Much has been written about income safety nets in the past eight years since Guyana was lucky enough to find out it was sitting on billions of barrels of oil and thus expecting revenues that can be deployed for the welfare of all its citizens. And there certainly is enough money. In fact the Buxton Proposal by Professor Clive Thomas that many thought was unrealistic at $5000 per household now seems rather conservative. After all that is only around US$1.2B when revenues from oil are expected to reach US$2.78B by 2026.
However there is serious resistance to cash transfers from among the middle and business classes rather than those who stand to actually benefit the most. Their collective attitude towards the working class is deeply troubling even though most of them are barely one generation removed from the same poverty. Of course they will tell you it is only by their hard work and sacrifices they got where they are today – the bootstraps fallacy. Much of their tales are fiction but it helps to reinforce the narrative that poor people’s poverty is self-inflicted and a result of their deficient characters.
As such many of the arguments against safety nets revolve around the expectation that poor people will become lazy if given a monthly grant or would take to drink. What they are likely most concerned about when it comes to cash transfers is that workers will become unwilling to provide their labour to be exploited and/or will demand a reasonable wage rather than the pittance many, especially in rural areas, currently receive.
One must also ask about the wisdom of the part time jobs programme. While it does provide $40,000 per month, questions are increasingly being raised about the method for selecting individuals and how much work is actually being done. More problematic is that it may be encouraging the participants to settle for part time jobs when they could be looking for full time positions. As such it seems to be a poverty trap.
This cash transfer debate is not unique to Guyana which is really quite typical for a developing country. As such it is instructive to look at other countries and their programmes aimed at reducing poverty which one must remember is the objective of these initiatives. It is also about addressing the insecurity that comes with very low incomes where an accident, an environmental event such as a flood or a drought, an illness or a job loss is a calamity for the household.
A 12-year project by the Kenyan government which started in 2017 is already providing instructive findings in how cash grants affect behaviour. The project covers some 243 villages in rural areas consisting of 20,000 residents.
It splits them into four groups: Long-term Universal Basic Income (UBI) with 44 villages receiving US$22.50/monthly for 12 years, guaranteeing 10 years of future payments.
Short-term UBI: 80 villages receiving $22.50/ month for 2 years, with no further payments.
Large Lump-sum: 71 villages receive a one-time payment of US$500.
Control Group: 100 villages receiving no financial transfers.
The key findings up to the end of 2023 were as follows: Long-term UBI recipients were 54% more likely to invest in businesses or land, compared to the control group. UBI households saw average business income rise by 63% for long-term and 31% for lump-sum recipients. Long-term UBI led to 51% higher savings than in the control group.
Most significant was that the UBI had no negative impact on work with no significant effect on labour force participation or hours worked. Other social benefits included reduced stress and depression and an increase in women’s control over finances and decision-making within households.
Villages with UBI recipients also showed slightly higher voter turnout possibly because they felt more politically invested by the programme. Finally there was no increase in alcohol consumption. We repeat there was no increase in alcohol consumption.
We can now turn to America, a country of extreme wealth but one with widespread poverty. According to the US Census Bureau, in 2022, 11.6% or 9.1 million children, lived in poverty as measured by the Federal Poverty Line – a family of four earning less than $27,750.
Anecdotally anyone who has been to parts of Queens where many Guyanese happen to live would be startled to see their fellow countrymen and women in long lines for food banks each Saturday morning. America had not seriously addressed this poverty for decades. That was until COVID which saw massive and swift financial interventions under the American Rescue Act with some 80 million households receiving stimulus cheques among a slew of other reliefs including improved child tax credits. The effect on child poverty was instantaneous: 5.5m fewer children living in poverty in December 2021 than one year before. Of course it cost the US government US$5 trillion that may (or may not) have to be paid back at some point.
Guyana has no such concerns.
The “Because We Care” and the uniform grants that benefit the parents and guardians of 205,000 schoolchildren with $45,000 per annum will cost only $9.2b – less than .001% of the 2024 trillion dollar budget. Clearly this could be increased to an amount that is far more impactful. Additionally the method of its transfer could be changed with payments perhaps each quarter. As for how the transfers are delivered even the PPP/C government would admit that having its ministers or teachers hand out envelopes is not the best use of their time.
So post offices that are already equipped and located to pay pensions along with electronic transfers to bank accounts would be far more efficient. It could also be in the form of a rebate or even a payment based on filed tax returns because it is only fair that anyone receiving such a payment be part of the tax system.
Whatever the format, the current “Because We Care” grant is fair in its comprehensiveness and could become the basis for a more robust approach to eradicate poverty in Guyana.
