Nobody is perfect. At times we have difficulty managing our finances, we don’t always take our medications as planned, and sometimes we don’t perform up to par at work. However, research shows that people experience these problems to different degrees. Across financial strata, research reveals that the financially less well-off engage in these behaviors more often than those who are financially stable (1). These behaviors are particularly concerning, because, for those with limited financial resources, they can lead to poverty as well as perpetuate it.

In their article, “Poverty Impedes Cognitive Function,” which appears in the latest issue of Science, University of Warwick Professor Anandi Mani and several other social scientists (2) suggest poverty, and the ever-present concerns that come with it, places an undue burden on an individual’s limited mental resources. Compared with those who are free from poverty, this burden leaves those in poverty with fewer cognitive resources with which to make choices and take action. Mani et al. write, the poor “are less capable not because of inherent traits, but because the very context of poverty imposes load and impedes cognitive capacity.”

However, it is important to note that their explanation is not limited to the traditional populations of poverty, defined by a specific income level or ability to access basic human needs. The authors define poverty “broadly as the gap between one’s needs and the resources available to fulfill them.” That is, people in poverty are those who feel “poor,” who feel they have less than they need.

In the present work, Mani et al. demonstrated the impact of poverty on cognitive resources in two very different populations, New Jersey shopping mall-goers and Indian sugar cane farmers. The research showed that although the financial wealth differs considerably between these two populations, the “poor” in each population experienced diminished cognitive ability as a result of the cognitive burden imposed by their respective levels of poverty.

In the first study, Mani et al. presented New Jersey mall-goers with four financial scenarios about which they had to make a hypothetical decision. The scenarios were designed to induce participants to think about their own personal financial concerns. One scenario went as follows:

“Your car is having some trouble and requires $X to be fixed. You can pay in full, take a loan, or take a chance and forego the service at the moment… How would you go about making this decision?”

Some participants were presented with “easy” scenarios (a $150 car repair), while others were presented with “hard” scenarios (a $1500 car repair). After being presented with either four “easy” or four “hard” scenarios, researchers tested participants’ cognitive function, using two metrics; Raven’s Progressive Matrices, which measures “fluid intelligence” and is used in IQ tests, and a spatial compatibility task, which measures cognitive control (3).

For their analysis, the researchers divided participants into two groups, “rich” and “poor.” They did so by computing the median effective household income, which takes into account total household income and number of people in the household. Participants whose effective household income landed above the calculated median were considered “rich”, while those whose fell below were considered “poor.”

The authors found that in the “easy” condition, when financial concerns were presumably low, both rich and poor participants performed the cognitive tasks equally well. However, in the “hard” condition, when financial concerns were more salient, poor participants performed significantly worse than rich participants. The authors suggest that the “hard” condition evoked greater financial concerns in poor participants, than it did in the rich, which left the poor with less mental resources for the cognitive tasks, and lead to diminished performance.

Building upon these results, Mani et al. investigated how naturally occurring financial pressures, rather than lab-induced, can impact cognitive functioning. Mani et al. studied Indian sugar cane farmers who are paid for their crop once per year. These farmers have trouble smoothing their consumption over the year, and as a result experience periods of wealth (post-harvest) and periods of poverty (pre-harvest). Mani et al. used this context to understand how cognitive ability can change as a function of a naturally occurring financial cycle.

During the pre-harvest, farmers report greater financial concerns than during the post-harvest. This is evident by the number of items they pawned, and the likelihood they had taken out a loan. Similar to poor participants at the mall, Mani et al. predicted that during the pre-harvest, with financial concerns weighing on their mind, farmers would perform worse on the cognitive tasks than during the post-harvest period, when financial concerns were less pressing. It is important to note that there was no experimental manipulation in this study. Mani et al. simply measured the cognitive ability of farmers during the naturally occurring pre and post-harvest periods. In this study, researchers again employed the Raven’s test, but due to the limitations in the field replaced the spatial compatibility task with a numerical stroop test (4).

As expected, during the pre-harvest farmers performed worse on the cognitive tasks than did farmers during the post-harvest. Furthermore, this effect held after controlling for farmer nutrition, stress, amount of physical work, and potential learned effects from taking the cognitive tests twice. Likewise, many of the calendar effects that one would expect when studying the harvest cycle (weather or yearly festivals) do not apply to sugar cane farmers, as harvest dates are arbitrarily set by the sugar mills and are spread throughout the year. Thus, Mani et al. conclude that pre-harvest farmers, like poor New Jersey mall-goers, experienced a reduction in cognitive ability, because their cognitive resources were consumed by the financial concerns they faced at that time.

Across the two studies, it is important to note the magnitude of the drop in cognitive ability. The drop in performance observed in poor New Jersey mall-goers and pre-harvest sugar cane farmers, when they felt the pressure of poverty, was comparable to losing a full night’s sleep or a 13 point drop in IQ.

These findings have significant implications for poverty-related policy. One of most immediate implications is that policies and programs designed to help alleviate poverty could be more effective by making resources for the poor more accessible and less cognitively taxing. The authors write, “Policy-makers should beware of imposing cognitive taxes on the poor just as they avoid monetary taxes on the poor. Filling out long forms, preparing for a lengthy interview, deciphering new rules, or responding to complex incentives all consume cognitive resources.” While, few policies take cognitive demand into account, research shows that relatively simple interventions that reduce cognitive demand–reminders, help with forms and planning, and built in defaults (5) –could be the difference between whether or not a program designed to help the poor works for or against the people it is trying to help.

Co-authors of this study, Harvard Economics Professor Sendhil Mullainathan and Princeton Psychology Professor Eldar Shafir have written a new book on how mentally taxing situations, like poverty, can affect cognitive ability. The book, Scarcity: Why Having Too Little Means So Much, introduces the “new science of scarcity,” and reveals a pervasive logic and pattern of behavior that can leave people always dealing with scarcity; “having less than you feel you need” (6). Mullainathan and Shafir show this to be true for money, time, and companionship, among other human needs. In the introduction to their book, they write:

“Scarcity captures the mind. Just as the starving subjects had food on their mind, when we experience scarcity of any kind, we become absorbed by it. The mind orients automatically, powerfully, toward unfulfilled needs. For the hungry, that need is food. For the cash strapped it might be this month’s rent payment; for the lonely, a lack of companionship. Scarcity is more than just the displeasure of having very little. It changes how we think. It imposes itself on our minds” (7).

Scarcity was released Tuesday, September 3rd. The Psych Report recently published an exclusive excerpt from the book.

Disclosure: Eldar Shafir is a member of The Psych Report’s Advisory Board.

Notes and References:

1) See references 1-9: Mani, A., Mullainathan, S., Shafir, E., & Zhao, J. (2013). Poverty Impedes Cognitive Function. Science, 341(6149), 976-980.

2) Authors: Anandi Mani, University of Warwick; Sendhil Mullainathan, Harvard University; Eldar Shafir, Princeton University; Jianying Zhao, University of British Columbia

3) “The Raven’s test involves a sequence of shapes with one shape missing (27). Participants must choose which of several alternatives best fits in the missing space. Raven’s test is a common component in IQ tests and is used to measure “fluid intelligence,” the capacity to think logically and solve problems in novel situations, independent of acquired knowledge (28, 29). The spatial incompatibility task requires participants to respond quickly and often contrary to their initial impulse. Presented with figures on the screen, they must press the same side in response to some stimuli but press the opposite side in response to others. The speed and accuracy of response measures cognitive control (30), the ability to guide thought and action in accordance with internal goals (31).” (Mani, A., Mullainathan, S., Shafir, E., & Zhao, J. (2013). Poverty Impedes Cognitive Function. Science, 341(6149), 976-980).

4) In the numerical stroop test, participants are presented with items like “5 5 5,” and their task is to say the number of items in the sequence, rather than the number itself. In this case, they must say “three”, rather than “five”. Similar to the spatial compatibility test, the speed and accuracy in the numerical stroop test serves as a measure of cognitive control.

5) See references 41-45: Mani, A., Mullainathan, S., Shafir, E., & Zhao, J. (2013). Poverty Impedes Cognitive Function. Science, 341(6149), 976-980.

6) Page 4. Mullainathan, S., & Shafir, E. Scarcity: Why Having Too Little Means So Much. 2013. New York, New York.

7) Page 7. Mullainathan, S., & Shafir, E. Scarcity: Why Having Too Little Means So Much. 2013. New York, New York.