Cycle of poverty
In economics, a cycle of poverty, poverty trap or generational poverty is when poverty seems to be inherited, preventing subsequent generations from escaping it. It is caused by self-reinforcing mechanisms that cause poverty, once it exists, to persist unless there is outside intervention. It can persist across generations, and when applied to developing countries, is also known as a development trap.
Families trapped in the cycle of poverty have few to no resources. There are many self-reinforcing disadvantages that make it virtually impossible for individuals to break the cycle. Lack of financial capital, education, and social connections all play a role in keeping the impoverished within the cycle of poverty. Those who are born into poverty have been shown to consistently remain poor throughout their lives.
Educational psychologist Ruby K. Payne, author of A Framework for Understanding Poverty, distinguishes between situational poverty, which can generally be traced to a specific incident within the lifetimes of the person or family members in poverty, and generational poverty, which is a cycle that passes from generation to generation, and goes on to argue that generational poverty has its own distinct culture and belief patterns.
Measures of social mobility examine how frequently poor people become wealthier, and how often children are wealthier or achieve higher income than their parents.
Causes of the cycle
Economic factors
The US federal minimum wage has not kept up with inflation. It peaked in 1968 at $14 an hour in inflation-adjusted dollars. It has been at $7.25 an hour since 2009. Some, such as the Center for Law and Social Policy, the Center for American Progress, and Oxfam say that poverty is caused and maintained, to a significant degree, by low wages that some people in poverty earn. A low minimum wage also lowers wages above it too. It is more and more difficult for those households to get out of poverty, especially in states that haven't raised the minimum wage very much, or at all, since 2009.The Washington Center for Equitable Growth and The Review of Economic Studies noted studies that found that higher minimum wages in some places increased employment. One reason was that they lowered the rate of people leaving their jobs, thus increasing the number of filled jobs. The Robert Wood Johnson Foundation reported that researchers have determined that regardless of possible job losses a federal minimum wage increase would bring great financial relief to many people.
However, some labor economists say that little poverty has been reduced following minimum wage increases. Others, such as the National Bureau of Economic Research, say their studies demonstrate that the negative consequences had on some low-wage earners due to minimum wage increases, such as minimum-wage earners in competitive markets having their work hours reduced or even losing employment after the minimum wage is increased, may not always be outweighed by the positive effects, depending on the unique circumstances of each labor market.
Some poor households, with or without full-time working members, have people that can not work very much, if at all. According to the United States Census, in 2012 people aged 18–64 living in poverty in the country gave the reason they did not work, by category:
- 31% – Ill or disabled
- 26% – Home or family reasons
- 21% – School or other
- 13% – Cannot find work
- 8% – Retired early
According to the U.S. Government Accountability Office, about 20 percent of American families that include a worker earning up $7.25 per hour, 13 percent of families with a worker earning from $7.25 to $12.00 per hour, and 5 percent of families with a worker earning from $12.01 to $16 per hour were in poverty over a period from 1995 to 2016.
In the case of banking, people who cannot maintain a minimum daily balance in a savings account are often charged fees by the bank, whereas people with larger amounts of wealth can earn interest on savings and substantial returns from investments. Unbanked people must use higher-cost alternative financial services, such as check-cashing services for payroll and money orders for transferring to other people. People who have had previous credit problems, such as overdrafting an account, may not be eligible to open a checking or savings account. Major reasons for not opening a bank account include not trusting banks, being concerned about not making a payment due to a bank error or delay, not understanding how banks work, and not having enough money to qualify for a free account.
Though most industrialized countries have free universal health care, in the United States and many developing countries, people with little savings often postpone expensive medical treatment as long as possible. This can cause a relatively small medical condition to become a serious condition that costs more to treat, and may cause lost wages due to missed hourly work. Poor people may have lower overall personal medical expenses simply because illnesses and medical conditions go untreated, but on average life span is shorter. Higher-income workers usually have medical insurance, which shields them from excessive costs and often encourages preventive care. In addition to available personal savings, higher-income workers are more likely to be salaried with specified personal time and sick days that prevents them from losing wages while seeking treatment.
Because no skills or experience are required, some people in poverty make money by volunteering for medical studies or donating blood plasma.
Internal and external factors sustaining poverty
Amongst the most popular characterizations of the ongoing experience of poverty are that:- It is systemic or institutionalized or
- A person is misguided by emotional challenges driven by historical experiences or
- A person is affected by a mental disability,
Systemic factors
Donald Curtis, a researcher at the School of Public Policy in the United Kingdom, identified that governments regard the welfare system as an enabling task. Curtis maintained, however, that the system lacks cohesiveness, and is not designed to be an empowerment tool.For example, outside parties are funded to manage the effort without much oversight, creating a disconnected system, for which no one leads. The result is mismanagement of budget without forwarding progress, and those that remain in the poverty loophole are accused of draining the system.
Bias
Jill Suttie, wrote that implicit bias can be transferred nonverbally to children with no more than a look or a gesture, and as such is a learned behavior. Critical thinking skills can ward off implicit bias, but without education and practice, habitual thoughts can cloud judgment and poorly affect future decisions.Decision-making
A Dartmouth College study reported that probabilistic decision-making follows prior-based knowledge of failure in similar situations. Rather than choose success, people respond as if the failure has already taken place. Those who have experienced intergenerational poverty are most susceptible to this kind of learned behavior.Intergenerational
Professors of Sociology Wagmiller and Adelman asserted that roughly 35–46% of people who have experienced hardship in young and middle adulthood also experienced moderate to severe poverty in childhood. As of 2018, 7.5 million people experienced poverty in California alone.Mental illness
In a qualitative study, Rudnick et al.,, studied people living in poverty with mental illness and determined that participants felt that wellness care, nutrition, housing, and jobs were severely lacking. Respondents asserted that the most significant problem was access to quality services; bureaucratic systems appear to be devoid of logic and treatment by providers were often unaccommodating and uncooperative.Lowered productivity
The stress of worrying about one's personal finances can cause lower productivity. One study on factory workers in India found payment earlier in the work period increased average worker output by 6.2%.Choices and culture
According to a 2009 and 2011 study made by the Brookings Institution, people who finish high school, get a full-time job, and wait until age 21 to marry and have children end up with a poverty rate of only 2%, whereas people who follow none of the steps end up with a poverty rate of 76%.Early childhood adversity and basic needs stressors contributing to the cycle of generational poverty
The stress of early childhood adversities, including basic need stressors, abuse, and neglect, are major causes of generational poverty. Studies have shown that the trauma of child abuse manifests negatively in adult life in overall health and even in employment status. Abuse and neglect are potential adversities facing those in poverty, the adversity that is shared among all below the poverty line is the daily stress over basic needs. "The stress of meeting basic needs takes all precedent in the family, and children learn that the only way to survive is to focus on getting basic needs met". Every member of a household in poverty is impacted by basic need stressors. The ability to secure and pay for childcare is another contributing factor to the problems those in poverty have with finding and keeping a job.These stressors are not just unpleasant, they are catastrophic to a body's health and development. Exposure to chronic stress can induce changes in the architecture of different regions of the developing brain, which can impact a range of important functions, such as regulating the stress response, attention, memory, planning, and learning new skills, and also contribute to dysregulation of inflammatory response systems that can lead to a chronic "wear and tear" effect on multiple organ systems. Chronic stress is detrimental to our health and has even been proven to harm memory and organs, including the brain. Working memory, defined as a human's capacity to store information in the brain for immediate use, is known to be shorter for children raised in poverty versus those raised in a middle-class environment. Children suffering through basic needs stressors from the earliest of years have to work harder than their peers to learn and absorb information.