James Baldwin wrote, “Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.” He was referring to high prices, but this statement could also describe the premise of a study in the 2 November issue of Science, which is that the poor often behave in ways that make it more difficult to climb out of poverty.
A key reason for this behavior, the researchers show, is that scarcity itself affects how people focus and make decisions.
Low-income individuals often play lotteries, fail to enroll in assistance programs, save too little, or borrow too much, seeking shorter-term cash gains at the expense of a stable long-term financial strategy. Experts tend to explain this behavior in terms of environmental factors, such as housing or financial access, or personality traits of the poor themselves.
Anuj Shah of the University of Chicago Booth School of Business and colleagues suggest an alternate view, which is that having less makes people focus more deeply on their most immediate problems and neglect less pressing ones.
To test this hypothesis, they had volunteers play a series of game-show-like games, giving some players more money or borrowing opportunities. The poorer players paid more attention to their choices and spent more time making them, but they also become more mentally fatigued as the game went on. The poorer players also borrowed more—especially during the rounds where they were most engaged—which was ultimately counterproductive.
In the game and in the real world, “the poor are much more focused, and they have to be more careful about how they’re using their resources,” Shah said in a Science Podcast interview. “It’s exhausting to think about how we’re going to use each minute, each dollar, and that extra focus ends up being the thing that…depletes our attention later on.”
The researchers conclude that the poor often save and borrow for specific expenses, such as a wedding or a new appliance, and they propose that policies and programs that draw people’s attention to specific future needs should be useful for helping them save. These findings could also apply to people who are short on other resources, such as free time, Shah said.
Read the abstract, “Some Consequences of Having Too Little,” by Anuj Shah and colleagues.
Listen to a Science Podcast about the research.