Entrepreneurship can offer a promising career path for people facing discrimination in traditional job markets, and training programs can boost socioeconomic mobility. However, a new study by Wharton reveals that these programs can also have unintended consequences.
The study examined a business training program for residents of Brazilian urban slums, or “favelas.” The authors found that while the program improved participants’ economic situations, it also led to adverse social and psychological outcomes due to the stigma associated with living in favelas. The findings highlight the complexity of socioeconomic mobility, where rising incomes can lead to increased prejudice.
Mixed outcomes
Incorporating these findings into policy can enhance its effectiveness. While investing in training programs helps lift people out of poverty, it’s essential to acknowledge that social mobility has both positive and negative effects. Effective policies must address these negative impacts.
The researchers studied a nine-month training program offered by the non-profit Banco da Providência to 207 participants in 2018. The program included psychological support, technical training, and management coaching for favela residents in Rio de Janeiro.
The program’s impact was assessed through economic outcomes (job placement and income) and social and psychological outcomes (self-efficacy, optimism, and social stigma). The results were mixed. Economically, participants saw significant improvements, including higher incomes and increased entrepreneurial activity. The program also boosted participants’ sense of self-efficacy and optimism.
However, participants also experienced heightened social stigma due to their favela residence, which is often associated with criminality. As participants earned more, they faced more prejudice. The study describes this as the “allegory of the favela,” illustrating the bittersweet nature of socioeconomic mobility.
Social stigma
Interviews with participants revealed that increased social interactions with potential employers and suppliers led to perceptions of untrustworthiness and criminal associations. Long-standing inequalities and negative media portrayals contributed to this stigma, significantly affecting participants’ social and psychological well-being.
The study underscores the complexity of achieving socioeconomic inclusion in discriminatory societies. Favela residents often turn to entrepreneurship as a second option and succeed within their communities, but face external stigma due to their origins. The more successful they become, the more prejudice they encounter, highlighting the difficulty of overcoming ingrained social biases.
These findings have important practical implications. This study is one of the few to examine both economic and socio-psychological impacts of business training programs for people in segregated areas. By considering both outcomes, the study provides a comprehensive view of individuals’ lives, beyond just their economic status.
A holistic approach
A holistic approach, as recommended by the study, will aid in achieving the United Nations’ Sustainable Development Goals, especially those related to poverty eradication (Goal 1), reducing inequality (Goal 10), and promoting sustainable cities and communities (Goal 11).
“Emphasizing entrepreneurship as a path out of poverty is key, and efforts should be made to reduce stigma, such as providing specific lines of credit,” the authors conclude. “Additionally, training should include helping participants connect with potential buyers and suppliers, aiding their transition from the informal to the formal economy.”
Ultimately, the study calls for a societal shift in attitudes towards disenfranchised people, which is crucial for breaking the cycle of segregation and helping individuals reach their full potential.
