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Economics

How a universal basic income stabilized Kenyans in bad times

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As the COVID-19 pandemic continues to exacerbate existing inequality, a new study suggests that a universal basic income may help the world’s poorest and most vulnerable populations weather crises like the pandemic a little easier.

The research found that rural Kenyans who received a daily universal basic income equivalent to $0.75 USD were less likely to go hungry and even recorded improvements in their physical and mental health. The working paper, “Effects of a Universal Basic Income During the Pandemic,” was authored by MIT professors Abhijit Banerjee andamong others.

The researchers’ latest findings, culled from an ongoing 12-year study, were collected amid growing interest in whether a UBI — a guaranteed stipend —  offers social protection in the developing world during bad times, including COVID-19.

“We were in a unique position to be able to actually provide some evidence on this because we had a running trial,” said Suri, an associate professor of applied economics at 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.”

Universal basic income in Kenya

As part of the initial study, which began in 2017, the researchers divided villages in two counties in rural Kenya into four groups:

  • Those receiving a long-term UBI of 75 cents per day for 12 years.
  • Those receiving a short-term UBI of 75 cents per day for two years (these payments had largely concluded by the time the authors conducted their COVID-19 survey).
  • Those who received a one-time, lump sum transfer of approximately $500 payment.
  • Those receiving no UBI transfer (for comparison purposes).  

Beginning in April 2020, the researchers returned to those groups to determine whether the UBI cash transfer was helping alleviate some of their burdens due to COVID-19. At the time, there were only 12 COVID-19 cases in Bomet and Siaya, two of the poorest counties within Kenya where researchers were focusing their efforts. But the effects of a nationwide lockdown that began on March 15 were already impacting the region, as was the usual pre-harvest agricultural cycle. 

Between April and June 2020, the researchers surveyed 8,427 individuals by phone, comparing their findings with data collected earlier, between August and December 2019, to assess the effect of the pandemic.

UBI helped alleviate food insecurity

Hunger was widespread in the study’s group that wasn’t receiving a UBI — 68% of households reported food insecurity in the previous 30 days. Recipients in all three groups receiving UBI were 4.9 – 10.8 percentage points less likely to report experiencing hunger.

Rural Kenyans who received a daily universal basic income equivalent to $0.75 USD were less likely to go hungry.

“What the UBI is doing is not so much protecting their business income as protecting their food security while they face volatility in their business income,” Suri said.

The authors noted that a large reason those surveyed may have reported such high food insecurity in the comparison group was due to the timing of the survey, which took place just before Kenyans usually harvest their crops, a time when cash-flow is often tight.

UBI correlates with physical and mental well-being

Having a UBI also proved to have important benefits for survey respondents in terms of physical and mental health. Around 29% of Kenyans who didn’t have a UBI said they had sought medical attention in the previous 30 days, whereas those who had the stipend were 2.8 – 4.6 percentage points less likely to visit a clinic. In addition, UBI recipients were 3.6 – 5.7 percentage points less likely than the control group to have had a household member fall ill.

People in better health are less likely to need hospital services, “which means if the disease does come to this part of the country in a big way, then hopefully there will be a little less pressure on medical resources,” Suri said.

To gauge the state of the respondents’ mental health, researchers used the Center for Epidemiological Studies Depression Scale and found that those receiving a UBI were less depressed than the control group.

The depression scale ranges from 0 – 60 with scores of 16 points or more considered “depressed.” Some 43.7% of the control group scored 16 or higher, but scores were lower (indicating improved mental health) across all three UBI groups.

While the research did not determine a cause for that difference, Suri said,  “These are really poor people. They probably stress every day about having enough money to feed their kids. I could imagine it would improve your mental health if you’re not worrying about how you’re going to feed your kids every day.”

A UBI helped entrepreneurs keep the lights on

Prior to the onset of the pandemic, having the added income from the UBI encouraged Kenyans to start a business, but during the pandemic, Kenyans chose to put that money toward food and basic necessities. While these businesses did not shut down during COVID-19, their business incomes did fall, but, many businesses were able to avoid closing their doors for good, Suri said.

All told, Suri said, the research shows a universal basic income provides an incentive to start a business when times are good and provides stability during times of strife, such as a global pandemic.

The authors are planning to release an additional update in several months. The study’s additional researchers include MIT’s Banerjee, University of California San Diego professor Paul Niehaus, and Michael Faye, a co-founder and president of nonprofit GiveDirectly. The late Princeton professor Alan Krueger was also a co-author of the study.

Listen to Suri speak about the UBI in Kenya on NPR’s World Affairs