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Why do poor people stay poor?

Sep 30, 2020 | Michael K. Warne


Many in the general public believe poor people remain poor due to a lack of work ethic. In reality, work ethic alone is not enough to change their situation.

I recently read an article1 by Nick Maggiulli with the same title as above.  It started out with this:
Why do poor people stay poor?
It’s a question that everyone already seems to have an answer for.  
“The poor are lazy.”
“The poor can’t manage money.”
“The poor don’t have the right mindset.”
These theories are anecdotal at best and downright insulting at worst. The problem with these arguments is that they are based on small sample sizes rather than empirical data.2  While I agree that some people are poor because of these things, there has been little experimental research done on this topic…until now.

The article also mentions the work of researchers at the London School of Economics, who earlier this year released a paper on the subject.3

Their study hypothesized that many people remain poor throughout their lives not because they aren’t smart or don’t have any work ethic.  It has much more to do with the fact that they spend most of their time just working to survive, versus improving their position in life.

The study indicates that poverty seems to have a gravity to it, and it’s easy to remain ensnared by its grips.  And in order to break poverty’s gravitational force, it takes an even greater external force to lift people up.  It reminds me of a spacecraft rocketing into space. Without the force of the rocket behind it, here on Earth it remains with the rest of us Earthlings.

The researchers in the aforementioned study tested their theory by giving random female villagers in Bangladesh one-off transfers of wealth.  They found that if the one-time injection of wealth is enough, it’s the external force needed by the villagers to change their situation by finding more productive and valuable jobs.

This makes me think of my situation growing up.  I remember learning early on that this world is comprised of “Haves” and “Have Nots.”  And I recognized that I was firmly in the latter category.  If I wanted to change my position, I had to work hard in school so that I could potentially earn a scholarship to help pay for college.

But thinking back, hard work was not enough.  It took external forces to help me get to where I am today.  I remember way back in my senior year of high school making a mistake by not preparing well enough for a Physics test.  I had a 4.0 GPA, and I needed to keep it to have any chance for an academic scholarship.  For the first time ever, I made a cheat sheet with formulas on it to help me ace that test.  Well, I got caught, and I received a fat ZERO on that test.  I was embarrassed, and my teacher, who I respected, was shocked and disappointed.  In high school, I was the antithesis of smooth, with the ladies as well as rule breaking.  This was further evidence.  However, I learned my lesson, and I worked the rest of the year to get my grade up, despite my zero on that test.  My determination impressed my teacher enough to write a letter of recommendation for a scholarship I later received.  If not for the grace and forgiveness shown by my teacher, I might not have been able to attend college.

I remember in my sophomore year of college making the decision to join the Air National Guard.  Money was running out, and I needed to do something.  The Guard not only paid me more money per hour than I had ever made up to that point, it also qualified me for the GI Bill, which thankfully filled the budget gap.  Without the external help of the GI Bill, I might have just had to drop out of college.

From 2000-2002, I worked as a production manager at Waterpik here in Loveland, CO.  After two years in that job, most manufacturing in the US started shifting to Mexico and China.  Our production wasn’t spared, and neither was my job.  That was in 2002, in the middle of a recession.  It was tough to find a job, but after a few months, I had one job offer.  It was the start of my career as a Financial Advisor, and it was the most pivotal moment in my career.  That one opportunity allowed me to positively affect hundreds, if not thousands of others through my wealth management practice and in my personal life. Thank you, China.

These are just three examples where serendipity played a part in my story.  There are many more on my path to success. Those of us who have “made it” in life probably worked hard to get there.  But they needed help along the way…along with some luck.  Sometimes it’s an injection of wealth; sometimes it’s just someone believing in them and taking a chance.  Either way, we have much for which to be thankful.  And we have a great responsibility to pay it forward, giving others a hand up as well.

By the way, in the spirit of the old TV detective Columbo, I must mention one more thing.  My Physics teacher, Mr. Alexander, who was so influential in my life, was one of the semi-finalists in the ill-fated Teacher in Space program.  Another teacher, Christa McAuliffe, was eventually chosen for that mission.  Her death, along with the rest of the crew, was a tragedy both to her family and our nation.  But it spared the life of a man who would later be my Physics teacher and who would help launch me on my path to where I am today.


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