Why It Matters

Easing impact of poverty

Debt is traditionally seen as a consequence of poverty rather than a cause of it.

In 2013, a new school of research overseas contributed to a paradigm shift in how the poor are viewed by suggesting that the state of scarcity taxes the brain to such an extent that they have little "mental bandwidth" left to deal with decisions.

In such cases, people tend to make bad choices that may further lock them in the cycle of poverty.

Findings from a new study here, led by the National University of Singapore, have confirmed this to be true for the urban poor in a city like Singapore, compared to the examples of extreme scarcity in developing countries examined by the poverty scholars in the earlier research.

The Singapore study has also taken the discussion a crucial step further. It shows that the longer-haul cognitive impact of poverty on the poor can be reversed or alleviated.

Academics here surveyed 246 low-income households with chronic debt just before and three months after their debts were repaid as part of a one-off debt-relief charity project.

They found that the effects of clearing the debts of the poor - reducing anxiety levels and improving cognitive functioning - last even three months down the road when test results were taken.

Comparatively, the 2013 research done by Harvard economist Sendhil Mullainathan and Princeton psychologist Eldar Shafirlooked at the impact of scarcity at a particular point in time.

The latest findings here have huge implications, especially for families mired in poverty for years.

It means that such scarcity may not leave a permanent cognitive mark on the debtors and their children and suggests the potential for debt-relief programmes in reversing the insidious impact of lack on the brain.

More research is needed to see if the impact of scarcity - be it money, time or even affection - can still be eased one, five or 10 years down the road. In the meantime, this promising study gives hope to many needy families in debt.

A version of this article appeared in the print edition of The Straits Times on April 23, 2016, with the headline 'Easing impact of poverty'. Print Edition | Subscribe