Cycle Of Poverty

In economics, a cycle of poverty or poverty trap is caused by self-reinforcing mechanisms that cause poverty, once it exists, to persist unless there is outside intervention. It can persist across generations, and when applied to developing countries, is also known as a development trap.

Families trapped in the cycle of poverty have few to no resources. There are many self-reinforcing disadvantages that make it virtually impossible for individuals to break the cycle. This occurs when poor people do not have the resources necessary to escape poverty, such as financial capital, education, or connections. Impoverished individuals do not have access to economic and social resources as a result of their poverty. This lack may increase their poverty. This could mean that the poor remain poor throughout their lives.Hutchinson Encyclopedia
Cycle of poverty

Controversial educational psychologist Ruby K. Payne, author of ''A Framework for Understanding Poverty'', distinguishes between situational poverty, which can generally be traced to a specific incident within the lifetimes of the person or family members in poverty, and generational poverty, which is a cycle that passes from generation to generation, and goes on to argue that generational poverty has its own distinct culture and belief patterns.

Measures of social mobility examine how frequently poor people become wealthier, and how often children are wealthier or achieve higher income than their parents.

Causes of the cycle

Chronic general poverty

Poverty can be created or sustained for large numbers of people through general economic conditions, which tend to be self-sustaining. Metrics for these conditions include:
* Low gross domestic product or overall low productivity, failing to produce enough wealth for the population as a whole to escape poverty
* High unemployment, creating poverty for the unemployed and putting downward pressure on wages
* A lack of education, which prevents people from getting high income jobs.

* Low social mobility, perpetuating poverty for a given person or family
There are also various poverty metrics that directly indicate its extent, generally involving income, wealth, or both. It can be measured on an absolute scale (which might put almost an entire country's population below the poverty line) or in a relative way, identifying people who are poor compared to others in the same country.

Countries with chronically low levels of economic development fail to provide opportunities for many individuals to leave poverty. These may be caused by:
* Problems with the means of production:
** Lack of or poor quality infrastructure
** Widespread lack of skills needed for employment (including education) or high-wage employment
** Lack of equipment and automation that would boost productivity
* Economic mismanagement, such as regulatory failure
* Widespread corruption
* Inability of the government to guarantee stable market conditions, including physical security and enforceable property rights
* High burden of disease
* Barriers to international trade, possibly including international sanctions

Non-circular causes of poverty

Generally poor economic conditions can also be due to temporary causes, which might not result in a "cycle of poverty" if the economy recovers thereafter. Temporary economic problems can be caused by:
* Recession (for which there are many causes) and the lower-activity portion of the business cycle
* Climate change
* Disasters
** War, whether through direct destruction or general funding burden
** Natural disasters, including storms, drought, and earthquakes
** Epidemics
** Famine
** Anthropogenic disasters, including accidents

A one-time event, whether affecting the economy in general or personal in nature, can push a given person or family into poverty, after which they enter the "cycle of poverty" which is difficult to escape. Examples of personal events that can have a negative economic impact include:
* The loss of a job or failure of a family-owned business
* A health issue, which can result in lost wages, a permanent disability, or medical debt in countries without free universal health care
* The death of a family member
* An unplanned pregnancy
* Short-term financial mismanagement of personal savings or debt
* A breakup or divorce, if alimony does not compensate for the loss of one partner's income
* A foreclosure or eviction
* An automobile collision or other loss of a vehicle needed to get to work
* Commission of a crime that results in a criminal record and difficulty obtaining work
* Incarceration that results in loss of economic assets and social networks

Factors maintaining personal poverty

Once poor, people can experience difficulty escaping poverty because many changes that would allow them to do so require money they don't have, such as:
* Education and retraining with new skills
* Child care which would enable a single parent or second parent to work or take classes
* Transportation to a distant job
* Migration to an area with better economic opportunities
* Starting a new business, which might require market research, technical assistance, and startup funding
* Obtaining land for subsistence farming
* Curing a health condition that prevents work, including diseases of poverty which don't affect people outside of the "cycle of poverty"

According to the United States Census, in 2012 people aged 18–64 living in poverty in the country gave the reason they did not work, by category:
* 31% - Ill or disabled
* 26% - Home or family reasons
* 21% - School or other
* 13% - Cannot find work
* 8% - Retired early

Some activities can also cost poor people more than wealthier people:
* Rent – If unable to afford the first month's rent and security deposit for a typical apartment lease, people sometimes must live in a hotel or motel at a higher daily rate.Nickel and Dimed
* Food
** If unable to afford an apartment with a refrigerator, kitchen, and stove, people may need to spend more on prepared meals than if they could cook for themselves and store leftovers.
** Buying in bulk (large quantities) is usually cheaper than buying small quantities in multiple transactions, but poor people are less likely to have cash on hand to finance a large purchase of food needed for the more distant future. Poor people are less able to afford delivery or automobile transport of quantities too large to carry on public transit or bicycle.
** People who live in food deserts without access to fast transportation may buy more expensive food from nearby convenience stores, and have more difficulty transporting perishable goods.
* Banking – People who cannot maintain a minimum daily balance in a savings account are often charged fees by the bank, whereas people with larger amounts of wealth can earn interest on savings and substantial returns from investments. Unbanked people must use higher-cost alternative financial services, such as check-cashing services for payroll and money orders for transferring to other people. People who have had previous credit problems, such as overdrafting an account, may not be eligible to open a checking or savings account. Major reasons for not opening a bank account include not trusting banks, being concerned about not making a payment due to a bank error or delay, not understanding how banks work, and not having enough money to qualify for a free account.
* Debt – People who have no net savings sometimes have to use high-interest credit cards or other loans to pay for emergency expenses or even daily needs. Interest must be paid on debt, and a lower credit score (which can result from a low income) typically results in a higher interest rate, such as for a subprime mortgage. Payday loans can have an extremely high interest rate, and other forms of debt not typically used by high-income consumers include refund anticipation loans, car title loans, and pawnshops. In addition, individuals with low credit scores may fail credit checks when employers request them.
* Overdue payments – People who cannot afford to pay all of their bills on time, or who accidentally make a late payment due to waiting until the last possible day can incur late fees not affecting people who can simply schedule automatic payments from savings.
* Furniture – If unable to afford a piece of furniture, a rent-to-own agreement can make it available without having savings, but at a higher long-term cost.
* Transportation – If unable to afford a car, taking public transportation can take longer, effectively an increased cost in the form of lost time. Many poor people must live further away from work in order to find housing they can afford.
* Health care – Though most industrialized countries have free universal health care, in the United States and many developing countries, people with little savings often postpone expensive medical treatment as long as possible. This can cause a relatively small medical condition to become a serious condition that costs more to treat, and possibly causing lost wages due to missed hourly work. (Though poor people may have lower overall personal medical expenses simply because illnesses and medical conditions go untreated, and on average life span is shorter.) Higher-income workers typically have medical insurance which prevents them from experiencing excessive costs and often provides free preventive care for example. In addition to personal savings they can use, higher-income workers are also more likely to be salaried and get sick time that prevents them from losing wages while seeking treatment. Because no skills or experience are required, some people in poverty make money by volunteering for medical studies or donating blood plasma.
* Government benefits may require paperwork or attendance at mandatory classes that a job wouldn't, effectively an increased cost in the form of lost time per unit of money taken in.

Government policy, government funding, and access to financial services can play a large role in preventing one-time events from pushing people into poverty, and in overcoming barriers to escaping poverty. People who cannot work due to a disability often rely on government assistance, family members, or charities, but may also have personal savings. Many governments have programs to support the elderly, given that many have not saved enough money to last throughout their planned retirement, and that many will experience health problems that prevent them from working. Inability to work can present an insurmountable barrier to exiting poverty if external assistance is insufficient.

Internal and external factors sustaining poverty

Amongst the most popular characterizations of the ongoing experience of poverty are that:
# it is systemic or institutionalized or
# a person is misguided by emotional challenges driven by historical experiences or
# a person is affected by a mental disability,
or a combination of all three reasons (Bertrand, Mullainathan, & Shafir, 2004).

Systemic factors

Donald Curtis (2006), a researcher at the School of Public Policy in the United Kingdom, identified that governments regard the welfare system as an enabling

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