Why basic income security is essential for financial well-being

Let me describe what happens on the day this column is due. Before I even wake up, the task looms in my head. My coffee is not served until the computer is turned on. Notes from all kinds of topics are taken, read and underlined. Multiple ideas are typed on three to four parallel documents. I focus frantically on the column. I don’t have time to take calls, view messages, or browse the Internet. The column should disappear. The deadline is beckoning. I decide to do better next time. Except that all I do is think, read, take notes. Writing is a hassle. My editors are good souls.

How we behave when we run out of things – in this case of time – is a much studied idea. Adrenaline rush, focus, prioritization and focus are all qualities that only appear when there is a limited amount of time before a task can be completed. This finite ending places an urgent “now” focus on the mind. It has only limited merits. Don’t we see some seniors getting softer as they get older? The realization that we are mortal and that the end is near could bring about changes that were previously considered nearly impossible. Do you not save on the amount of toothpaste that you apply to the brush, because the tube is about to be exceeded? Don’t we fill our palms with a generous amount of shampoo when the bottle is new and full? The way we behave in scarcity is very different.

When Steven Covey wrote about the scarcity mindset in his famous book Seven Habits, he emphasized that people can take a world view of scarcity or abundance. If one thinks that there is only a limited pie available for everyone, they will see life as a zero sum game. They would think that what you gain must be the loss of someone else. It would therefore be difficult for them to share the recognition or the credit. If someone else is hired, it takes away what they have; if some get a raise, it is at the expense of theirs; if someone gains power and influence, it decreases him. These people with a scarcity mindset tend to be envious, unable to appreciate or feel happy for others, and are unwilling to share. An imaginary state of limited resources can make us mean.

Another difficult condition is the true scarcity of resources. Research shows that families who do not have enough to finance even their basic needs tend to be severely affected. They are struggling to get out of their situation of poverty. The cognitive resources of those who are poor are diminished by the mental space occupied by their scarcity. When thoughts of where your next meal is coming from occupy your mind, you run out of energy to deal with cognitive issues. Your mental resources are depleted because you fear that you won’t have enough to eat, or that you won’t have the money to pay the rent or buy the next set of essentials. In an experiment that involved soldiers starving for a period of time before interacting with starving prisoners after the war, researchers found that soldiers spent a disproportionate amount of time talking about food. The food they couldn’t eat, but the thoughts and conversations about the food filled their mental spaces.

When the researchers tested decision-making abilities and choices, they found that the same group of people made bad decisions and made bad choices before their income was earned; and that they made better choices soon after payday. There is enough evidence to show how shortage affects behavior and why it is important to tackle the shortage first, before having any expectations that people who suffer will make the decisions necessary to get out of their situation. poverty. Studies have shown that poor people tend to have problems with self-control, not because they are reckless and irresponsible, but because they may have exhausted their will to tackle shortages. They can suffer from a failure of self-control when their energies have been lost in the fight against hunger and depraved conditions. Drug addiction, addictions and the inability to deal with these issues have been attributed to willpower exhaustion caused by poverty and scarcity.

By examining the predominance of loan sharks and the usurious rates at which daily loans are taken out by small vendors and day laborers, it has been found that many of those who suffer from a shortage are unable to think about the future or have a future. long-term vision. Borrowers are known to systematically prioritize the immediate problem and seek relief from the current nagging problem that occupies their mental space. The misuse of credit by low income groups, overuse of credit cards by low income groups and the persistent use of high cost informal debt by poorer sections can be attributed to a large extent to this. cognitive dissonance. Or the lack of mental energy to see that their decisions have long term negative consequences.

Payday loans are a common feature in the West, mainly used by low income groups. These are very high cost loans, issued on the basis of future payroll, made for a few days – 15-18 days – before the next payday. The borrower typically uses these loans to make payments for children’s education, for the car or other IMEs that may be due, or for emergency expenses. However, research shows that the entire loan is not repaid after payment because they cannot afford such a severe charge on the income. Thus, the loan is rolled over at high rates. These informal loans are taken out because they fall outside the realm of credit and formal scores; they help keep debt away from family and friends; and they are procedurally easy to obtain. But they remain difficult to pay, create debt traps and represent the preference for immediate sub-optimal solutions.

Guaranteeing a basic income for all is a much debated idea. Scarcity creates its own pitfalls and limitations. The Power of Sleep, for example, shows how energy and productivity levels don’t depend on the amount of work, but on the amount of rest. Income security to cover basic food, clothing, and shelter needs is like that much-needed sleep. The state of calm when shortages do not obstruct the mind in underperformance. This author must mend his way of working as close as possible to his deadline. The induced scarcity is not a good practice.

(The author is president, Center for Investment Education and Learning)

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