Poverty in the eyes of the poor

When being asked about how to distinguish the poor from others, lots of people have a tendency to apply measurements based on absolute income. One of these is the ‘Poverty Line’, introduced in 1990 by World Bank to measure poverty across countries and cultures. According to this measurement, people who live on less than $2 per day are living in poverty and being targeted by many reducing-poverty policies all over the world. However, poverty is also a state of mind. Different people may have different ideas about what poverty is. It means there is a likelihood that people with little income do not consider themselves poor. This feeling leads to the state where people do not want to change their lives. Policy targeting these people can be useless, as it offers what these people do not need. Therefore, it is of importance to understand how the poor consider themselves poor to build better content for a reducing-poverty policy.

How poor does the poor perceive themselves? A good way to answer this question is to address the poor’s relative income, i.e how the poor compare their income to a reference point. The reference in this case can be the income of a reference group, for instance their neighbors; the income in the poor’s aspiration or even the income of themselves 3 years ago. This is exactly the basic idea behind Castilla (2012). In detailed, this paper conducted a survey for 1535 households in 5 central and southern states of Mexico and analyzed how these reference points stated above affect the poor Mexican’s perception of being poor. Using income satisfaction as a proxy for this perception, the paper produces some interesting results. Firstly, a person will feel poor when his income is lower than that of the reference group or his aspiration. The income of themselves 3 years ago, however, does not have that much impact on income satisfaction. Secondly, the well-being perception of people under poverty line is mainly affected by the level of aspiration income, while the non-poor are affected by both aspiration income and the income of the reference group.

From this result, we can conclude that reference points in general, and aspirations in particular play an important role in determining how the poor perceive their well – being. This result is supported by Pocheptsova et al (2009), in which people are argued to be more affected by reference dependence when they are resource-depleted. As the poor have to struggle with resource deprivation, the relationship between their perception of well-being and aspirations becomes especially strong. However, the story does not end here. We have known that the poor’s subjective well-being depends on aspirations, but what determines the poor’s aspiration is still an enigma. Therefore, in the next part we will try to find out the determinants of the poor’s aspiration.

There are many influences on individual aspiration. According to Appadurai (2004), poverty is the main culprit behind the poor person’s lack of capacity to aspire. As an individual, the poor face limited access to material goods and services. They also have social structures and norms constrained and framed their social lives. The cultural prejudice leaves them unrecognized, deepens their inequality and strips away their dignity. As a group, they do not have voices to engage in policy that governs their lives. Policies are in favor of the rich, and the poor have no capacity to debate, contest or oppose to them. Because of this, they have problems taking opportunities to pursue their aspirations, thus gradually lose the capacity to aspire and easily get trapped in aspiration failures.

Dalton et al (2016) took a different approach to aspiration, i.e aspiration is determined endogenously by individual. The authors argue that people would aspire only when the outcome is perceived to be achievable. Therefore, the level of aspiration depends on the outcome, which in turn is affected by the level of effort exerted. In other words, effort level determines aspiration. Based on this intuition, Dalton et al (2016) concludes that both the rich and the poor face aspiration failure; however, the poor tend to pay a bigger price. In detailed, given a fixed level of aspiration, the poor with lower initial wealth will choose lower effort than the rich person. This lower effort in turn lowers the level of aspiration for the poor. With lower aspiration, the poor lose incentive to make effort, thus exert even less effort, which again decreases the aspiration level. Finally, the poor end up with very low effort level and aspiration level, which perpetuates their initial status.

Despite taking two different approaches, these two papers both lead to a unique conclusion: low aspiration of the poor people is the consequence of poverty. The difficulties in life, the stigma of society and the lack of experience in yielding the capacity to aspire all together combine and lower the poor’s aspiration. This results in the poor making less effort towards any goals, which makes the aspiration of the poor even lower. Combining this result with the one we have discussed earlier, we can find some interesting implications. How the poor mentally perceive themselves depends on the aspiration level. However, the reality of resource deprivation, lack of opportunities and bad living conditions continually decreases their aspiration. More interestingly, this decrease in aspiration gives the poor wrong assumptions about themselves. They will feel less poor, thus make less effort and continue to stay in their initial state.

The picture of the poverty and aspiration failure is now clearer. From the view of non-poor, the poor neglect opportunities and possibilities because of aspiration failure. They have low expectations such as never to escape poverty, thus making any further steps to get out of poverty is useless. The view of the poor is argued to be much different. Because of perception failure, the poor are more and more satisfied with their lives and choose to stay in their current states. They may find possibilities and opportunities unnecessary, ignore them and stick to the status-quo. This result provides a new approach to reducing-poverty policies. While the combination of opportunities granting and nudging is still good, there should be some changes in the way the poor are nudged. Giving them hopes and rising their aspiration may not be effective, because they will only make the poor feel poorer and exacerbate their aspiration failure. A starting point should be to talk them out of the perception failure and show them that comparing their income to aspirations can only make their situation worse. It is important for the poor to know how to precisely assess their conditions and have the clear target to pursue. This target can be set by policy-makers in a way to drive the poor out of poverty. Only when the perception problems are solved, can opportunities and solutions to aspiration failure be effective. Lastly, it is important to note that, the result from this essay is just a hypothesis. Therefore, its validity needs being proved in the future researches. However, whether this hypothesis is valid or not, it still teaches us a valuable lesson: if we want to help the poor, we will have to walk in their shoes first.

References

Appadurai, A. (2004). The capacity to aspire. In Rao, V., and M. Walton (eds.), Culture and Public Action, The International Bank for Reconstruction and Development, the World Bank, Washington, DC.

Castilla, C. (2012). Subjective well-being and reference-dependence: Insights from Mexico. Journal of Economic Inequality, 1-20.

Dalton, P. S., Ghosal, S., & Mani, A. (2016). Poverty and aspirations failure. The Economic Journal126(590), 165-188.

Pocheptsova, A., Amir, O., Dhar, R., & Baumeister, R. F. (2009). Deciding without resources: Resource depletion and choice in context. Journal of Marketing Research46(3), 344-355.

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