The effect of poverty on cognitive function: Does a reminder of financial hardship affect subsequent decision-making?

Abstract

The conditions of poverty are thought to change the way people process information and make decisions. Past research has shown when low-income participants are reminded of their financial situation they perform worse on tests of cognitive function than high-income participants. Across five studies, this thesis was designed to explore when and how a reminder of financial hardship affects subsequent decision-making. Study One: Study one tested the mechanism driving the effect of poverty on cognitive function. A student sample of participants were exposed to a financial versus a non-financial reminder that elicited or did not elicit fatigue then measured on their subsequent deliberative risk-taking. Participants engaged more risk after a high- compared to a low-fatigue task but were not sensitive to whether the task reminded them of their financial situation. Study Two: Study two sought to extend this effect to a consumer choice paradigm. An Auckland-based sample of participants were exposed to a financial versus a non-financial reminder then measured on their subsequent heuristic tendency in a novel choice task. Low-income participants engaged a less deliberative and more heuristic decision-strategy after being reminded of their financial situation, however, high-income participants showed the opposite sensitivity. Study Three: Study three tested the efficacy of an intervention to support better cognitive function. An Auckland-based sample of participants were randomly assigned to participate in a month-long money management program. Compared to a wait-list control, participants exposed to the intervention showed an improvement in their deliberative cognitive function in terms of self-control stamina. This improvement was greatest for participants with a lower income. Study Four: Study four explored the impact of decision-context. A US-based sample of participants were exposed to a financial versus a non-financial reminder then measured on their subsequent risk-taking in a high- or low-affect context. Low- and high-income participants engaged a similar level of risk in a high-affect context but, in a low-affect context, low-income participants engaged more risk after a financial reminder. Contrary to expectation, more risk was related to a more optimal strategy so the financial reminder actually facilitated cognitive function. Study Five: Study five explored the impact of poverty-measurement. A US- and an India-based sample of participants were exposed to a financial versus a non-financial reminder then measured in terms of cognitive control, cognitive flexibility, and working memory. The results showed greater differences in sensitivity to the initial task when comparing participants based on absolute rather than relative income. However, this sensitivity did not manifest as expected. While US-based participants performed worse on the cognitive tasks after the financial reminder, India-based participants performed better. Conclusion: The results from the present thesis showed that any effect of poverty on cognitive function is more complex than past research suggests. For some people, being reminded of their financial situation did not affect their subsequent cognitive function and in some contexts, poverty actually facilitated better decision-making. This research helps shape our understanding of the cognitive effects of poverty and informs the design of poverty alleviation strategies.