Universal Basic Income is About to Get Its Biggest Test Yet

After decades of discussion and support among academic circles, as well as a few small-scale but promising experiments, universal basic income is about to get its biggest and possibly most decisive try yet. Writing for Slate, the co-founders of one of the world’s leading nonprofit charities lay out their plan to give this innovative idea its due:

The organization that we founded, GiveDirectly, has decided to try to permanently end extreme poverty across dozens of villages and thousands of people in Kenya by guaranteeing them an ongoing income high enough to meet their basic needs—a universal basic income, or basic income guarantee. We’ve spent much of the last decade delivering cash transfers to the extremely poor through GiveDirectly, but have never structured the transfers exactly this way: universal, long-term, and sufficient to meet basic needs. And that’s the point—nobody has and we think now is the time to try.

[…]

We’re planning to provide at least 6,000 Kenyans with a basic income for 10 to 15 years. These recipients are some of the most vulnerable people in the world, living on the U.S. equivalent of less than a dollar. And we’re going to work with leading academic researchers, including Abhijit Banerjee of MIT, to rigorously test the impacts.

By “rigorous” we mean a few things. First, the test must be experimental, so that we generate unbiased and transparent estimates of impact. Second, the guarantee must be a long-term commitment. We already know quite a bit about the beneficial effects of giving people money for a few years; the key question is how the knowledge that your livelihood is secured for more than a decade affects your behavior now. Do you take more risk? Get more schooling? Look for a better job? Third, the guarantee needs to be universal within well-defined communities, since the goal is as much to understand social dynamics as individual behaviors. While various other basic income pilots have been conducted in the past, none so far have met all three of these criteria.

The group estimates that this evaluation will cost roughly $30 million, 90 percent of which will go directly to the poorest households, and the remainder to the staff, office, payment fees needed to deliver it. Because it is being tried in a developing country, the costs to make people’s needs will be lower, thereby making the project more affordable. It will also complement similar experiments being planned in FinlandCanada, and elsewhere.

And even though it will provide some well needed empirical evidence, on the largest scale thus attempted, the authors point out that there is plenty of data already available from prior attempts:

As it turns out, that assumption was wrong. Across many contexts and continents, experimental tests show that the poor don’t stop trying when they are given money, and they don’t get drunk. Instead, they make productive use of the funds, feeding their families, sending their children to school, and investing in businesses and their own futures. Even a short-term infusion of capital has been shown to significantly improve long-term living standards, improve psychological well-being, and even add one year of life.

On the other hand, well-intentioned social programs have often fallen short. A recent World Bank study concludes that “skills training and microfinance have shown little impact on poverty or stability, especially relative to program cost”. Moreover, this paternalistic approach is often for naught: Jesse Cunha, for example, finds no differences in health and nutritional outcomes between providing basic foods and providing an equally sized cash program. Most importantly, though, the poor prefer the freedom, dignity, and flexibility of cash transfers—more than 80 percent of the poor in a study in Bihar, India, were willing to sell their food vouchers for cash, many at a 25 to 75 percent discount.

Whatever the results might be, I am definitely looking forward to seeing what we can learn from this approach. Favored by economists and political scientists across the political spectrum, UBI promises a streamlined, transparent, and affordable way to alleviate poverty, stimulate economic activity, and adapt to a possible future of mass automation and scarce jobs. Or so we will see in due time, hopefully!

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