Features; Opinion

OPINION: Important study finds that giving money without conditions to the poor increases both employment and wages

A randomized field study recently conducted in Uganda found that giving money to people without conditions actually increases both how much they work and how much they earn per hour. The study gave a $400 one-time grant to 20 young people, chosen randomly out of a group of rural Ugandans who applied to be a part of the study. Essentially, this grant amount is a one-time basic income, sometimes called a basic capital grant.

Perhaps, $400 doesn’t sound like much, but because poverty is so high in rural Kenya, the $400 grant is equivalent to an entire year’s income for the people in the study. Researchers then followed the recipients for two and a half years to see how they behaved relative to rural Ugandans who did not receive the grant. What they found might surprise some readers.

Two-and-a-half years later, receipts of the grant worked 17% more hours than similar Ugandans who did not receive the grant, and they earned higher wages and salaries, so that their incomes increased by even more than the hours the worked for a total increase of 50%. If those who did not receive the grant were making $400 per year, recipients were making $600 per year. No one knows yet how long the differential will last, but it is likely to accumulate for at least several years, perhaps many years.

The reasons for the increase in wages and hours worked are not yet certain, but possible explanations stem back to the extreme poverty experienced by so many people in developing nations. People who face such low wages have very little time to spend either improving their skills or looking for better work. They simply must spend their time focusing on getting enough food for the next day. A basic income gives them the opportunity to step back, improve their skills and/or look for a better job.

The theoretical possibility that basic income could have a positive affect on wages and hours worked (especially among the poorest people) has been understood for a long time. But this study provides an extremely important piece of empirical confirmation.

The basic income debate should take these results seriously. These results challenge the widely-held (yet rarely-empirically-investigated) belief that poor people are poor because they are too lazy either to work hard or to learn better skills. There are billions of people around the world living on less than two dollars per day. Perhaps unconditional cash is what they need most.
-Karl Widerquist, begun in Lerwick, Shetland, Scotland, completed in Beaufort, North Carolina, USA

See earlier posts on BI News about this study.

For more on this study see this blog post by one of the authors of the study: Blattman, Chris, “Dear governments: Want to help the poor and transform your economy? Give people cash,” Chris Blattman: International development, politics, economics, and policy, 23 May 2013

See also the original study: Blattman, Christopher, Nathan Fiala, and Sebastian Martinez “Credit Constraints, Occupational Choice, and the Process of Development: Long Run Evidence from Cash Transfers in Uganda,” the Social Science Research Network, May 20, 2013

And the following editorial: Yglesias, Matthew, “Good News About Unconditional Transfers to the Global Poor,” Slate May 29, 2013

Karl Widerquist

About Karl Widerquist

Karl Widerquist has written 883 articles.

Karl Widerquist is an Associate Professor of political philosophy at SFS-Qatar, Georgetown University, specializing in distributive justice—the ethics of who has what. Much of his work involves Universal Basic Income (UBI). He is a co-founder of the U.S. Basic Income Guarantee Network (USBIG). He served as co-chair of the Basic Income Earth Network (BIEN) for 7 years, and now serves as vice-chair. He was the Editor of the USBIG NewsFlash for 15 years and of the BIEN NewsFlash for 4 years. He is a cofounder of BIEN’s news website, Basic Income News, the main source of just-the-facts reporting on UBI worldwide. He is a cofounder and editor of the journal Basic Income Studies, the only academic journal devoted to research on UBI. Widerquist has published several books and many articles on UBI both in academic journals and in the popular media. He has appeared on or been quoted by many major media outlets, such as NPR’s On Point, NPR’s Marketplace, PRI’s the World, CNBC, Al-Jazeera, 538, Vice, Dissent, the New York Times, Forbes, the Financial Times, and the Atlantic Monthly, which called him “a leader of the worldwide basic income movement.” Widerquist holds two doctorates—one in Political Theory form Oxford University (2006) and one in Economics from the City University of New York (1996). He has published seven books, including Prehistoric Myths in Modern Political Philosophy (Edinburgh University Press 2017, coauthored by Grant S. McCall) and Independence, Propertylessness, and Basic Income: A Theory of Freedom as the Power to Say No (Palgrave Macmillan 2013). He has published more than a twenty scholarly articles and book chapters. Most Karl Widerquist’s writing is available on his “Selected Works” website (works.bepress.com/widerquist/). More information about him is available on his BIEN profile and on Wikipedia. He writes the blog "the Indepentarian" for Basic Income News.

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One comment

  • Ton Bil

    Interesting research, thank you for reporting it here. Two important factors in the experiment must be controlled for in future research, before we could generalize the results. (1) Being member of a subset of the population getting the grant, makes people believe they have a more than “normal” chance to improve their conditions: if I know that most of the people around me can improve their situation just like me, it’s less probable I’ll take the effort – the competition is too wide and strong. (2) Knowing that others did not receive the grant, could make the endowed ones feel “lucky” and successfull – this emotional state of having “luck” might inspire to other actions. It will be interesting to see such an experiment repeated with all members of a certain social group of poor people. For even further generalizations, the experiments should be conducted outside of Uganda, since economic and social conditions vary heavily between countries.

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