Cash Aid Could Solve Poverty — But There's A Catch

Added: 07-24-2018

A government experiment in Zambia studied the outcomes of providing cash donations to people in poverty and found that it is highly productively as it increases income and leads to entrepreneurship. The government will implement the program but only for incapacitated people or single moms even though the study shows that able-bodied families in poverty significantly benefit from the program.

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Type Reading Time Author Date Source
article 11 minutes NURITH AIZENMAN 08-09-2017 http://www.npr.org/
Type Reading Time
article 11 minutes
Author Date
nurith aizenman 2018-07-24 00:00:00 UTC
Source
http://www.npr.org/
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Key Takeaways

  • Regular cash donations to people living in poor rural areas can lift them out of poverty as the cash can be used for hiring help to maximize output or starting a new business. 
  • Being “socially acceptable” is causing the government of Zambia to ignore evidence from an experiment and only provide cash to highly vulnerable people even though able-bodied people in poverty can significantly benefit from the program.

Summary

This article discusses an experiment in Zambia where the government provided regular cash to people in a poor rural area for five years, mostly targeting mothers of young children and incapacitated people. The study assessed how recipients used the cash and whether they went beyond just using it responsibly and actually used it productively. Initially the study was controversial as many assumed that people would either waste the money or eventually run out of it, however the study found that cash aid is a great tool for poverty reduction. 

The results found that recipients increased their spending by 50% due to increased income which is “proof that they were using the free money to make more money.” Recipients used the cash in two main ways: families that were unable to work hired help, and younger families became entrepreneurial. 

The article discusses the story of Nasilele and Chipopa Lyoni, a couple with four kids, living in poverty. Nasilele was chosen to be part of this study and she received $18 every other month. Two and half years later, her family crossed the poverty line, doubled their money and started several businesses. 

The government plans to implement this program, however there is a catch: the cash will only be provided to those who cannot work such as the elderly, the sick and single moms with many kids. They are not going to give money to families with two able-bodied parents such as Nasilele and Chipopa Lyoni because of preconceptions that able-bodied people should not receive government aid. A social welfare official explains that this decision is “socially acceptable”, even though it ignores evidence from the experiment. 

The Zambian government is becoming increasingly more open to cash aid and in the future, the definition of vulnerable may also extend to able-bodied couples in poverty.



From http://www.npr.org/