Poor people face greater financial hardship in regions with greatest income inequality
While some rely on friends and neighbors to help them with their groceries, the poor may need to put themselves at risk from COVID-19 by venturing on public transport for supplies. Depending on where they live, they may not trust anyone else to help them.
This is true in areas of the United States with the highest levels of income inequality, where the poor are less likely to rely on their communities for support because of shame or embarrassment, according to an article to appear in Nature Human Behavior.
Take the example of New Haven, Connecticut. Part of the city is a richer university area, and the other part is predominantly low-income. It would be rare, according to research, for a person in low-income areas to seek help from those in the college section – especially now that the coronavirus continues to spread.
The findings illustrate why policymakers and researchers should move beyond a single focus on helping low-income people and instead look for ways to develop stronger communities.
“If I’m poor it exacerbates my need to rely on the community, but what does it mean if I don’t trust my community? This means that there is no way for me to get what I need without putting myself in danger. This can have disastrous long-term effects among the poor, ”said lead author of the study, Jon Jachimowicz, assistant professor of business administration at Harvard University.
“Our work shows that hardship increases for low-income people by reducing their ability to rely on their community as a buffer against financial and other hardship,” said the co-author. Elke Weber, Professor Gerhard R. Andlinger in Energy and Environment and Professor of Psychology and Public Affairs at Princeton’s Woodrow Wilson School of Public and International Affairs. “This suggests that stimulus measures designed to deal with the economic and social fallout from the coronavirus should focus on closing the existing income and wealth gap in our country.”
The study was an interdisciplinary effort led by psychologists and economists using data analysis strategies across disciplines.
The team also included lead co-author Barnabas Szaszi from Eotvos Lorand University, Marcel Lukas from Heriot-Watt University, David Smerdon from the University of Cambridge and Jaideep Prabhu from the University of Cambridge.
Researchers conducted eight studies involving more than one million people in the United States, Australia and Uganda. Their work included analysis of instrumental variables, laboratory experiments, online studies, and fieldwork.
In the first four studies, the team empirically supported their hypothesis that greater income inequality hits the poor hardest. Their findings were in line with expectations: in all countries, the greater the economic inequality, the more difficult the financial difficulties for those with the lowest incomes.
In the following four studies, they investigated the main driver of this effect, finding strong evidence to support their claim: higher economic inequality weakens the perception of a community buffer, which is a key source of support for low income people.
Researchers have estimated that this lack of support comes at a cost of $ 6,587. This means that someone earning $ 36,587 in New Haven, where income inequality is greater, experiences the same financial difficulties as someone earning $ 30,000 in a more homogeneous income area like Princeton.
So why do low-income people feel that they cannot turn to community members for help? Many people with money issues worry about what other people think, so they don’t ask for help. Researchers have actually found that the higher the income inequality in a region, the more suspicious the poor are of members of their community.
Other factors also perpetuate cycles of poverty in these places. One is a person’s need to display their wealth for the sake of status through physical objects like a luxury car, which further indebted them. In other cases, people overwhelmed by destitution may resort to negative behaviors like taking out payday loans to cover their bills, which only worsens their financial situation.
All of this supports the strengthening of local communities, the researchers said. Programs like the YMCA are hugely beneficial, and community investment funds could further strengthen cities with the greatest income disparity. Infrastructure matters too; the pedestrian potential of a city can bind neighbors together. In light of COVID-19, stimulus bills could help address some of these issues, while financially helping the most vulnerable.
“At a time when the coronavirus crisis emphasizes cooperation and community support, our decision-makers need to be aware of the social and economic conditions that plague such support, especially for the most vulnerable among us, the poor. ”Weber said. .