How a basic income experiment helped these Kenyans weather the Covid-19 crisis

Several years ago, researchers in Kenya decided to study the effects of a universal basic income (UBI) trial on people’s wellbeing. Some 6,000 recipients in a 12-year trial beginning around 2017 received 75 cents a day — not much, but enough, their research found, for people to be less food-insecure and more likely to start a business. Others received payments for just two years (that ended in December 2019), and still others received a lump sum payment.

In early 2020, the coronavirus hit. In response, governments like Kenya’s imposed harsh lockdowns that sought to prevent the virus’s spread but that also had devastating impacts on the economy.

That prompted researchers to ask: How does receiving a UBI (or having received a UBI up until recently) affect how communities are hit by a serious economic setback like this one? The researchers decided to check back in on the households in their UBI trial. This week, Nobel Prize-winning MIT economist Abhijit Banerjee, GiveDirectly’s Michael Faye, the late Princeton economist Alan Krueger, UCSD’s Paul Niehaus, and MIT Sloan’s Tavneet Suri released a working paper — meaning it has not yet undergone peer review — on what they found.

Mostly, they found encouraging news: Even a very small UBI can really help with a deeply difficult situation. The lockdown in Kenya to reduce the spread of the coronavirus was hard on rural communities like those in the UBI study, which were already quite poor. The social safety net is limited, and people go hungry even in good times. When people earned less money, they were more likely to have to give up necessities. Food insecurity was widespread — 68 percent of households in the control group reported experiencing hunger in the last 30 days.

But the UBI measurably improved things — not just for the people still receiving it but also in the group where the last payments stopped in December. “Recipients were 4.9-10.8 percentage points less likely to report experiencing hunger,” the paper finds, and “3.6-5.7 percentage points less likely to have had a household member sick during the last 30 days.” Recipients were even less likely to be depressed.

It should be noted that almost no one in either the experimental or control groups actually had the coronavirus, which likely hadn’t reached rural Kenya by the time of the study — though its effects certainly had, through a nationwide lockdown that was stricter than that in much of the US.

Here’s how the UBI actually played out: In good times, the UBI had allowed many recipients to start businesses. When the lockdown happened, business income plunged. But UBI meant that this wasn’t as devastating to those families as it otherwise would have been.

“UBI lets people start businesses and have more business income,” Tavneet Suri, one of the co-authors of the paper, told me. “As the pandemic comes along, they lose some of that business income. But the businesses stay open; they’re still doing some transactions.” A small-business owner, she said, will “expect the income to vary a lot,” and with UBI, they’re “not subject to having to exit if it varies.”

People who did not start businesses still typically saw higher income as UBI recipients and were less likely to be hungry now. As for the finding that they were less likely to be sick, perhaps having a bit more money made it less likely that household members got sick from other sources — because they could afford to eat better, access clean water, or rest when they needed it.

The far-reaching benefits of a UBI

Proponents of UBI have argued for years that consistent benefits can improve people’s lives when times are good as well as when they’re difficult. In good times, they encourage people to invest in their future — for example, by starting businesses or getting education or training. And in bad times, they mitigate the downsides of having taken risks like starting a business, so that people can still eat.

Knowing that they’ll have some income no matter how bad things get may encourage people to take bigger risks when things are good. “That’s what we’re seeing” from the results in the study, Suri told me. “Income benefits in good times and then stability benefits during bad times.”

The researchers looked, too, at whether the UBI might have encouraged recipients to do more activities that risked the spread of the coronavirus. For instance, maybe having more money would make people more likely to have social interactions with friends and family. In normal times, that’s good news. And usually, if they’re more likely to go to the doctor with a health concern, that’s good too — but during the pandemic, it might expose them or the doctor to the coronavirus. If UBI increases social interaction or health system utilization, then under these unusual circumstances that potentially increases the spread of disease.

Researchers didn’t find any such effects, though. Instead, “Transfers generally had small beneficial effects or null effects on behaviors related to public health.” Recipients were less likely to see a doctor — because they were less likely to get sick — and maybe slightly less likely to have social interactions. There were no effects found on work or on commercial activities like shopping.

Another criticism that is frequently aired about using a universal basic income for disaster relief is that giving people money can increase demand for goods — say, food — but the disaster will have restricted the supply.

If you talk to most economists, economists are always like ‘give cash, supply chains are generally functioning in most areas.’ But the one exception is disasters,” Rema Hanna, a development economist at the Kennedy School at Harvard, told me. For example, if there is a severe famine, giving everyone in the world a trillion dollars would not mean there’s enough food for everyone — it would instead result in people bidding against each other for more and more expensive food. That doesn’t mean you shouldn’t give cash as disaster aid, she said, but it does mean it’s important you’re “sure that supply chains are functioning.”

But in this case, it looks like they are. When everyone in a village got a cash transfer, they ate better rather than just bid up the price of food. The coronavirus lockdown in Kenya mostly blocked trade from large cities and across international borders, Suri told me, while food is mostly conveyed more locally. And some people can shift production to ensure there’s more food in a crisis — even when the country is locked down, the food supply is not fully fixed. So giving people more money really does help, and it doesn’t just lead to increased food prices. (Other research has reached the same conclusion.)

The coronavirus crisis is unlike most crises that a social support net has to weather, but the lessons from Kenya’s experiment are hardly uniquely applicable to the pandemic. Many of the results researchers observe also apply to other short-term times of difficulty or scarcity, from the annual dry season to a drought year or a natural disaster.

It seems that, in hard times, UBI doesn’t fix everything — but it can make things a little easier. And fears that it would make the problems that befall people worse have failed to materialize. The new study is a bit more evidence that UBI should be a big part of our thinking as we figure out how to ensure the world’s poorest can endure the crises — from global warming to pandemics — ahead.

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