living conditions (Ludwig et al., 2001) may cause not saving money or borrowing excessively. Some researchers on the other hand, suggest that certain behavior that promote poverty is resulted from the personality traits of the poor (see Lewis, 1969; Salling & Harvey, 1981; Kane, 1987). Shah et al. (2012) consider how certain behaviors can become a result of having something too little. They suggest that having less of something (money, time etc.) requires more focus. Because the problem of having less draw so much attention, other problems can be overlooked by the individuals.

This attentional neglect can be the reason of excessive borrowing behavior of the poor. In order to test this hypothesis, researchers performed 5 Experiments in which they showed how the scarcity creates increased focus and why scarcity leads people to borrow. In all experiments, participants were randomly assigned to the poor or rich condition. These budgets were given to the participants across a game. During multiple rounds of the game poor participants had smaller paychecks compared to rich participants. On each round, participants spend their budget in order to earn rewards. If participants can finish a round without spending all their budgets, they can save it for future rounds. Participants were also assigned according to the borrowing condition. Some could not borrow during the game, some on the other hand can borrow with a cost of R: borrowing a certain amount of additional resource for the current round subtracted R units from their overall paycheck.

In Experiment 1, 60 participants played a Wheel of Fortune (WoF) game in which scarcity was manipulated by giving them to chances of guessing letters. Poor participants had 6 guesses (84 in total) and rich participants had 20 guesses (280 in total) in each round. After WoF, participants' cognitive fatigue was measured with a Dots-Mixed task in which participants should respond to presented (on right or left side) visual stimuli by pressing a right or left key. Even though, rich players spend more time playing the WoF and they made more guesses, poor participants showed worse performance compared to rich in the attention task (η2p = .07). In Experiment 2, participants played a video game similar to Angry Birds in which they shoot targets. Poor participants had 30 shots whereas rich participants had 150 shots in total. In order to understand how scarcity affects focus, researchers analyzed how much time participants spend aiming each shot. They found out that poor participants spend more time aiming their shots compared to rich participants (η2p = .17) and more successful at clearing the targets.

Furthermore, poor participants borrowed more than rich participants and the analysis revealed that this borrowing was counterproductive. Performance of the rich did not change significantly based on the borrowing condition. On the other hand, performance of the borrowers was worse compared to non-borrowers among poor participants which suggests that poor participants over borrowed during the game. In Experiment 3, 143 participants were given a game called Family Feud, a trivia game where each question allows multiple answers. Poor participants were given 15 s and rich participants were given 50 s per question. Participants continued the game until they finish their budget. There were three borrowing conditions: no borrowing, borrowing with R =1 (i.e., "without interest"), and borrowing with R = 2 ("with interest") in the experiment. Results revealed that poor participants borrowed more than rich participants. Similar to Experiment 2, poor participants over borrowed. Even though there was no significant difference between different borrowing conditions on the performance of rich participants, performance of the poor was best at no borrowing conditions and worst with borrowing with interest condition. In Experiment 4, researchers subtracted the borrowed source from the overall paycheck and the rest divided by the number of rounds.

In this case, when participants borrow in one round, they get less paycheck for the next rounds. Similar with other experiments poor borrowed more than rich and their borrowing was counterproductive. In Experiment 5, 137 participants played the Family Feud. Some participants could see pre- views of the subsequent round's question at the bottom of the screen; others could not. Results revealed that performance of the poor participants did not change across pre-view conditions. On the other hand, performance of the rich participants was better in pre-views than without. Overall, these experiments indicates that scarcity elicit greater focus which result in neglecting other problems. The study suggests that scarcity leads people to choose the locally convenient response to get rid of the current demand, which result in a constant financial instability. Therefore, poverty or having less of something could result in behaviors such as over borrowing.

Above-mentioned studies concern with the effect of poverty on working memory and attention processes and it is not enough to generalize these finding into all cognitive abilities. One interesting study (Dang et al., 2016) suggest that these finding related to the limited capacity of the working memory and functions that rely on procedural processes might not affected from the monetary distraction of the poor experienced. Researchers suggested that monetary concerns elicited by reminding the financial problems would even promote procedural cognitive functioning. In the study researchers calculated the poverty index of participants to divide them as rich and poor as Mani et al. (2013). They used the same scenarios of Mani et al. (2013) for the participants in the reminding condition, there were also participants that took part in control condition in which they received no manipulation. After that they completed an information- integration categorization task (Waldron & Ashby, 2001). In this task, there are different values of each symbol based on their shape, background color, number in shapes and color of numbers. For example yellow background =+1 and black background=-1 or square=+1 and circle= -1 etc. Participants were told that background color was the irrelevant feature and not to attend to it. The three relevant dimensions (shape, number in shape and color of number) were labeled as X, Y, Z and participants were asked to categorize the stimuli as Category A if value (X) + value (Y)+ value (Z)> 0 and Category B in the contrary case. Results revealed that even though there was no statistical difference between the poor and rich participants in the control condition, poor participants outperformed the rich participants in information-integration categorization task when they receive reminding of the financial problems. This study suggests that poverty may affect not all but some aspects of cognitive functioning especially the ones that are affected more from the cognitive load which are working memory and attention. Other cognitive abilities may be intact or even better compared to rich individuals as Dang et al. (2016) found.

Childhood Poverty

Substantial amount of data suggests that being in a low socioeconomic status is associated with declining performance on the motor, emotional, cognitive and language tasks (Lipina, 2014). These effect are crucial for individuals’ life especially if poverty context start from the childhood. Researchers suggested that childhood poverty should be evaluated separately than the adulthood poverty. Since, brain and cognitive development is crucial during childhood, poverty may have some severe consequences on the cognitive functioning of the children. Lipina et al. (2013) examined the effects of childhood poverty on cognitive functioning in an Argentine sample. 250 students around the age of 4 were tested with several cognitive tasks such as Stroop, Childhood Attention Network Test, Self-Ordered Search, Tower of London etc. which measures their attentional control, working memory and planning.

Results revealed that children from low socioeconomic levels show worse performance compared to children from higher socioeconomic levels in general but not all in attentional control demanding tasks. These results suggests that poverty may affect certain types of cognitive abilities but not all. Therefore, childhood poverty could result in some alterations in the certain networks but not affecting others. These results are consistent with Dang et al. (2016) and suggests that poverty have some important effects on the cognitive abilities but these effects are limited to certain cognitive processing task. In another study, Flouri et al. (2014) revealed that the relationship between socio-economic disadvantage and emotional problems was stronger with children who have lower cognitive ability. Furthermore, study revealed that children in constant poverty and have difficulties in self- regulation can develop emotional problems when they started to primary school. Those who are better at self-regulating on the other hand, show a resistance to the negative emotional and behavioral effects of the poverty. These results suggest that some personal traits such as self- regulation can work as a coping mechanism and protect the child from the negative emotional and behavioral effects of the poverty context.

Perception of Wealth

When discussing the poverty, it is important to address psychology of perceived wealth. Economic behavior and life satisfaction are highly affected from the perceived wealth of the individuals (Diener, 1984; Kahneman & Deaton, 2010; Larson, 1978). Net worth is not the only factor of perceived wealth although it is a very important indicator. Perceived wealth of the individuals can be affected by the wealth of the people around them. One other factor is also suggested by researchers is that assets and debts. For example, Tversky and Kahneman (1986) revealed that economic behavior of the people can change based on the win and loss conditions. In their experiment, researchers asked participants to assume that they were richer by $300 and choose between a sure gain of $100 and an equal chance of $200 or nothing. Another group of participants were asked to assume that they were richer by $500 and choose between a sure loss of $100 and an equal chance of $200 loss or nothing. Results of the study revealed that people tend to choose a sure gain and a risky loss. People probably do a risk calculation rather than an economic calculation. Sussman and Shafir (2012) conducted a study in order to reveal that whether two equivalent net wealth, composed of different levels of assets and debts, perceived as the same based on the subjective economic well-being.

In order to reveal that researchers conducted series of experiments. In all experiments participants reported that their household income was between $50,000 and $75,000. In their first study, researchers presented the participants several financial profiles that shows the assets and debts instead of only showing the net worth. Hence, the participants were presented whether the profile owners were in black (positive net wealth) or in the red (negative net wealth). In the study “asset” refers to the sources that contribute to the person’s positive wealth such as saving accounts, retirement accounts, property holdings etc. “Debt” on the other hand refers to all the money that the person owns such as credit card debt, loans, mortgages etc. Participants were presented profile pairs and decided which individual better off financially. Each presented pair comprised of one low profile individual with lower assets and lower debts and one high profile individual with higher assets and higher debts even though their net worth was equal. Results of the experiment showed that in positive net wealth (when assets are higher than debts) pairs, participants evaluated low-profile individuals wealthier than high profile individuals. This means that if the profiles have more assets than debts, the one with lower debts perceived wealthier compared to the one with higher debts. In negative net wealth (when debts are higher than assets) pairs on the other hand, high profile individuals perceived wealthier by participants indicating that when individuals have more debts than assets the one with higher assets perceived as wealthier.

In a follow-up experiment, researchers presented a more detailed description of financial situation (assets and debts) pairs by giving information about cash, stocks, home, other real estate, credit card debit, student loans etc. Participants were this time asked that which financial profile you would like to have among the pairs. Results were similar with the first experiment indicating that participants choose to have a high profile with higher assets and higher debts in negative net worth condition and low profile with lower assets and lower debts in positive net worth condition. These experiments suggest that debt contributes negatively to the perception of wealth in positive net wealth situation on the other hand, asset contributes positively in negative wealth condition. In their second experiment Sussman and Shafir (2012) wanted to see whether people with higher assets would be more likely to borrow in negative net wealth condition based on the results of Experiment 1. Participants were given hypothetical scenarios in which there are pairs of financial situations (similar with the Experiment 1) and asked to indicate in which situation they would borrow money in order to buy something. When net worth was positive, participants were more likely to borrow in low profile condition over high profile.

On the other hand, when net worth was negative participants were more likely to borrow in high profile condition. These results were also supported by a follow-up experiment in which researchers revealed that participants were more likely to give loan to the better of situations that was explained in previous experiments indicating that perception of wealth is consistent in conditions where people judge others’ financial situation, evaluate which financial situation that they would have, whether they would borrow in those conditions and whether they would give loans to individuals with these profiles. Researcher found similar results when they presented 10 profiles to participants and asked them to rank from best to worse. In positive net wealth condition, the profile gets better when debts decrease on the other hand in negative net wealth condition, the profile gets better when assets increase. These experiments are important to understand how assets and debts can change the entire perception of someone’s wealth and consequently affect their economic behavior.

Simple Intervention on the Stigmatization of the Poor

Stigmatization of the poor as incompetent is seen as one of the most important reasons of diminished cognitive capacity among the poor. Hall et al. (2014) tested whether self-affirmation can boost cognitive performance of American adults at urban soul kitchen. They recruited 80 participants who report their annual household income as $8000 which is well below the poverty line and measured their cognitive performance by using Ravens' Standard Progressive Matrices which is a universally accepted measure of fluid intelligence and a test of cognitive control. Half of the participants received an affirmative intervention and other half participate as a control group. The affirmative intervention included describing a personal experience that make participants feel proud and successful. The participants in the control condition describe their daily meal routine. Results showed that self-affirmed group showed significantly higher performance both in the Raven's Matrices and cognitive control tasks.

In a follow up experiment, they revealed that the effect of self-affirmation cannot be attributed to the positive mood. They showed that the participants who watched funny videos showed significantly worse performance than self-affirmed group in both Raven's Matrices and cognitive control tasks indicating that the self-affirmation has an inducing effect on the cognitive performance and this effect cannot be attributed the positive mood regulation of then manipulation. The interesting finding of this study was that when participants replicated the first experiment with high-income participants, they observed no significant effect of self-affirmation on cognitive performance. This result implies that the self-affirmation invention could alleviate the effect of stigmatization of the poor which result in immediate cognitive performance enhancement. Furthermore, Hall et al. (2014) revealed in their same study that self-affirmed participants were more likely to enroll themselves to benefit programs compared to control group. It is important to address that even simple interventions such as self-affirmation can have enormous effects on the cognition of the poor. The cognitive capacity is important when making decisions, solving problems, focusing attention and even controlling the impulses. By improving intervention programs such as self-affirmation, we cannot only remove the negative effects of stigmatization and enhance the decision making and problem solving abilities, we can also remove the barrier of participation to the benefit programs.

Poverty Research Paper: Conclusion

Poverty is a serious problem that we have to face today. Studies indicate that there are several negative cognitive effects of the poverty. Even though these effects are limited and cannot be generalized to all cognitive processes, it affects the decision making and attentional processes of the individuals and enhance the negative effects of poverty context especially if the poverty is started from the childhood. Therefore, it is important to understand the underlying mechanism of how poverty allocate the attentional resources and results in cognitive effects. It is also important in the future to study why only some part of the cognitive processing is affected but others stay intact. Finally, it should be addressed that one of the most important struggle in the poverty context is the stigmatization of the poor by the people around them. It is important to develop intervention programs to teach people how to deal with social side of being in a poverty context.

References

Bernheim, B.D., Garrett, D. M., Maki, D. (2001). Education and saving: The long-term effects of high school financial curriculum mandates J Public Econ. 80, 435.

Dang, J., Xiao, S., Zhang, T., Liu, Y., Jiang, B., Mao, L. (2016). When the poor excel: Poverty facilitates procedural learning. Scandinavian Journal of Psychology 57, 288-291.

Diener, E. (1984). Subjective well-being. Psychological Bulletin 95, 542-575.

Flouri, E., Midouhas, E., & Joshi H. (2014). Family poverty and trajectories of children’s emotional and behavioural problems: the moderating roles of self-regulation and verbal cognitive ability. J Abnorm Child Psychol 42:1043–1056.

Hall, C.C., Zhao, J., & Shafir, E. (2014). Self-affirmation among the poor: Cognitive and behavioral implications. Psychological Science 25 (2) 619– 625.

Johnson, R.W., Mermin, G. B.T., Murphy D. (2007). The impact of late-career health and employment shocks on Social Security and other wealth (Institute Discussion Paper 07-07, 2007).

Kahneman, D. & Deaton, A. (2010). High income improves evaluation of life but not emotional well-being. Proceedings of the National Academy of Sciences, USA 107, 16489-16493.

Kane, T.J. (1987). Giving back control: long-term poverty and motivation Soc. Serv. Rev. 61, 405.

Larson, R. Thirty years of research on the subjective well-being of older Americans. Journal of Gerontology 33, 109-125.

Lewis, O. In On Understanding Poverty: Perspectives from the Social Sciences, Moynihan, D.P. Ed. (Basic Books, New York, 1969), pp. 187-200.

Lipina, S., Segretin, S., Hermida, J., Prats, L., Fracchia, C., Camelo, J.L., & Colombo, J. (2013). Linking childhood poverty and cognition: environmental mediators of non-verbal executive control in an Argentine sample. Developmental Science 16(5): 697-707.

Ludwig, J., Duncan, G.J., Hirschfield, P. (2001). Urban poverty and juvenile crime: evidence from a randomized housing-mobility experiment, Q. J. Econ. 116, 655.

Mani, A., Mullainathan, S., Shafir, E., & Zhao, J. (2013). Poverty impedes cognitive function. Science 341, 976-980.

Sailing, M., Harvey, M.E. (1981). Poverty, personality, and sensitivity to residential stressors. Environ. Behav. 13, 131.

Shafir, E. (2017). Decisions in the poverty context. Current Opinion in Psychology 18: 131-136. Shah, A.K., Mullainathan, S., & Shafir, E. (2012). Some consequences of having too little.

Science 338, 682-685.

Shah, A.K., Zhao, J., Mullainathan, S., & Shafir, E. (2018). Monet lives in the mental lives of the poor. Social Cognition 36 (1): 4-19.

Smith, A.: The Wealth of Nations. New York: Random House; 1937.

Sussman, A.B., & Shafir, E. (2012). On assets and debt in the psychology of perceived wealth. Psychological Science 23 (1): 101-108.

Tversky, A. & Kahneman, D. (1986). Rational choice and the framing of decisions. Journal of Business 59, 251-278

Waldron, E. M. & Ashby, F. G. (2001). The effects of concurrent task interference on category learning: Evidence for multiple category learning systems. Psychonomic Bulletin & Review, 8, 168–176.