A popular idea among progressives on the left is a universal basic income (UBI). Supposedly, UBI is magic. It involves giving cash transfers to everyone without strings attached. According to scholars at the University of North Carolina Chapel Hill:
The goals really differ, depending on the policymaker but also on who’s proposing it. I think for a lot of folks on the left, they see it as more a platform to build your life on. So it’s going to be there for you when you when you need it.
You also see from people on the left the idea of UBI as promoting freedom. Oftentimes we talk about freedom as being freedom from constraints. Some folks on the right, libertarians in particular, emphasize the need for government to stay out of our lives. And thinkers on the left often point out that if people are just leaving you alone, you might be unlimited in terms of choices, but you’re not actually going to be able to do anything unless you have resources. So the idea is that if people have a platform to build their lives off, they have resources every month. They can actually do things. They can meet their needs. They can pursue various projects.
The New York Times reported on the results of a different type of cash transfer, published in the journal Nature. This particular study was an analysis of 37 countries where cash was given to seven million poor people. That is, it wasn’t universal. Rather it was cash transfers to the most vulnerable subset of the population. Keep in mind, UBI isn’t really about rich or middleclass people. It’s about funneling money to poor people and getting rich and middleclass voters to buy-in to the program by giving them cash too. Purportedly, the cash grants reduced the death rate in poor women and children:
In countries that began making such payments, deaths among women fell by 20 percent, and deaths among children younger than 5 declined by 8 percent, researchers reported on Wednesday in the journal Nature. The impact was apparent within two years of the programs’ start and grew over time.
The reductions in death rates were similar whether the funds came with certain conditions, such as school attendance, or whether they had no strings attached, the analysis found. Programs that covered bigger shares of the population or distributed larger amounts of cash produced even greater benefits.
Countries with poor health care and high death rates had the biggest drop in deaths.
Direct cash transfers have been shown to improve school attendance, nutrition and use of health services. A few single-country studies have linked the payments to reduced death rates. But it was unclear whether those trends applied on a global scale.
A few years ago, I read an unbiased critique of UBI payments. The economists interviewed said for payments to have an effect they needed to be relatively large, close to $1,000 a month. However, payments that large were far too expensive and would require substantial tax hikes.
“There’s some concerns about whether these programs are sustainable, whether governments can and should pay for them,” said Harsha Thirumurthy, an economist at the University of Pennsylvania and a co-author of the analysis.
In the study researchers looked at entire communities because they couldn’t identify the actual people receiving payments. In some cases the cash payments were the entire family income. Researchers noticed spillover effects on other aspects of the community due to the influx of cash within the community. However, there are other possibly explanations to account for lower death rates.
Berk Özler, a developmental economist in the World Bank’s research division, offered an alternate explanation. Cash transfers are often accompanied by improvements to health care services or other infrastructure that helps communities, he noted.
“Maybe it’s not the direct effect of people having more cash in their pocket,” he said.
In other words, cash payments were probably not the only area of increased social spending. The new health clinic that went in down the street may have helped too.
In social science research there is a phenomenon known as the Hawthorne Effect. That’s when test subjects change their behavior because they’re being watched. The pilot projects for cash transfers are usually small or done through a lottery system. Test subjects who know they’re the lucky beneficiary of a new cash giveaway program may act in beneficial ways initially but revert to old spending patterns later (i.e. more beer and cigarettes). If poverty is due to mental illness or drug addiction it makes little sense that spending patterns would be rational. Another problem with studying the effects of cash transfers on families is what’s known fade-out. That’s when participants change their behavior initially when an intervention is introduced but at some point they will become used to the intervention and the effects lessen over time. If cash transfers confer sudden, lifelong benefits, a raise at work should do the same. Yet we’ve all heard the conventional wisdom of a family believing a raise would take the strain off a tight budget. Then months later they still cannot figure out why money is tight despite a raise they thought would alleviate the shortfall.
There is nothing magical about cash payments that automatically make poor families spend the money on priorities that policymakers believe people should favor. Progressive supporters of cash transfers don’t let inconvenient facts bother them, however. To progressives, distributing cash to poor people is a goal despite the results.