Yesterday McDonald’s (MCD) closed its McResource website, a well-meaning effort that had become a font of bad press for the fast food chain. The site suffered for two opposite but equally embarrassing problems. Some of its advice—how to tip an au pair or a pool cleaner, for example—clearly did not apply to McDonald’s workers. But some addressed the potential desperation of low-wage employees. It also suggested that workers considering returning unopened Christmas gifts to get out of debt. A worker group publicized the fact that a McDonald’s worker who called the McResource help line was told to look into food stamps. And in what was perhaps the final straw, the site was discovered to be cautioning employees about the health effects of fast food, calling a cheeseburger and French fries an “unhealthy choice.”
But while the McResource site offered the lowest of hanging fruit for mockery and derision, it raises a broader question about the place of such advice for low-wage workers who are struggling to make ends meet. The site’s recommendations certainly could have been less comically tin-eared; even if so, would they have been useful?
The tradition of seeking to improve the lives of the poor by teaching them virtuous habits—thrift, sobriety, piety, self-control—extends back to Victorian social reformers. Today, the question of whether poverty is caused primarily by bad decision-making or societal conditions is one of the main points of contention between American conservatives and liberals. But if interesting new research is correct, the conditions and the decisions are indistinguishable. In other words, poor people really do tend to make worse financial decisions than rich people, but it’s not for lack of good McAdvice. It’s because they’re poor.
The research, some of which was published in the journal Science last fall, was led by the Harvard economist (and MacArthur-certified “genius”) Sendhil Mullanaithan and the Princeton cognitive scientist Eldar Shafir. The two detail the work in their book Scarcity: Why Having Too Little Means So Much, published in September. After asking shoppers in a New Jersey mall to estimate their own household income, the researchers gave them tests that measured either their fluid intelligence (if you’re curious, they used the Raven’s Progressive Matrices test) or their impulse control.
Before taking the tests, the subjects were given a hypothetical household financial dilemma to solve: Their car is having trouble. Should they go ahead with a repair or hold out and hope the car continues to work without it? The key detail was this: For half the subjects, the hypothetical repair costs $300; for the other half, it would cost $3,000.
Mullainathan and Shafir’s team found that for the poorer test subjects, being faced with the more costly hypothetical had a marked effect on their performance on the cognitive tests. The mental strain of having to work through the potentially ruinous financial calculation—even hypothetically—exhausted them, and they did significantly worse on the intelligence and impulse-control tests than equivalently poor subjects who had been given the cheaper hypothetical. How much worse? As poorly as if they were severely sleep-deprived. (For the wealthier test subjects, neither scenario was unaffordable so there was no effect.)
In other words, the financial stresses of poverty can weaken people’s decision-making ability. As blogger Matthew Yglesias has pointed out, this may help explain the research finding that simply giving money to poor people is a particularly effective form of aid—particularly compared to the far-more-popular practice of giving the poor the things donors think they need—with noticeably positive effects years later. By providing a financial buffer and alleviating stress that may lead to poor decision-making, a cash infusion helps people make better financial decisions.
In contrast, giving the poor advice as to how to make better decisions—even if such advice is more germane to their lives than how much to tip a domestic—doesn’t do anything to alleviate that pressure. It’s a cruel twist that, if Shafir and Mullainathan are right, the poor simply can’t afford to think as clearly as the rich.
