With the social and economic toll of the coronavirus pandemic striking hundreds of millions around the world, the idea of a universal basic income (UBI) has been raised as a potential solution. Unique new research is looking at the effects of UBI during a pandemic by analyzing data from a massive ongoing 12-year income study in Kenya, and its conclusion suggests the policy may help individual well-being but it is not a silver-bullet solution in times of extreme disruption.
The idea of universal basic income proposes that all citizens of a country receive a regular unconditional sum of money, either monthly or annually, calculated to cover basic living expenses. UBI is increasingly touted as an efficient way to replace the unwieldy bureaucratic mechanisms of many governmental social welfare systems.
In 2017 a massive UBI experiment kicked off in rural Kenya. Managed by non-profit GiveDirectly, and designed by economists from MIT and Princeton, the US$30 million dollar project is set to run for 12 years and includes nearly 15,000 households across 295 villages.
The trial split participants into four groups: a long-term cohort receiving payments of 75 cents, per adult, per day for 12 years (calculated to cover basic needs such as food and healthcare), a short-term group receiving the daily 75 cent payment for just two years, a lump sum group receiving a single $500 payment (equal to the total amount the short-term group would receive over two years), and a control group receiving no money.
Across the back end of 2019 the researchers running the trial collected a large volume of survey data from participants. The original plan was to present interim trial findings in 2020.
And then the pandemic happened.
The researchers quickly pivoted and turned the hurdle into an opportunity to investigate the effects of UBI on individuals during a pandemic. Thousands of participants in the trial were surveyed by phone by June 2020, allowing the researchers to contrast the new data with the findings gathered in late 2019.
“We were in a unique position to be able to actually provide some evidence on this because we had a running trial,” explains Tavneet Suri, an economist working on the project from MIT Sloan. “It seemed like a good opportunity to add some evidence over these conversations that were happening and are still happening about the role of social protection during COVID.”
A new study outlining the results of the latest survey found that all participants receiving any kind of UBI intervention reported improvements on hunger, health and well-being measures, compared to the control. These effects were positive, but also modest in size, the researchers point out.
“Nearly 70% of people in the control group reported experiencing hunger in the 30 days prior to our survey this summer (due to the lean season),” Suri writes in a recent editorial. “Recipients of the basic income, though, were between 7% and 16% less likely to report experiencing hunger. They were between 9% and 14% less likely to have had a sickness of any kind, and they were also less depressed.”
These basic findings are perhaps unsurprising, however, the researchers cautiously note the findings do suggest a UBI may not be a silver bullet in times of a global pandemic. Interestingly, overall incomes fell more in the UBI groups when the pandemic hit compared to the control group.
What this means is that although the UBI cushioned some from the immediate negative effects of the pandemic, it may not be effective as a solitary tool to deal with extreme events such as this.
“The benefit of UBI is it encourages risk-taking and investment, but it is not hard to imagine situations where those risks increase exposure to shocks,” says Suri. “In our study, we saw that the income gains of small business owners that had received UBI were wiped out by the pandemic/agricultural season. This is not a failing of UBI, just a warning that it is not designed to deal with such severe situations."
Many participants in the trial had invested in building new small businesses over the past couple of years, and these businesses were hit hard by the pandemic.
“The theory behind UBI emphasizes the idea that it encourages risk-taking and investment and it is not hard to imagine situations where both of those increases exposure to the shock,” the team writes in the new study. “Indeed this is one interpretation of what we observe in the present crisis where the very real pre-pandemic income gains from UBI are wiped out during the pandemic.”
Ultimately, the study concludes income supplements such as UBI are inarguably useful in helping people manage their physical and mental health during a pandemic. But it is not enough on its own.
The researchers argue one-off cash stimulus payments are likely to be important during times of acute economic crisis. These payments could be activated at short notice and are “shock responsive,” helping aid resilience to unexpected and dramatic events such as a pandemic.
“Our study shows that a guaranteed basic income provides some resilience to help people weather difficult times,” concludes Suri. “But it also suggests that [ongoing UBI] cash transfers may not be the right policy choice for helping people manage extremely challenging circumstances – particularly if they’ve taken a financial risk such as starting a new business.”
The paper Effects of a Universal Basic Income during the pandemic is available here.
