Poverty lowers cognitive capacity

Financial constraints don’t just take a toll on your wallet, but also leads to poorer cognitive functions.

According to the findings of a new study, people who worry too much about their daily living tend to lose an equivalent of 13 IQ points.

The study, published Thursday in the journal Science, suggests that financial worries lead to exhaustion of mental energy, leaving little brainpower to concentrate on other areas of life. Thus, poor people are more likely to make bad decisions that deepen their woes further.

“Previous accounts of poverty have blamed the poor for their personal failings, or an environment that is not conducive to success,” study’s co-author, Jiaying Zhao, a professor from the University of British Columbia’s Department of Psychology, said.

“We’re arguing that being poor can impair cognitive functioning, which hinders individuals’ ability to make good decisions and can cause further poverty.”

The study
For the purpose of the study, researcher tested 400 shoppers with family incomes ranging from $20,000 to $70,000. The participants were presented with a hefty and a small car repair bill.

Participants with a lower family income scored the same on IQ test as those with higher incomes upon being presented a small car repair bill. But their IQ scores fell 40 percent when they faced a whopping repair bill.

The researchers also tested a group of 464 farmers in India. The farmers in the Indian fields are usually paid once a year. Typically farmers take out loans and pawn goods before the harvest and are flush with cash if the yield is good.

The farmers took IQ tests both before and after the harvest. Researchers found that the IQ scores improved by 25 percent when the farmers earn well and are wealthier after the harvest.

“Our results suggest that when you’re poor, money is not the only thing in short supply. Cognitive capacity is also stretched thin,” Sendhil Mullainathan, Harvard economist and study co-author, said.

“That’s not to say that poor people are less intelligent than others. What we show is that the same person experiencing poverty suffers a cognitive deficit, as opposed to when they’re not experiencing poverty.”

“What happens is that your effective capacity gets smaller because you have all these other things on your mind. You have less mind to give to everything else,” Mullainathan explained.