No guarantee that cash transfers will improve people’s lives - Economist

No guarantee that cash transfers will improve people’s lives – Economist

Oct 14, 2019 News

The media, politicians, local citizens as well as those abroad, among others, continue to give attention to cash transfers, as there is much debate on its feasibility, and on whether it will benefit people’s livelihoods.

Economist: Dhanraj Singh

“Cash transfers have worked in some cases but also failed miserably in others. There is no consensus in the literature, except that it is not a clear cut policy with a guaranteed outcome. So, we should be paying attention to policies that are more likely to deliver outcomes,” stated Dhanraj Singh, Economist and Executive Director of Guyana Budget and Policy Institute.
The economist disclosed that there is no guarantee that the cash will be used for its intended purposes. He theorised that individuals will move cash around and spend it on other things instead of spending it on education and health. He claimed that cash grants to individuals will not generate public necessities including good roads, hospitals, vaccination programmes, or portable drinking water, which are all critical for ending poverty while benefitting the entire population. He added, “Nor will cash transfers to individuals train nurses, teachers, or pay for long-term skills for building a strong labour force.”
According to Singh, cash transfers can lead to a decreased labour force where work is being dis-incentivised. He explained, “When individuals are given unearned cash, some may be inclined to work less than they would otherwise have. How pervasive this is likely to be depends on the society in question.”
“It is quite possible there will be a positive impact on the economy largely from the increased consumer spending that is likely to follow. However, this overall impact is unclear. Increased household spending can add a few points on the inflation rate which would actually reduce the real value of money and households’ wealth. Also, cash transfers are often used for consumption expenditures which could provide some immediate relief and benefits to households, but do nothing to address the fundamental and long-term problems that are keeping people in poverty, such as poor infrastructure, poor quality education and healthcare, lack of connectivity, poor workforce preparation, and lack of economic opportunities.”
Singh noted that the bigger concern in this regard of cash transfers from an economic standpoint is sustainability. He questioned, “What happens when oil revenues dry up and you have an entire nation accustomed to collecting unearned cash income each month?”
The economist stated that such questions, among others pertaining to the issue of cash transfers, take a stance as to why it is better to make strategic investment in critical public services that lay a solid foundation for long-term success.