10 Insights On The Poor
Respect, migration, identity and more
Hello,
Most of the stuff we read about economics and finance focuses on the privileged class.
GDP numbers, wage growth, asset allocation, blah blah blah- those are all the concerns of the fortunate.
It almost feels like in studying all those dizzying topics, we systematically ignore the poor.
That’s all the more mindblowing because the poor comprise over 25% of the world’s population (people living on ~$5/day). The number probably exceeds half of humanity if you increase that to $10/day.
Given the misery that poverty creates, forcing ourselves to study this phenomenon and its alleviation should be a moral imperative.
Thankfully, it’s not like nobody cares. There are a bunch of economists who’ve spent time studying the poor, trying to understand their attitudes, issues, their struggles in dealing with attempts to get them subsidies or jobs.
One such economist is the Indian Nobel Laureate Abhijeet Banerjee.
He has done extensive research on this topic, and here are 10 intriguing insights on the poor & the underprivileged and how they can be helped. It’ll change the way you perceive them:
The need for respect: The poor hate using food stamps because it’s an attack on their dignity. It makes them feel terrible about needing dole-outs in a society where “everyone can work hard to build a good life” (this pervasive capitalism-induced myth is more damaging than we think). Rebranding these stamps, which have acquired a derogatory connotation, to something like “Golden State Advantage Card” (that’s just like a debit card) works well to reduce the stigma associated with these schemes. In designing policies, the dignity of the poor must be kept top of mind.
Why do they wait for a job?: A very interesting study in Odisha found that many young folks were unemployed not because there weren’t enough jobs- it’s just that they weren’t taking them up. Why? Because of an expectation mismatch. These youngsters with a college degree felt that the jobs on offer meant long hours, too much work, and not the kind of work they’d want to do. This is a case of them expecting comfy jobs that a college ed should bring, only to realize that the work available is onerous. But here’s an even more interesting reason: many of them were constantly writing exams for govt positions and waiting year after year for their selection- something that was rarely going to happen given the extremely low number of openings!
Why they don’t migrate: Despite being given detailed info about opportunities in the city, the poor in villages don’t migrate. Even when they get monetary incentives to do it, they come back after 1 season despite earning well in the city. Why? Because it’s not that easy to move your ass to a city just because that’ll pay more. It’s a lonely experience with terrible living conditions and hard work, without any of the comforts of friends/family and the familiarity of home. Moreover, people are worried about losing their share of the land inheritance if they jump: a powerful force that keeps them tethered to their village.
Perils of paperwork: Policies aimed at benefiting the poor often fail because they are f**ked by the friction. A widow pension scheme in Delhi saw very low uptake because it had complex paperwork, which scared most applicants away. In a trial, those helped with information were 6% more likely to apply, and those given assistance by an NGO rep were 11% more likely. If there’s one thing that unites the rich and the poor, it’s a visceral hatred of paperwork.
Unfair treatment: Despite the above-mentioned support, only 26% of the total participants in the trial ended up applying for a pension, perhaps due to low trust in the government. This may be stemming from a history of unfair treatment- where people eligible for a scheme are unfairly denied access or randomly declared non-eligible. This means that many poor don’t make the effort to apply, because if rejection is a certainty, why waste your time and get insulted once again? This explains why so many policies to help the poor don’t benefit them.
Conditional transfers: Imposing certain conditions on policy usage adds friction: We’ll send you cash if you send your kid to school. Studies have found that the resulting drop-off blunts the intended impact. Plus, the cost of administration (investing in personnel and processes to verify if the conditions are being met) adds cost—a double whammy that makes it such a bad deal. Many have suggested that unconditional transfers are way more beneficial in boosting participation.
Bad rep: A common thought while giving money to the poor is “he’ll blow it on drinking or drugs”. Or that it’ll make them lazy. Many researchers have studied this and found no compelling evidence that this happens. The poor spend acquired cash on food, and contrary to the belief of expert aunties, it doesn’t reduce their incentive to work. Rather, it helps them escape the predatory loan sharks who’re out for their pound of flesh. Moreover, cash handed over to women is even better as it improves the balance of power in the house and even allows her to pursue her work/start a small business.
UUBI: While UBI may not be a great solution in the West, for the poor in countries like India, a universal ultra-basic income might give the poor a bit of breathing room to escape the daily grind of survival. The fact that it’d take much less money than a standard UBI scheme and the long-term benefits it brings, it might not be a bad idea to roll all the central government’s subsidy schemes into one such unconditional, zero-friction policy. Simple ideas like making people go to an ATM to claim this income can reduce 20-30% population’s uptake (because for the well-off, the effort won’t be worth it).
Dignity: A program in Paris that helped the poor start a biz worked wonders because of one key difference- it assembled them and heard them out. Being heard, and having their needs acknowledged is one thing the poor rarely get. Always given gifts/hand-outs, they feel robbed of their agency and sad about not making contributions to society. We deepen that issue by thinking they’re “not grateful” for the help being offered. They need help, but that doesn’t mean we reduce the help to just hand-outs. More than money, one of their biggest needs is to do some work/business and get respect.
Hope & Identity: For a long time, politicians have treated the poor, not their poverty, as the problem. Equating a poor woman’s circumstances (which are just bad luck) with her identity is as disempowering as it can get. The only thing that keeps people in terrible conditions going is hope, and it is the job of policymakers to help these people absorb life shocks without letting them affect their identities and give them more reasons to be hopeful about the future.
That’s it for the day folks. If you liked this, consider donating money to charitable causes, giving regular tips to delivery folks, and sponsoring school/college ed for the unfortunate. If you don’t trust charities, start with the unfortunate around you.
Every bit helps. Change begins with us.
And if you have an intellectual mindgasm reading this, here are some more:
A Note To India’s Builders [Very Popular]
How The World Rose From Poverty [Amazing Idea]