How Poverty Makes Workers Less Productive

How Poverty Makes Workers Less Productive

February 2, 20216:31 AM ET

GREG ROSALSKY at NPR Planet Money

https://www.npr.org/sections/money/2021/02/02/961910289/how-poverty-makes-workers-less-productive

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The researchers then monitored the workers' on-the-job performance, comparing them to a group of workers that didn't get paid upfront. The researchers find that the workers who were paid upfront were significantly more productive, making 6.2% more plates per hour. The biggest effect was seen with the poorest workers. Even more, the plates they made were less likely to be marred by mistakes, indicating they were more attentive on the job.

The authors conclude that giving workers cash upfront helped alleviate the mental burden of their financial problems and freed them to be more productive. It echoes findings from other studies on the psychological consequences of poverty, but it is novel because it looked at the effects of it at a real job rather than in a laboratory setting.

Given the emerging body of evidence that suggests the cognitive load of poverty hurts low-income folks' ability to escape their circumstances, the authors argue that policymakers should consider reshaping welfare programs with these psychological issues in mind. Giving poor people cash without conditions, for example, could do a lot to help them earn more cash on their own.

We've written before in the Planet Money newsletter about growing evidence that our welfare programs may not be up to the task. A study last year by the California Policy Lab found evidence that a huge percentage of poverty-stricken Californians are not getting the Earned Income Tax Credit because of the difficulty of filling out tax forms. Mullainathan and his colleagues' work is a reminder that policymakers should recognize the cognitive burden on many of those who live in poverty and make it easier for them to get assistance.



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