At the macro-level, marketing makes the poor even poorer because aggressive campaigns target the poor with a range of products — chiefly cigarettes, alcohol, fast-food, lotteries, pawn shops, casinos, predatory mortgages, fringe-banking schemes, payday loans, rent-to-own and high-interest credit cards. These products are patently crippling to low-income consumers’ health and wealth. Still and all, market forces never cease to ‘slay the slain’. Unlike the poor, the rich have systems such as attractive ‘no-fees’ options, automatic deposits, and reminders that are designed to shelter higher-income consumers from errors. Overall, much less is done by marketers to aggressively campaign positive options such as healthier diets, non-profit services, union banks, and prime-rate lenders to low-income consumers (Bertrand, Mullainathan & Shafir, 2006).  

The credit card industry serves as an illustrative example to show the inequity on how low-income as compared to higher-income consumers are treated. A recent report by FRONTLINE and The New York Times cites some shady tactics that the industry uses to incite consumers to take on more debt. A set of code words within the industry’s vernacular follows the insidious theme. Consumers who pay off the full balance on-time are referred to as ‘deadbeats’, whereas low-income consumers that carry monthly debt are called ‘revolvers’. Deadbeats are lost causes, whereas revolvers are cash cows. Revenues are generated by tactics that include hidden fees, default terms, penalty fees and higher rates that are often triggered by marginal errors (e.g., payment that arrives only an hour late; a charge that exceeds the limit by a few dollars) (Bertrand, et al., 2006).

Clearly, the poor become poorer because of manipulative and exploitative marketing tactics. A deeper level of analysis reveals that the working poor are also more likely to fall for these tricks because of impaired decision making perpetuated by the state of poverty itself.

According to Dr. Sendhil Mullainathan, a Professor of Economics at Harvard University, the poor necessarily require higher levels of self-control and restraint. In his book, Scarcity, Dr. Mullainathan explains that scarcity of financial resources affects the poor as they cannot afford to waste a dime never less shell out wads of cash to splurge on non-essential wants. The working poor are constantly trying to stretch their dollar so they can scrape by and fit the bare necessities in their tight budgets.

Dr. Mullainathan explains that in these circumstances, there is a profound psychological dynamic at work called the bandwidth tax. The single-mindedness and tunnelled vision caused by scarcity leads to reduced mental functioning in both fluid intelligence (solving problems and reasoning logically), and executive control (planning and controlling impulses).

We can all think of an instance when increased cognitive load inhibited problem-solving. How many of you have struggled to find your car keys while running late to work in the morning only to realize they were in your pocket the whole time? In this simple example, we understand that the scarcity of time leads to an increase in bandwidth tax, which then impairs the capacity to search the most obvious place wherein which the keys might be.

For the working poor, budgeting or planning errors can occur even after meticulous tracking because their minds are constantly ruminating about financial struggles. For example, a high-level of bandwidth tax may lead to more forgetfulness causing missed or late payments, which then lead to further penalty fees. Also, the working poor may experience reduced ability to solve unexpected problems like a bounced cheque, or a failed transaction. The outcome — they dig themselves into a deeper hole. In this way, scarcity not only raises the cost of mistakes, it also provides more opportunity to make mistakes by reducing mental capacity. As a result of this constant state of anxiety, unease, and impaired mental functioning, the working poor may become more vulnerable to shady payday loans, fringe-banking schemes, and predatory mortgages.