Countries worldwide are expanding efforts to give their citizens money to cope with the economic turmoil caused by the coronavirus pandemic. Some analysts argue that cash transfer programs are not worth their cost, but others point to evidence that the programs have helped people endure crises.
How many countries are providing cash transfers?
Nearly ninety countries have announced new cash transfer programs—where governments put money directly into people’s pockets—to mitigate the effects of coronavirus restrictions, according to research led by World Bank economist Ugo Gentilini.
In the United States, ninety million people so far have received checks of up to $1,200 as part of the Donald J. Trump administration’s $2 trillion stimulus package. The administration joins other governments in issuing one-time payments: Hong Kong has pledged $1,280 to permanent residents over the age of eighteen, and Japan is giving $930 to every citizen, a plan expected to cost 2 percent of the country’s gross domestic product (GDP).
Some have floated the idea of implementing a universal basic income (UBI), or regular, unconditional payments intended to reach all people. Spain plans to introduce an unconditional guaranteed income, though not UBI, for three million low-income people and intends to keep the program after the pandemic.
Governments have also expanded existing programs. For example, the Chinese government instructed local officials to relax qualification conditions for dibao, the world’s largest unconditional cash transfer program, which benefits low-income families and other vulnerable populations.
Is this a new idea?
No. In recent decades, many countries, especially in Latin America, have used cash transfers to supplement traditional welfare systems, believing them to be a more targeted anti-poverty tool.
These programs can be unconditional or conditional. For example, some require recipients to regularly visit health clinics or ensure that their children attend school. They can be a one-time payment or happen regularly. Some are universal, while others are aimed at the poor, informal workers, or other vulnerable groups.
What is the goal of cash transfer programs in crises?
During previous emergencies, such as the 2008 financial crisis, economic stimulus packages were meant to promote consumer spending and restore economic growth. But now, with many workplaces shut down, experts say such programs aim to quickly put money into people’s pockets so that they can fulfill their most basic needs.
“In this situation, the primary goal is allowing people to support themselves until the crisis wanes,” says CFR’s Edward Alden. “It’s an economic maintenance package designed to keep people out of severe poverty until the pandemic passes.”
Are they an effective emergency response?
There have been hundreds of studies on existing cash transfer programs, and many have found them to be successful [PDF]. Researchers say long-term programs have reduced poverty and inequality, lowered mortality rates, and increased individuals’ resilience.
In emergencies, short-term programs similar to those being used by many countries to deal with the coronavirus crisis have helped communities rebuild. However, some using cash transfers in the past experienced challenges [PDF]. Sri Lankan officials were accused of giving aid only to their supporters after a tsunami in 2004. Bangladesh did not allocate enough funding when responding to a 2009 cyclone, so many people reported receiving insufficient amounts of cash. Pakistan faced problems registering potential beneficiaries following floods in 2010.
Experts stress that any country pursuing cash transfer programs now should be prepared to follow through. The programs must have a solid financing base, a system to identify beneficiaries, an outreach program, and a delivery platform. Some have advocated for universal cash transfers that reach all people to guarantee that no one is left out amid the pandemic.
What will happen to new programs after the coronavirus pandemic?
Timelines for lifting lockdowns remain uncertain, but if restrictions persist, governments will likely face pressure to expand programs. In the United States, some Democratic lawmakers are calling for monthly payments to most Americans for at least six months, though the proposed bill has yet to garner support from Republicans.
Experts believe that even once the pandemic is over and employment returns to normal, some of the new programs could stick around. “The new wave of cash transfer programs may be absorbed into countries’ social protection systems, or may subside entirely after the pandemic. Or they may well become something in between, like remaining a dormant option to be resumed during crises,” Gentilini says.