Fighting Intergenerational Poverty

Sep 17, 2014 in Blog

It’s easy to agree that poverty is a problem, but explaining its causes and prescribing solutions is a far more difficult and complex task. What if children born into poverty could become as likely to succeed as their wealthier peers? What if intergenerational poverty were not an unavoidable and enduring evil, but entirely tractable?

These are the challenging questions ideas42 is seeking to help answer with a new initiative calledPoverty Interrupted. Using behavioral insights drawn from the cognitive effects of scarcity to create more effective program design, Poverty Interrupted aims to find ways to help reduce intergenerational poverty for families with young children. Currently in the research and design phase, Poverty Interrupted will identify behavioral barriers that preventing better outcomes for people in poverty. Once identified, we will develop interventions designed to mitigate those obstacles.

Despite the efforts and expenditures of countless public and private organizations each year, poverty remains a severe problem in the United States. As of 2012, the relative poverty rate in America is 17.4 percent —well above the OECD average of 11.1 percent (OECD 2014). Beyond the inherent injustice of that statistic, it is also extremely expensive to society for low-income families to fail. The national cost of poverty—including both public spending and lost earnings—is estimated to be $500 billion per year, or nearly 4 percent of GDP (Holzer et al. 2007). Children are especially vulnerable; in 2012 more than 21 percent of Americans under 18 were living in poverty (OECD 2014). Most concerning of all, if current trends continue, many of these children will grow up to head low-income households of their own, and continue a cycle of intergenerational poverty.

Despite these disheartening facts and figures, ideas42 believes that emerging insights from behavioral economics offer hope. Central to the Poverty Interrupted initiative is the recognition that poverty presents inherent cognitive challenges that must be addressed before economic mobility can be achieved.

The Poverty Interrupted initiative is framed by the concept of scarcity – exploring how a shortage of money, time and other important resources taxes our ability to make decisions, pay attention and exert self-control. This cognitive effect has significant implications for programs and policies that serve and support low-income families whose lives are marked by chronic scarcity.

Initial findings and promising solutions were presented by ideas42 at CFED’s 2014 Asset Learning Conference in an interactive round table session titled Designing for Scarcity: A Behavioral Approach to Two-Generation Strategies.

Stay tuned for upcoming reports from the Poverty Interrupted project team that will outline behavioral insights and propose recommendations on mitigating the negative effects of scarcity and helping millions of struggling families break the cycle of intergenerational poverty.