The Case for Universal Basic Income

Some assume that providing people trapped in dire poverty with a basic income for a set time means they will never learn to provide for themselves. But not everyone makes that assumption. The NGO GiveDirectly is giving no-strings cash gifts to the extremely poor in Kenya by guaranteeing them a universal basic income for 10 years.

A similar experiment is underway in the Dutch city of Utrecht, where the government plans to guarantee a basic income for welfare recipients. Finland is also planing a two-year basic income experiment, and the Canadian province of Ontario has a pilot underway as well. But no one has attempted basic income cash transfers quite like this before.

GiveDirectly estimates that it will cost about $30 million to give a full basic income to 6,000 poor Kenyans for 10 years. About 90 percent of that amount will go directly to poor households, and the rest will be spent delivering the money to them. A project of similar size in the U.S. would cost almost $1 billion, according to the NGO. GiveDirectly will start by putting in $10 million of its own funds, to match the first $10 million donated by others.

GiveDirectly’s efforts will make it possible to “generate statistically robust evidence” to support the basic-income solution, as co-founder Michael Faye wrote in a piece for Slate. Having evidence of the effectiveness of providing a full basic income will allow GiveDirectly to “directly inform policy debates in those emerging markets.” According to Faye, the money will “shift the life trajectories of thousands of low-income households” at worst, and at best it could “change how the world thinks about ending poverty.”

GiveDirectly will give cash deposits to Kenyan people in dozens of villages. It has already spent “much of the past decade” doing cash transfers to the extremely poor, Faye wrote. What the organization hasn’t done yet is structure the cash transfers to be “universal, long-term and sufficient to meet basic needs.”

Studies of cash transfers have found positive results. A 2013 evaluation of GiveDirectly’s cash transfers to extremely poor Kenyans found that those who received the transfers spent more on food, medical care and education. The estimates for alcohol and tobacco were “negative.” The recipients experienced “large increases in psychological well-being, and several types of transfers lead to reductions in levels of the stress hormone cortisol." What the results suggest is that unconditional cash transfers “have significant impacts on consumption and psychological well-being,” the evaluation concluded. 

Another analysis of seven government-run, cash-transfer programs in six developing countries found that such programs do not discourage work. As the study authors wrote, “We find no systematic evidence that cash-transfer programs discourage work.”

A 2013 analysis of cash-transfer programs in Uganda also found positive results. The analysis studied thousands of mostly unemployed youth for two and four years after they received cash transfers worth twice their annual income. What they discovered is that most invested their transfers in “vocations and earnings rise by at least 40 percent, especially among the more credit-constrained, patient, and risk-averse.”

Giving cash directly to the extremely poor is “an unorthodox idea,” Faye said in an NPR interview. “For a long time, we assumed that the poor could not be trusted to make decisions for themselves. So we made them for them,” he added. “And we sent them goats, and we sent them cows and food stamps and so on. And as it turns out, the poor are quite good at making decisions for themselves.”

That’s what makes GiveDirectly’s idea to give full, basic universal incomes to the extremely poor in Kenya so revolutionary. It is trusting people living in dire poverty to make their own decisions and trusting that eventually they will be able to provide for themselves. But providing for themselves is not the only reason for cash transfers. Faye told NPR that the goal is to “improve welfare for the poor and improve their lives pretty dramatically.”

The results of GiveDirectly’s efforts in 10 years will be fascinating and could very well change the way that extreme poverty is addressed. 

Image credit: Flickr/Daniel Borman