Scarcity and the Mindsets of Social Welfare Recipients: Evidence from a Field Experiment

Abstract

Financial scarcity is a fundamental condition for recipients of social welfare. We draw on scarcity theory to suggest that the condition of scarce resources may have a range of important psychological consequences for how welfare recipients' cope with their problems, navigate citizen-state interactions, for their perceived ability to deal with their problems, and for their psychological well-being. In a field experiment using Danish unemployed social assistance recipients (N = 2,637), we test the psychological consequences of scarcity by randomly assigning recipients to be surveyed either shortly before payment of their social assistance benefits, shortly after, or mid-month. We find no impact of the scarcity manipulation and thus our main findings run counter to the idea that short-Term changes in scarce financial conditions influence the mindsets of social welfare recipients. However, a series of exploratory cross-sectional regressions show that subjective scarcity, that is "the feeling of having too little", is associated with an increased focus on solving problems, but negatively associated with psychological well-being, sense of mastery, and job search self-efficacy. We conclude that these correlates may reflect more long-Term consequences of scarcity but that more and stronger causal evidence is needed given the cross-sectional nature of these data.