Money worries are cognitive handicap for poor people

money worry

I’ve been meaning to write about this for a while, but am only just now getting around to it. At the end of August, Science published a paper showing that worrying about money has a significant impact on poor people’s cognitive function; i.e. when you’re poor, money worries take up valuable brain-space, distracting you from whatever else you might be trying to achieve

This is one of those findings that might seem like common sense. Especially if you’ve ever been poor, you will be painfully aware of how intrusive and distracting money worries can be; the unbidden worst-case-scenario daydreams, the sudden panic of remembering a forgotten bill. But like a lot of ‘common-sense’ ideas, it’s worth having this one thrashed out and tested systematically. Even if common-sense is right (and it often isn’t), it’s helpful to more fully understand the mechanisms involved, the scale of the problem, and so on.

This is especially true in this case, where there are clear an important implications for inequality and social mobility. If the very experience of being poor puts you at a mental disadvantage, then getting out of poverty is going to be that much more difficult. This is the broad message of the paper, and it’s an important one that bears repeating, especially in the US where poverty is predominantly blamed on the behaviour of the poor themselves. However, this angle has been well-covered by mainstream media reports of study. So instead I’m going to look at the study itself a bit more closely. What exactly did the researchers find, and how important is it for people’s real-world experience of poverty?

The study involved two very different components. The first looking at shoppers in a New Jersey mall, and the second at poor sugarcane farmers in India. In New Jersey, the researchers asked two groups of shoppers what they would do if their car unexpectedly needed repairs. The first group were told the repairs would cost $150, and the second that they would cost $1500. Both groups then completed two cognitive tests based on manipulating shapes. These tests were intended to tap into people’s underlying cognitive abilities without being influenced by education or literacy.

The results were incredibly clear-cut. In the $150 group, poorer people (those with a household income of under $70,000 – the sample median) did just as well as richer people (those earning over $70,000), but in the $1500 group, poorer people did much worse. The authors interpreted this as a direct effect of activating poorer people’s money worries, and it is difficult to argue with this interpretation. The only difference between the two groups was the dollar value of the hypothetical repair, and richer people did just as well in both groups. This suggests that, for richer people, either amount was affordable – and therefore did not activate any underlying concerns about money. For poorer people, the higher amount strongly activated these worries, which then distracted them during the cognitive tests.

The context for the Indian farmers was very different, but the results were strikingly similar. In this group the researchers looked at cognitive performance before and after the sugarcane harvest. Farmers had many more money problems before the harvest, and sure enough, after the harvest was in and they had been paid for their crop, they performed significantly better on the tests. This was true even after accounting for nutrition and practice effects.

These complementary results from two very groups, in two very different parts of the world, leave little doubt that there is something interesting going on. Financial concerns are clearly having an impact on some aspects of cognitive performance. The question is how relevant these findings are to poor people’s experiences and difficulties in the real world.

The researchers downplay the relevance of their New Jersey findings, noting that the situation was hypothetical and highly artificial (this is what the Indian study was intended to address, using the harvest as a real-world ‘intervention’). But here I think the authors are actually underselling their results (not a common problem among academics these days). They suggest the car-repair scenario might not be representative of the kinds of situations rich and poor people really encounter. For example, rich people may just have bigger expenses, in line with their lifestyles, and therefore worry just as much. So while the poor worry about a $1500 car repair, the rich worry about their kids’ $15,000 private school fees. This may be true to some extent, but to suggest that rich people have as many worry-inducing expenses as poor people do seems pretty ridiculous.

This makes the magnitude of the effect found in this study even more amazing. Comparing their results to previous work, the authors find that the effect of money worries is around the same size as that of losing a full night’s sleep, and is similar to the difference between chronic alcoholics and normal adults. Think about the last time you had a bad night’s sleep and spent the next day at work knocking into things and staring listlessly at your computer screen. Now imagine having no sleep and trying to get absolutely anything done.

The only downside of the study in these terms comes from the measures of cognitive function the authors used, which are quite abstract. This isn’t a criticism. They needed something that would not be contaminated by education and knowledge, and that would be comparable across two very different cultures. Within these constraints they chose well; and it’s absolutely worth knowing that abstract cognitive function is affected by money worries in this way. However, the main gap this leaves is in how this cognitive deficit might translate into real-world effects. How does bearing the additional cognitive load of money worries affect how people make financial or employment decisions, how they perform at work, or how they interact with government programmes? Answering these questions will give us a better understanding of just what a handicap poverty can be in so many areas of life.

(As just a last note – this is particularly important when we’re thinking about the design of welfare programmes like Universal Credit. We’ve got to remember that people aren’t operating at peak capacity when they’re dealing with these programmes – they’ve got a lot on their mind after all)

About Robert de Vries

I'm an Early Career Research Fellow in the Sociology department at the University of Oxford. I'm mainly interested in how people are affected by concerns about their social status; how it colours the way they think, feel, and behave. I try and contribute here regularly, but my addiction to writing excessively long posts keeps getting in the way.
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2 Responses to Money worries are cognitive handicap for poor people

  1. Pingback: The Psychology of Poverty and Welfare Reform | Inequalities

  2. Pingback: The Habits of Highly Annoying Get-Rich Gurus | Inequalities

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