Failure looks like social policy that makes life harder for people

Jess Berentson-ShawTax and Welfare

With the discussion we are having about social policy at the moment I thought it would be good to discuss the science of what happens to anyone who lives on a low income, especially over any prolonged period of time, or during important stages of their development (e.g. the first years of life). It is important to understand the experience of living on a low income because good social policy draws on people’s behaviours and responses to the conditions they experience.

Why do we have policies to support people who are not doing well?

There are lots of reasons why a society would choose to put in place tax and welfare policies to support people who don’t have the perfect set of life circumstances. We mainly choose to do so in New Zealand because we think all people matter and regardless of their background or circumstance we should ensure everyone has a standard of living that means they are properly included in our society. Primarily it is about shared values and our commitment to human rights. The World Values Survey tells us New Zealanders put taking care of others pretty high on the list of things that they value (more so than other countries).

There is also a pragmatic reason to support people (though I think this is secondary to our values). That is to keep society ticking over. Poor health and wellbeing, lower educational achievement, lower earning power as examples, limit individuals and hence limit the countries wellbeing (especially if we look past GDP as a measure of wellbeing). We want to ensure all people are contributing in the best way they can as adults – we want them to thrive in a way that is meaningful to them. We could of course choose to not invest in all New Zealanders, accept the poorer outcomes we see in kids who grow up in resource poor households and communities, and instead import the people we need to run the country, but that is a pretty myopic view. And if we come back to our values not something many people in New Zealand think is ok.

So we have agreed, via the democratic process, that we should support people to prevent poor outcomes for a number of reasons. Obviously we want to do that in the most effective way we can and to do that we need to understand why living without enough causes poor outcomes or what happens to us when we find ourselves poor? We (people in government, policy and research, and communities themselves) can use the knowledge to design effective policy.

Researchers call it using science to understand people and their behaviour (economists call it behavioural economics).

The popular explanation for why low incomes cause poor outcomes is that people cannot buy things needed to thrive. Is this supported by research?

We call this the “investment pathway” theory and it has been a popular one. It is the idea that people with low incomes and wealth don’t do as well as others because they cannot purchase the goods and services associated with doing well. For example books for children to read, healthy, warm houses in safe neighbourhoods, enriching experiences like holidays and trips, time with parents even.

If people making policy think the investment pathways explains why poverty leads to poor outcomes then naturally they would choose policies to increase incomes for families, without a lot of consideration of the impacts and consequences in other areas of their life. For example a focus on increasing paid work would be an understandable solution if policy makers believe families just need to be able to purchase key goods to do better.

However, the science is not particularly convincing that this is why those on low incomes don’t thrive. Lack of purchasing power has something to do with it, but the recent evidence says it is more about stress, and in fact how stress and investment may interact.

Under financial pressure we all get stressed

So what happens when the car breaks down, or we get sick and cannot work for longer than we thought, or the landlord puts the rent up and we have to move? Or even our children get the chance to go on a scholarship trip? And we know our incomes and savings can’t cover it? We get stressed. It is a pretty normal human reaction. For people living on low incomes with little or no wealth and rising costs this stress becomes a constant factor in their lives.

In New Zealand the cost of living in relation to incomes and wealth has become a very significant issue in the last 30 years. Housing costs have sky rocketed, quality food is expensive, income support levels were cut seriously in the early 1990s, state housing numbers have been reducing, work has become more precarious, and wealth has been concentrating in the few. It is a recipe for high stress for many people, and it is pretty unrelenting. Income inequality and poverty rates have not shifted downwards for any sustained period of time during this generation.

Any of us can hold up a weight if we know we can put it down in a few minutes, try holding it for 10 hours, 10 days, 10 months even 10 years. Humans will not thrive under such conditions and it is the stress we need to think more carefully about.

There are two main stress pathways that science shows us resource scarcity acts through to influence people’s wellbeing.

The first stress conduit through which lack of resources act on people’s wellbeing is through ‘family stress’.

Some very interesting studies have been done with people experiencing long-term poverty; they found that the economic stress causes a cognitive load that impacts their decision-making abilities equivalent to losing an entire night sleep. Basically coping and worrying about money takes up a large chunk of your finite “cognitive bandwidth”, bandwidth you could be using for other day-to-day decisions and actions. So that is not good.

In other natural experiments (that is experiments that happen in real life with people experiencing the issue of concern), when parents incomes are increased and compared to a group of parents without the increase, those with the income increase show improvements in mental health, relationship conflict, anger, and other parenting behaviours. Critically in this body of research there were no conditions placed on parents in order to receive the money, conditions that would increase stress in other ways. These same studies showed significant improvements in children’s outcomes, notably their mental health and educational achievements, alongside the parents.

Similar experiments with sole parents of young children in receipt of income support have shown that when employment is added as a precondition of income support, children’s wellbeing does not improve even if there may be slightly more income coming into the family.

The family stress pathway is based on a large body of evidence (that I cover in Pennies from heaven) showing that economic stress impacts relationships, wellbeing, parental mental health, and decision-making ability and it is this that affects outcomes both for the individuals concerned and their children.

The second pathway through which lack of resources act on people’s wellbeing is ‘toxic stress’

What the evidence tells us is that economic stress has a physical impact on people. Long-term stress causes biochemical changes that in turn cause ill health in people.

Children experience the impact of economic stress in a family a couple of ways. First, if their parents are stressed then they may not be in a position to provide the stimulation babies and young children need for optimal brain development in the first few years. Basically, babies brains develop through experiential input, parents who are stressed day in day out have less time, mental energy, and capacity to provide this input. Brain imaging studies show that babies and children living in resource poor settings develop fewer neurological connections. There are experiments underway that are measuring the impact on the brain structures of children when parents receive unconditional income.

The second way that economic stress can be toxic to children is via their direct experience. Being stressed themselves (because their parents are stressed and unwell, and because their physical environment is harmful) has a biochemical and neurological impact upon developing children. Children’s’ immune systems and metabolism are affected by stress chemicals as they develop and it is an impact that can last a lifetime. Our own Dunedin Multidisciplinary Study, which tracked a cohort of children through their lives, showed that those, who grew up in families with few resources and then became better off as adults, had a higher risk of heart disease than those who grew up in better off families. There were immune system and biochemical consequences that moving across income bands later in life could not overcome. It tells us that early intervention in children’s lives is particularly important.

Low income and poverty are also associated with greater exposure to toxic chemicals in the physical environment (for example, mould and lead paint in poor quality housing), and this also affects children’s development.

Lack of investment and stress interact

Studies that use complex methods of data analysis indicate that the stress and the investment pathways may interact. The buying of a cognitively stimulating resource (such as a book), for example, often needs to be supported by a parent’s input to fully realise the investment –without a parent to cuddle up next to a child and read the book with them, the investment in the book is all but in vain. Stressed parents, trying to just get by, are unlikely to spend as much time reading with their kids and stressed children may not have the same capacity to gain the benefit from an investment in time or goods. The same applies to adults. Skills and capacity begets more skills and more capacity.

What does the science of stress mean for policy making?

Understanding how important stress is in relation to incomes and wellbeing means we need to design policies to actively reduce stress while trying to increase incomes: this is how all people will thrive. There is plenty of high quality research that tells us how to do that. Also we can listen to those who actually have to live on low incomes day in day out. There is some great data being crowd sourced right here.

On top of that the way any policy gets implemented matters. It might look good on paper but if it interacts with other policy to cause significant stress for people that is not the right policy for people in government to choose. The best policy we currently use that reduces stress and increases income is superannuation. It is a beautiful stress free tool that allows people to feel supported, but trusted, and as such they generally thrive.

But unconditional income is not the only policy to choose. Whānau ora for example allows whānau to identify what they need to thrive, and where their stresses are, or as Sir Mason Durie says

We don’t ask ‘what’s the matter with this Whānau’ we ask ‘what matters to this Whānau’

–Sir Mason Durie, TPM Pou

If you would like to read more of the research about stress, low incomes and good strong policy, pick up a copy of Pennies from heaven here. In the meantime listen to the stories of people who have to live on a low income in this country and consider whether the policies we are choosing are really going to work to ensure we all thrive?

Failure looks like social policy that makes life harder for people was last modified: March 1st, 2022 by Jess Berentson-Shaw
About the Author

Jess Berentson-Shaw

Dr Jess Berentson-Shaw is a science researcher working for the Morgan Foundation. Jess holds a PhD in Health Psychology from Victoria University. Jess has over 10 years’ experience working on applying science and evidence to public policy. She worked on improving the use of science in public health practice in NZ, before working as a Research Fellow at University College in London, where she researched how doctors and clinicians translate scientific evidence into their clinical practice. While in the UK she also developed a national data collection system, which was used to determine what factors contribute to poor outcomes for women and babies during pregnancy and birth. On her return to New Zealand she directed a research group that specialised in the independent evaluation and application of research and science to health policy and practice. Jess loves science and what it can do to make the world a fairer place.