Universal basic income in Kenya

Read "Universal Basic Income: Short-Term Results from a Long-Term Experiment in Kenya" by Abhijit Banerjee, Michael Faye, Alan Krueger, Paul Niehaus & Tavneet Suri here.

Can UBI be an effective policy in developing countries for supporting poverty reduction and growth? In this episode of VoxDevTalks, Tavneet Suri discusses new evidence from a long-term, large-scale experiment in Kenya evaluating the impacts of providing a universal basic income. Tavneet describes the potential benefits and costs of a UBI in the developing world, what setting up an experiment of this scale involved, and what they have discovered so far.

What is Universal Basic Income? 

Universal Basic Income (UBI) is a regular income provided by the government to all individuals, regardless of their circumstances. It is not targeted and is generally designed to cover basic needs, ensuring a consistent flow of income for everyone.

What are the benefits of UBI?

Poor people face many constraints, including credit and insurance constraints, as well as psychological constraints. These challenges are multifaceted, and while there is some evidence on how to address individual issues, there isn’t a universal solution for the diverse and interconnected problems faced by each person. UBI operates on the principle that individuals are best equipped to identify and address their own primary constraints.

UBI may help individuals escape poverty traps, situations where they cannot access opportunities with increasing returns due to lack of initial resources. 

There are a range of other potential drivers for UBI which also apply to developed countries. It promotes individual freedom, removes the stigma associated with welfare, and ensures support for individuals who may be poor even if their households are not. Universality also fosters positive spillover effects for communities,

Why is there scepticism about UBI?

Despite its potential, several concerns about UBI remain:

• Cost: Implementing UBI on a large scale is expensive.
• Labour supply effects: Guaranteed income might discourage people from working.
• Inflation: There is a risk that increased spending from UBI could drive up prices.
• Social structure impacts: UBI could negatively affect social cohesion or drive elite capture.

What is the current evidence on UBI?

Existing evidence from developed nations is limited because most programmes have been small-scale and targeted rather than universal.

In Iran and Alaska, UBI-like programs funded by oil revenues provide income to all citizens. Research in these regions has shown no significant decline in labour force participation. In Iran, there was even an observed increase in female labour participation. However, research has been limited given the fact that it is rolled out to the whole population so research relies on census data. 

UBI in two districts in Kenya

A large RCT is being carried out in two counties in Kenya to try and build the evidence base on UBI. 295 villages were split into three treatment groups:

• True UBI: monthly income for every adult for 12 years
• Two-year UBI
• Two-year UBI sum up-front

Payments are made to individual adults rather than households using mobile money.

How does UBI affect employment decisions?

Initial findings show no reduction in overall labour supply. However, there is a shift in the type of work people engage in. Many participants leave wage employment to start their own businesses or pursue self-employment.  This reflects a feature of UBI that its gives adults freedom to make their own decisions.