Insights into poverty and inequality - 1
From an article in the New Yorker magazine
Keith Payne is a psychologist and a professor at the University of North Carolina. He has come to believe that what’s really damaging about being poor, at least in a country like the United States—where, as he notes, even most people living below the poverty line possess TVs, microwaves, and cell phones—is the subjective experience of feeling poor.
This feeling is not limited to those in the bottom quintile; in a world where people measure themselves against their neighbours, it’s possible to earn good money and still feel deprived. “Unlike the rigid columns of numbers that make up a bank ledger, status is always a moving target, because it is defined by ongoing comparisons to others.” Payne writes.
Feeling poor, meanwhile, has consequences that go well beyond feeling. People who see themselves as poor make different decisions, and, generally, worse ones. Consider gambling. Spending on a lottery ticket, which has roughly a one-in-three-hundred-million chance of paying out in the USA (one-in-forty-five-million chance in the UK), is never a good bet. It’s especially ill-advised for those struggling to make ends meet. Yet low-income people (in the USA) buy a disproportionate share of lottery tickets, so much so that the whole enterprise is sometimes referred to as a “tax on the poor.”
One explanation for this is that poor people engage in riskier behaviour, which could be why they are poor in the first place. Payne cites a study on gambling performed by Canadian psychologists. Some of the participants were led to believe that they had more discretionary income than their peers and some were led to believe the opposite. Finally, participants were given twenty dollars and the choice to either pocket it or gamble it on a computer card game. Those who believed they ranked low on discretionary income were much more likely to risk the money on the card game. Or, as Payne puts it, “feeling poor made people more willing to roll the dice.”
In another study, this one conducted by Payne and some colleagues, participants were divided into two groups and asked to make a series of bets. For each bet, they were offered a low-risk / low-reward option (say, a hundred-per-cent chance of winning ten pence) and a high-risk / high-reward option (a ten-per-cent chance of winning a pound). Before the exercise began, the two groups were told different stories (once again, fictitious) about how previous participants had fared. The first group was informed that the spread in winnings between the most and the least successful players was only a few pence, the second that the gap was a lot wider. Those in the second group went on to place much chancier bets than those in the first. The experiment, Payne contends, “provided the first evidence that inequality itself can cause risky behavior.”
Payne’s inferences seem to run ahead of the data but the wealth of evidence that he amasses in his book, “The Broken Ladder: How Inequality Affects the Way We Think, Live, and Die.” is compelling. People who are made to feel deprived see themselves as less competent. They are more susceptible to conspiracy theories. And they are more likely to have medical problems. A study of British civil servants showed that where people ranked themselves in terms of status was a better predictor of their health than their education level or their actual income was.
Payne argues that the amount of money you have is not the main determinant of well-being; what matters is how you feel about it. The problem of inequality is relational, not economic. Poverty unquestionably harms health, encourages bad decisions and creates instability. But the key message of Payne's book is that people who are not deprived may act as if they are -- because they feel relatively poor.
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