As part of the study, researchers conducted experiments on two groups of subjects: low- and middle-income shoppers in a mall in New Jersey, and sugar cane farmers in rural India.
In the mall experiment, shoppers underwent a battery of tests to measure IQ and impulse control. However, half the participants were first given a “teaser” question — what they would do if their car had broken down and needed $1,500 worth of repairs — designed to put a pressing financial concerns at the forefront of their thoughts.
In India, researchers tested the cognitive capacity and decision-making of farmers before the sugar cane harvest, when they were most strapped for money, and afterwards, when they had fewer financial woes.
The results showed that people wrestling with the mental strain of poverty suffered a drop of as much as 13 points in their IQ — roughly the same found in people subjected to a night with no sleep.
“Poverty is the equivalent of pulling an all-nighter,” said Harvard economist Sandhil Mullainathan, another of the study’s authors. “Picture yourself after an all-nighter. Being poor is like that every day.”
Mullainathan said previous research often has assumed that poor people are poor because they are somehow less capable than others, whether inherently or because of past trauma or other environmental factors in their lives. But, he said, what the latest study suggests is that the strain of poverty can tax the cognitive abilities of anyone experiencing it — and that those abilities return when the burden of poverty disappears.
“While the poor may be experiencing a scarcity of money, at some level what they may really be experiencing is a scarcity of bandwidth, of cognitive capacity,” he said. “It’s the situation that’s creating the stress.”
Zhao and Mullainathan said that their findings, if accurate, could have profound implications for public policy.
For starters, policymakers “should beware of imposing cognitive taxes on the poor just as they avoid monetary taxes on the poor,” the paper states. Filling out long forms, deciphering complicated rules or undergoing lengthy interviews can consume scarce cognitive resources.
“You are captured by these monetary issues — how to pay rent, how to pay bills,” Zhao said. “As a result, you’re less attentive to other problems. You neglect other things in life that deserve your attention.”