Income & Mental Health: The Psychology of Poverty & Wealth

Reviewed by therapist.com Team

What Is Socioeconomic Class?

Socioeconomic class is a socially constructed method of dividing populations into groups based on their social and economic status. Like other social constructs (including gender and race), the defining lines of socioeconomic class are nebulous at best, changing over time, culture, and location. However, the consequences of socioeconomic class are real and affect various parts of life, including mental health.

Different Social Classes in America

In the United States, your socioeconomic class, also known as your social class or socioeconomic status (SES), is determined by three factors, listed in descending order of perceived importance:

  1. Income
  2. Education
  3. Occupation

Keep in mind that different institutions may use different criteria to define socioeconomic status. The divisions listed below are generalizations of the socio-economic landscape of the United States today.

1. Income

Generally speaking, the United States has three economic classes: lower, middle, and upper. However, we have chosen to isolate a fourth category, working-class, as distinct from the original three, due to its unpredictable nature in the U.S. economy.

Lower Class

Lower-class families lack enough income to meet their basic needs. The cost of living is prohibitively high without assistance, whether from family, friends, charitable organizations, or local or federal government. 

The lower class includes people who are unemployed as well as underemployed. This means that they may have one or more jobs but do not make enough money to live on. Lower-class workers rarely make more than the federal minimum wage and may even make less due to other, less reliable sources of income, such as tips.

The lower class also includes individuals who cannot work due to age and/or disability. Children, in particular, make up a large percentage of the lower class. It’s estimated that nearly one-third of all people living in poverty are children.

Keep in mind that the term “lower class” is not indicative of the dignity or worth of individuals experiencing economic hardship. Economic poverty is not correlated with moral poverty.

Working-Class

Working-class families walk the line between the lower and middle classes. They are employed, but their employment may not be secure. Large amounts of debt may put them in an economically precarious position.

Whether or not a working-class person is considered lower class or middle class depends largely on the perceived stability, safety, and skill of their labor. Many working-class individuals are “last hired, first fired,” making it difficult for them to afford middle-class luxuries.

A person with a dangerous job may qualify as middle class if their work is viewed as “skilled” or if their employment is protected by a union. But they may just as easily fall into the lower class if illness or injury forces them into medical bankruptcy. The unpredictable nature of working-class life is what separates it as a class of its own.

Middle Class

The middle class is divided into three subgroups: the lower-middle class, the middle-middle class, and the upper-middle class. These subgroups are determined based on household income, the number of people in the household, and the cost of living in a specific town or city.

A generic income breakdown for a small family living in a mid-sized town in an average state would be:

    • Lower-middle class: $50,000–$74,999
    • Middle-middle class: $75,000–$149,999
    • Upper-middle class: $150,000–$200,000

The middle class is particularly difficult to quantify because much is based on perception, not reality. One study found that nearly 70% of Americans believe they’re middle class when the real number based on income is closer to 52%. Debt, homeownership, assets, education, occupation, and lifestyle can all complicate what it means to be middle class.

Upper Class

The upper class is divided into two subgroups: the lower-upper class, also known as “new” money, and the upper-upper class, also known as “old” money.

Although income plays a role in the division of the upper class, much is based on perception and family status, as well as how the family’s wealth was attained. “New” money families earned their wealth in this generation or one generation past. No matter how wealthy they are, they may not be accepted by “old” money families.

“Old” money families earned their money in multiple prior generations and continue to protect and maximize their wealth largely through investments. Many upper-upper class individuals are unemployed because they can afford to live off of their family’s enormous generational wealth.

Both “new” money and “old” money upper-class individuals may not believe they are upper class because they compare their wealth to the ultra-wealthy class, characterized by at least $30 million in net worth. However, this does not mean wealthy families with less than $30 million are middle class. Generally speaking, families that make at least $250,000 are considered upper class, although that number may vary slightly based on location and the number of people in the household.

2. Education

Although income is the most important factor in determining SES, education can also play a role. Education may lift a family from one socioeconomic class into the next. Conversely, student debt may cause a family to fall from one socioeconomic class to a lower one. Education is typically divided into five categories:

    • No high school degree
    • High school degree
    • Some college, no degree
    • College degree
    • Advanced degree

3. Occupation

The type of job you have also factors into your SES. Occupational categories include:

    • Unemployed, no income
    • Underemployed, minimal income
    • Unskilled/undervalued labor, sometimes requiring more than one job
    • “Blue collar” skilled labor (including hazardous and non-hazardous jobs)
    • “White collar” skilled labor (office work)
    • Highly skilled professionals (doctors, lawyers, etc.)
    • Executives/business owners
    • Unemployed, high income (passive income, generational wealth, etc.)

How Does Social Class Affect Mental Health?

The Psychology of Poverty

Studies have shown that people who struggle with poverty have a higher risk for both physical and mental illness. Those with the lowest socioeconomic status are two to three times as likely to suffer from a mental health disorder than those with the highest socioeconomic status.

Early childhood poverty in particular appears to be more strongly linked to negative health outcomes than poverty experienced in late childhood or early adulthood. Studies have shown that poverty is most damaging when experienced during the first five years of a child’s life. Childhood poverty has tangible effects on brain development, resulting in delayed language acquisition, decreased memory skills, and impaired social-emotional development.

Studies have also shown that poverty affects memory and cognition in adults. The energy and effort expended on solving pressing financial problems in responsible ways can leave you with cognitive levels comparable to those you would have after losing an entire night of sleep. Additionally, people who are poor have higher levels of cortisol, the hormone associated with stress.

Far from the myth that poor people are irresponsible or reckless with their finances, research suggests that poverty makes people better problem-solvers in certain circumstances. People who are poor must often make smart, resourceful decisions to solve their present problems effectively. However, they have fewer resources to handle any unintended long-term consequences of those imperfect decisions, unlike wealthier individuals.

The Psychology of Wealth

At a certain point, the psychological effects of wealth can be damaging. One study from Purdue University found that, while better economic security correlates with higher levels of happiness, the positive benefits of wealth plateau at a certain level ($95,000 a year for individuals). Another study from Arizona State University found that wealthy teenagers are at a higher risk for substance abuse, risky behaviors, and mood disorders than their lower- and middle-class peers.

Being ultra-wealthy is linked to higher levels of personality traits known as the “Dark Triad”: psychopathy, narcissism, and Machiavellian (manipulative) behavior. These traits make them more likely to exploit others for personal gain, especially if it means climbing the socioeconomic ladder. Research has yet to determine if these personality traits arise due to wealth, or if wealth is more easily attained by those who already possess these personality traits.

Poverty & Mental Illness

Poverty as Trauma

According to the U.S. Department of Veterans Affairs, about 60% of men and 50% of women will experience trauma at some point in their lives. For some, that trauma is poverty.

Because trauma depends on an individual’s perception and experience of the traumatic event, many different circumstances can “count” as trauma. Therapists often use the idea of big “T” trauma and little “t” trauma to help individuals understand how they may have been traumatized by seemingly “small” things.

Poverty may be a big “T” trauma for some or a little “t” trauma for others. Examples of big “T” traumas that lead to or are exacerbated by poverty include:

  • War
  • Natural disaster
  • Terrorist attack
  • Severe injury or illness
  • Domestic violence
  • Being a victim of a crime
  • Witnessing a violent or disturbing event

Similarly, families who find themselves in poverty may also be dealing with one or more little “t” traumas, such as:

  • Divorce
  • Losing a job
  • Unstable housing
  • Legal problems
  • Family conflict, such as being disowned or kicked out of one’s home

Studies indicate that poverty may be considered a chronic traumatic experience. People struggling with poverty have been shown to have higher levels of posttraumatic stress disorder (PTSD) than the general population. However, these same economically disadvantaged groups are also less likely to have their PTSD diagnosed and treated.

Complicating Factors

Other societal and personal factors may contribute to a person’s traumatic experience of poverty, including:

How Does Poverty Affect Children’s Mental Health?

Poverty can have devastating effects on children’s physical and mental health. The negative effects of poverty on children’s physical health can be measured in children as young as five years old. The mental stress of poverty can disrupt or impair healthy parenting, increasing the likelihood of child neglect, which is linked to the subsequent development of PTSD.

Perhaps the worst part of experiencing poverty and mental illness as a child is that help is often difficult or nearly impossible to access. Children who act out in school because they are struggling with trauma are more often punished or criminalized than sent to a school counselor or therapist. Families may not know enough about mental health to seek treatment, or they may stigmatize the topic. Since children are financially dependent on their parents or guardians, they may not be able to seek mental health treatment, even if they desperately want it.

Barriers to Mental Healthcare

For families living in poverty, access to mental healthcare continues to be a struggle. Common barriers include:

  • Inability to afford treatment
  • No employer-guaranteed healthcare or paid time off 
  • No mental health providers nearby, especially in rural areas
  • Lack of transportation
  • Lack of reliable internet connection for teletherapy
  • Mental health stigma
  • Lack of affordable childcare
  • Lack of education or understanding about mental health

Seeking Affordable Mental Healthcare

Although you may face barriers, there are resources available to help you find affordable mental healthcare for you or your family. Many therapists offer online sessions for individuals who do not have access to reliable transportation. If you do not have insurance, some therapists may offer discounted rates to make your treatment more affordable. Click here to find a therapist near you who offers services on a sliding scale basis.

What is most important is getting professional treatment for your mental health needs. Our guide on how to find a therapist offers simple tips and basic education for how to navigate the mental healthcare system and find a therapist that’s right for you.

If you’re struggling with poverty, a trauma-informed therapist can help you understand the relationship between poverty and mental health. Click here to find a trauma-informed therapist near you.

Free Help Now

For some individuals, affordable mental healthcare may still be out of reach. If you are having a mental health crisis, free help is available now. Call or text one of the following helplines: