Cut the Costs: Poverty Interrupted

Jul 8, 2015 in Blog

For the 45.3 million Americans who struggle to cover basic expenses, living in poverty is costly in terms of time, money, and cognition. Recent research by two of ideas42’s cofounders gives a name to the cognitive costs of poverty: a bandwidth tax, levied by the experience of scarcity. They find that lacking a key resource, such as money to pay the rent, can temporarily lower IQ by as much as 13 points.

ideas42 explores the different costs of poverty and their effects in a recent white paper, published as part of our Poverty Interrupted initiative. The paper suggests three strategies for service providers and policy-makers hoping to help people escape from poverty. The first of these strategies is to cut the costs that programs and policies often impose on the very families they’re meant to support.

What do we mean by this? Consider a small non-profit, perhaps one helping families facing eviction and other housing crises, that regularly refers clients to outside agencies for additional services, such as subsidized childcare, access to a food bank, or affordable health care. Typically, it’s up to the beneficiary to follow up on the referral: look up a phone number, call to make an appointment, track down required paperwork, and so on. These activities may not seem like significant barriers, but when people are already struggling to manage their time and money, this additional bandwidth tax can prevent them from turning good intentions into completed actions.

Take Claudia*, a single mother living in Tacoma, Washington with her four children. Despite earning a regular paycheck from a manufacturing job and getting additional help in the form of housing assistance, subsidized childcare, and SNAP (food stamps), Claudia still struggles to cover all her family’s living expenses. “I live paycheck to paycheck, and right now we’ve got to focus on [just] getting by,” she says. And “getting by” can sometimes be as taxing as having a second full-time job. For Claudia, everyday activities are more time-consuming (and stressful). While many working Americans deal with long commutes, Claudia has the added burden of taking her four children to and from several different after-school and daycare facilities because she cannot afford to have her children attend one consolidated program. She also pays for her poverty financially through the surcharges and late fees that are often forced upon her—such as the additional $25 fee to pay-off the cost of her washer and dryer in installments. As for the taxes on her bandwidth, Claudia summed it up well when she said, “I have so much going on, I can’t remember everything.” With these added burdens in mind, it’s little wonder that over 30 service providers ideas42 engaged with while conducting research for our white paper reported that many useful referrals are often not acted upon by those living in poverty.

But what can be done about this? An organization looking to cut costs (in terms of both time and cognition) for people like Claudia could invert their referral model by taking the burden of following-up off her plate in order to increase the likelihood of follow-through. They might establish partnerships with other organizations that allow for cross-agency data-sharing (with the client’s consent, of course); co-locate with an organization providing complementary services in order to enable one-stop shopping for clients; or even simply provide clients with a “referral guide” that includes all of the information needed to make and attend an appointment at another agency in one easy-to-read document.

A second opportunity to cut costs is to uncover—and then remove—the “strings” attached to services or benefits. While public benefit programs like SNAP, TANF (family welfare), and subsidized childcare are an invaluable resource to families like Claudia’s, the reality is that obtaining and maintaining these benefits is often costly. It’s costly to apply for these programs, to keep track of the ways particular benefits can and can’t be used, and to remember to complete the periodic recertification procedures necessary to maintain eligibility.

In addition to simplifying application and recertification processes, policy-makers should seek to increase the fungibility of benefits. Claudia, for instance, occasionally has money left on her SNAP card at the end of the month, but she can’t use it to buy the laundry detergent or diapers she desperately needs. Removing or reducing the restrictions on her SNAP benefits would free up the mental bandwidth she currently devotes to remembering which items can be purchased with her card and to closely tracking the amount of funds available at any given moment. With increased flexibility, Claudia would be able to use her limited cognitive resources in more productive ways.

At ideas42, we’re partnering with innovative service organizations and funders across the country to put these recommendations to the test. It’s time to cut the costs facing Claudia on a daily basis. With more of her time, money, and cognitive bandwidth returned to her, Claudia would no longer need to focus so much of her attention on “getting by” in the present. Instead, she could plan for the future and focus on ways to help her and her children escape poverty permanently.

Learn more about the high cognitive costs of poverty—and ways to reduce them—in our Poverty Interrupted white paper. For information about partnering with our Poverty Interrupted initiative, contact ideas42 Vice President Anthony Barrows at

*Not her real name