by Daniele Fabbri | Jan 1, 2019 | Research
Credit Picture to: The Open University
A new paper, “Myth-Busting? Confronting Six Common Perceptions about Unconditional Cash Transfers as a Poverty Reduction Strategy in Africa”, based upon evidence collected in eight Sub-Saharan Africa (SSA) over a decade, presents evidence in favor of Unconditional Cash Transfers (UTCs) in Low and Middle Income Countries (LMICs).
Using experimental and quasi-experimental evaluations of large scale UTCs in SSA, conducted in collaboration with the Transfer Project, which sees the participation of UNICEF, FAO, The University of North Carolina, national governments and local research partners, the paper collects evidence regarding six common misconceptions about UTCs and refutes them: 1) UTCs induce higher spending on alcohol or tobacco; 2) UTCs are fully consumed (rather than invested); 3) UTCs create dependency (reduce participation in productive work); 4) UTCs targeted to households with young children increase fertility; 5) UTCs lead to negative community-level economic impacts (including price distortion and inflation); 6) UTCs are fiscally unsustainable.
1) UTCs induce higher spending on alcohol or tobacco
A common argument against UTCs is that they would lead to spending on superfluous goods, as alcohol, tobacco, or drugs, which are sometimes called “compensatory bads”.
The argument is largely based upon anecdotal evidence, spurring from the fear that cash would be administered improperly and wasted, and would lead to the prioritization of in-kind transfers. The paper found that as the household expenditure allocated on food and other items increased, spending on alcohol and tobacco didn’t.
2) UTCs are fully consumed (rather than invested)
Being transfers unconditional, the fear may arise that they are immediately consumed, and that they do not stimulate longer term planning and investment in productive activities and human capital.
Noticing that the cash transfers were administered in locations where the populations is well below the poverty line, it shouldn’t come as a surprise that much of the transfer is used to cover basic needs, which in turns ensures the maintenance and a form of stimulus to human capital development.
Even as the role of direct expenditure is substantial, the paper finds that UTCs have positive effects on the productivity indicators chosen as representative of investments, stimulating crop and livestock activities.
3) UTCs create dependency (reduce participation in productive work)
A common perception that is based upon the longstanding discourse on welfare dependency, fears that gave birth to the concept of workfare in the sixties and that grew under Reaganism and Thatcherism.
The idea is that poor families receiving cash transfers would become lazy and lose the incentive to work, when it isn’t laziness in the first place to create poverty. The allegations of welfare dependency thus stem from a sort of moral high ground, the implication being that poverty is somehow “deserved” and that the poor are not willing to work in order to better their condition once they receive the transfer.
We have seen formerly that UTCs influence investments, it is thus certain that they do affect household decision making in labor allocation, i.e. how receivers participate to the labor market; but labor force participation rate as exemplified by the chosen indicators showed no significant impact of transfers on labor supply.
4) UTCs targeted to households with young children increase fertility
Policymakers often sustain that Cash Transfers conditional to motherhood and having young children will have the unintended effect of increasing fertility rates.
The concern is even more severe for SSA, the last region to start experiencing the demographic transition.
Given that Conditional Cash Transfers (CCT) are the instrument of choice to foster higher fertility rates in OECD countries, the implications for their application look unavoidable; nonetheless the study found no instance in which a government UCTs increased fertility in SSA. Rather, the evidence suggests that UTCs have in some instances increased birth spacing and delayed pregnancies among young women.
5) UTCs lead to negative community-level economic impacts (including price distortion and inflation)
This fear stems from the idea that isolated cash injections would have a one-sided effect and only stimulate the demand side, whilst having no impact on the supply side. This would lead to detrimental effects, namely price distortion and inflation, devaluating the transfer and affecting also non-beneficiaries, which would find themselves facing higher prices.
The study found no evidence of inflationary effects, which can be explained by three factors: the relatively small share of UTCs beneficiaries (20% of the households); the sum of the transfer, which while substantial for the poor recipient it’s just a tiny proportion of the total cash flow of the community; the supply side is elastic, and there is enough market inter-connectivity for production to match increases in demand.
Theory suggests that UTC could be used to overcome market failures, functioning as a stimulus to pro-poor productivity and having net positive impact on local economies. Positive spillovers should manifest and affect non-beneficiaries, as a result of the stimulus to aggregate demand.
Local economy simulations indicate that UTCs generates positive effects on the local economy, with every dollar injected in the economy via the transfer causing nominal multiplier effects ranging from 1.27 in Malawi to 2.52 in Ethiopia.
6) UTCs are fiscally unsustainable
Once UTCs end their experimentation phase and are institutionalized, there is diffused concern that the administrative costs are too high. The fear is that the medium or long-term maintenance of the programs is fiscally unsustainable, and supposedly high administrative costs have been cited as one of the main reasons for not adopting UTCs.
The cost-transfer ratio (CTR) is the indicator generally used to measure the cost-efficiency of the programs. The CTR depends largely on the time at which it is measured; at the beginning of the programs there are large, fixed, start-up costs which weigh heavily on the ratio, representing a large part of the total costs in the first period. The start-up costs combine with the lack of economies of scale, which require times to be attained.
Using estimates of the CTRs for the programs of the Transfer Project, accounting for the scale-up effects and correcting for the start-up, lump sum costs, the study found that cash transfers at scale as a percentage of current spending and GDP are feasible and fully within the cost considerations of any national government. The expenditure for UTCs as a percentage of general government expenditures would have an average of 4.4 percent across countries, but could decrease of the 37% if the program was limited to the rural areas.
“…we have drawn on cross-country evaluation data to summarize evidence on six common perceptions that we believe hold back political acceptance of such programs. While the political context is such that these perceptions will need to be tested in each specific program in order to be fully internalized, we hope that the growing body of evidence, including that presented inthis paper, will permit more evidence-based rather than ideologically-based debates around cash transfers in LMICs”
More information at:
Sudhanshu Handa, Silvio Daidone, Amber Peterman, Benjamin Davis, Audrey Pereira, Tia Palermo, Jennifer Yablonski, “Myth-Busting? Confronting Six Common Perceptions about Unconditional Cash Transfers as a Poverty Reduction Strategy in Africa“, The World Bank Research Observer, Volume 33, Issue 2, 1 August 2018, Pages 259–298
by Andre Coelho | Dec 31, 2018 | News
Picture credit to: Opportunity for All (Government of Canada)
Jean-Yves Duclos, Minister of Families, Children and Social Development for the Canadian Federal Government, has launched a call for applications to assemble a so-called National Advisory Council on Poverty. This council will be comprised of experts in poverty-related issues, and “people who have lived experienced or are currently living in poverty (…) indigenous peoples, women, persons with disabilities, visible minorities and other vulnerable groups”. The purpose is, not only having actual experience of poverty in the group, but also for it to be “representative of Canada’s linguistic, gender and regional diversity.”
This advisory group will be responsible for giving advice about programs and funding strategies which can contribute to poverty reduction, as well as produce a yearly report with detailed information on how poverty reduction goals are being met, according to agreed metrics. On top of that, the group shall also engage the public, including the academic community, several experts, indigenous people and others which experience or have experienced poverty. Applications to work with the group can be done online, until the 29th of January 2019.
The creation of this Council derives from the overarching Program “Opportunity for All”, a Canadian Federal Government initiative which it considers Canada’s first poverty reduction strategy. According to the Program’s website, the purpose of “Opportunity for All is to eradicate poverty because we are all better off when no one is left behind. Opportunity for All supports a human rights-based approach to poverty reduction, reflecting principles that include universality, non-discrimination and equality, participation of those living in poverty, accountability and working together.” It may be worth mentioning that “universality” is only mentioned on this one occasion throughout the explanation of the whole program, but nonetheless it is clearly stated here. Furthermore, the Program states that:
“Opportunity for All is about working together to end poverty so that all Canadians can live with dignity, have real and fair access to opportunities to succeed, and be resilient enough to get through difficult times. Living with dignity means that Canadians would be living without hunger and would have enough income to meet their basic needs (…)”
Jean-Yves Duclos
Although basic income is not mentioned, the reference to a universal “all Canadians” linked with “enough income to meet their needs” might point in the direction of some unconditional cash transfer program as one of the tools for poverty reduction in Canada. That would be aligned with Jean-Yves Duclos recent statements on the subject. Furthermore, the Program is based an a civic approach to problem-solving, since consultation was done to the wider population:
“Opportunity for All is guided by the thousands of voices we have heard and, in particular, the voices of those with lived experience of poverty. Canadians told us that poverty is complex, that different groups experience different risks of poverty and different challenges in getting out of poverty, and that reducing it requires a long-term commitment as well as calls for a coordinated approach with diverse groups—government and non-government alike. Canadians told us that the Strategy must contribute to a national effort to reduce poverty. It must also recognize that when some members of our communities cannot reach their full potential, we are all affected. More specifically, Canadians have said that the Poverty Reduction Strategy should be about:
Dignity – Lifting Canadians out of poverty by ensuring everyone’s basic needs are met;
Opportunity and Inclusion – Helping Canadians join the middle class by promoting full participation in society and equality of opportunity;
Resilience and Security – Supporting the middle class by protecting Canadians from falling into poverty and by supporting income security and resilience.”
Again, focusing on the needs of everyone, ensuring the full participation of all people in society and creating a solid ground so that no one falls into poverty, suggests a basic income type of policy, without explicitly mentioning it. This could mean that the National Advisory Council on Poverty will study or consider basic income somehow within its mandate, although no direct information exists to confirm it, at this moment.
More information at:
André Coelho, “Canada: Ontario’s basic income experiment ended, but the ground is fertile for more pilots”, Basic Income News, December 22nd 2018
Canada’s First Poverty Reduction Strategy website
by Andre Coelho | Dec 25, 2018 | News
ARTE, the franco-german TV channel, dedicated to cultural content and dissemination, has launched (on the 20th November 2018), an interactive documentary on work, money and basic income, named “Gagner sa vie” (“Earn a living”). Over seven episodes transmitted on the Internet, in four languages (French, English, German and Dutch), it poses questions to the internauts and shows them the episodes, according to their choices. These questions are focused on employment, work, automation, trust, wealth distribution and basic income, inviting thought on present-day societal issues, particularly those revolving around work.
Each episode is eleven minutes long. These combine real life footage with animated cartoons, and cover experiences from the United States (the Cherokee casino dividends), Japan (excess work culture), Kenya (Give Directly’s basic income pilot in Kenyan villages), the Netherlands (Bitnation founders account), Israel (sharing in the rural community of Arava) and France (Gironde’s wish to start a basic income experiment). A seventh episode, launched later (already on December 2018), explores a possible future when machines do most work and a basic income already exists, financed by the tech companies that own those robots.
More information at:
Claire Bott, “BBC UBI radio programme”, Basic Income News, May 29th 2018
Cameron McLeod, “BitNation: Recent advances in cryptocurrency see basic income tested”, Basic Income News, 30th March 2017
Tomas Klemm, “The importance of indigenous voice and experience in the UBI discussion”, Basic Income News, June 15th 2018
André Coelho, “France: The Gironde region’s path to a basic income experiment”, Basic Income News, May 17th 2018
by Guest Contributor | Dec 24, 2018 | Opinion
“You should not discuss Basic income in Russia. You should not implement pilot projects in the country,” a representative of the Russian government preaches to Russian citizens. He is an adviser to the Analytical Center of the Russian government.
On November 14, 2018, a conference was held in Moscow: “Basic Income: is it a prologue to social policy of the 21st century?” In the best traditions of «Russia Today», the English version of the conference was framed as: “Basic Income as a prologue to social policy of the 21st century”. Thus, Russian society was initially forced to doubt the need for implementing basic income.
The organizers for the conference were: The Institute for Social Policy of the Federal State Institute, National Research University’s Higher School of Economics, the European Dialogue group, and Russia’s Friedrich Ebert Foundation. This is one of the first international conferences on basic income in Russia. The Russian public was very interested in the experience of other countries.
A panel discussion was moderated by Peer Teschendorf, the Director of the German Friedrich Ebert Foundation in Russia. The speakers for the panel included: Miska Simanainen, KELA (Finland) – “Experiment with basic income in Finland”; Giuliano Bonoli, University of Lausanne (Switzerland) – “The 2016 Swiss referendum on basic income”.
Presentations by Russian speakers gave new insight from the Russian point of view. These speeches included: “Basic income and goals of reforming social assistance systems”, “Transformation of compulsory pension insurance: the next paradigm is the unconditional basic income”.
In general, the conference ended like the old Soviet joke: “Whatever Russians do, it always turns into Kalashnikov`s AK-47“.
Participants brought many arguments in favor of basic income, but the organizers made the opposite conclusion: Basic income is not necessary for Russia. The organizers argued it is better to increase targeting of social support; in authoritarian regimes, since the president is always “good,” something like basic income is “not necessary”! This was the expected conclusion from a state-run university and “experts” dependent on the state budget.
“Experts have already moved far away from a primitive understanding of basic income as a guaranteed payment to all members of society regardless of the level of their income, employment, health status, and other factors,” Russian organizers said.
Solovyev Alexander SM “Basic Income Russia Tomorrow” spoke in favor of the need for the widest and most open discussion of basic income in Russia, as well as consideration for Russian pilot projects. Experimentation is essential to grasp the truth. The world’s support of basic income is constantly growing: US presidential candidate Andrew Yang, former US President Barack Obama, Facebook founder Mark Zuckerberg, Tesla founder Elon Musk and many other prominent figures from across the world have expressed interest and support in UBI.
Solovyev emphasized that BIEN and “Basic Income Russia Tomorrow” consider universalism and unconditionality as the main principles of basic income.
We would like to believe that Russian citizens, the scientific community and government officials will understand the importance of basic income for Russia. Basic income is really “a prologue to social policy of the 21st century”. Only the implementation of basic income will provide an opportunity to reduce social tension, eliminate social inequality, ensure equal rights for citizens, reduce poverty level and corruption in the country.
For Russia of this century, UBI is an essential policy.
by Andre Coelho | Dec 20, 2018 | News
Rebecka Le Moine. Picture credit to: SLU (Swedish University of Agricultural Sciences)
The Member of the Swedish Parliament (MP), and Green Party representative Rebecka Le Moine has submitted, on the 30th of November 2018, a motion for the deep investigation of basic income in Sweden. Rebecka, a 28 years old ecologist particularly dedicated to natural conservation issues, is a member of both the committees on Taxation and Environment and Agriculture.
The motion itself doesn’t go into a large detail about basic income itself, although it does provide a firm justification to pursue with deeper studies related to it. For instance, it refers to John Maynard Keynes’s predictions of a 15-hour working week, and the generalized usage of automation to replace most repetitive and/or too demanding (or dangerous) jobs. It also names Martin Luther King, particularly his voicing on eradicating poverty through the introduction of unconditional cash transfers. The most notorious basic income experiments around the world – Namibia, Finland, Canada, India – are also mentioned, as a way to contextualize the motion and show-reel some of the advantages of basic income (on an experimental setup).
The motion also draws on a human-rights approach to basic income, by referring to the United Nations Charter of Human Rights. Concretely, it appeals to article 22, where it says that all members of society shall have the right to a dignified life, according to each country’s capacity. The United Nations Sustainable Development Goals are also referred to, since these call for poverty eradication and equal rights to financial resources for all people.
On a more personal level, the motion justifies studying basic income deeper on the experimental fact that people get more creative and less risk-aversive when given unconditional money. It also testifies for the relation between freedom and civility, democracy and conscious environmentalism. More secure and less needy people are also more amenable and generous. It goes on to add that unconditional money equates to a power shift from society’s main institutions – governments, corporations, churches, ONG’s – to the individual, who gets a higher ability to say no to oppressive work and life conditions, or yes to tasks or life paths which are not sufficiently valued nowadays. That, of course, leads to major disruptions in the labour market and generalized social constructs.
As for financing, the motion swiftly mentions international prized economists who affirm basic income is affordable. That affordability can come from cost savings, with the reduction or elimination of certain conditional social benefits, together with increased taxes on the extraction of natural resources, carbon emissions, fortunes and on the financial sector.
More information at:
[in Swedish]
Rebecka Le Moine, “Basinkomst”, Motion till riksdagen, Sveriges Riksdag, November 2018
