Cash or work: What do people want?

The debate about how best to assist the poor is not going away.  Read some of our previous posts on this in issue in Tanzania , Sierra Leone and Kenya .

Are cash transfers more effective than government services in adressing poverty? If you do settle on cash transfers, should they cover a large part of the population in the form of a basic income grant? Or should such transfers be targeted at specifically vulnerable groups? And what conditions should be attached to such transfers  apart from a means test (every doesn’t even agree that means tests are a good ideas)? Should cash transfers be conditional on some ‘good behaviour’ such as sending your children to school (such as in Oportunidades in Mexico) or are such conditions unnecessary red tape separating cash from people that really need it? These and other similar questions continue to spice efforts to assist the poor and vulnerable.

The NREGA scheme in India is very much at the forefront of these debates. In a recent article Sowmya Kidambi and Aruna Roy of the MKSS argued that the complexities of conditional cash transfers make them more vulnerable to corruption than unconditional entitlements such as the NREGA. They also argue that there are important ideological difference between what they call a ‘cash dole’ and a scheme such as the NREGA that is based on the right to work. Read their article here.

 

Teaching the poor to Fish? Cash grants in Sierra Leone

Are cash transfers an effective poverty reduction tool in post conflict societies? Intuitively one would think that they would be, given the comparatively low demands that they make on state service delivery agencies and the dire poverty of people in these countries.

Cash transfers have recently been the topic of hot debate in richer countries such as South Africa and India. But what can they do in post conflict situations? Below we list and discuss some of the findings of Rebecca Holmes and Adam Jackson of the ODI’s briefing “Cash Transfers in Sierra Leone: Are they appropriate, affordable or feasible?“.

Are Cash Grants Affordable?

As a result of its recent history of conflict, Sierra Leone will not be able to finance its own expenditure anytime in the foreseeable future. So the debate about whether cash transfers are affordable in Sierra Leone is largely a debate about whether donors will funds such grants. Given the diversification and deepening of donor funding, existing donors in country such as Sierra Leone may soon be replaced by the entry of new players such as China and the growing body of private donors.

Does Sierra Leone have the state capacity to deliver them?

Surprisingly Holmes and Jackson find that Sierra Leone may already have sufficient private and public infrastructure to deliver cash grants. This underlines the more general point that cash grants are relatively undemanding of state capacity to deliver.

Do they create Dependency?

Holmes and Jackson indicate that donors’ main reservation about cash grants is that they could create dependency. There is however no evidence to support this fear.

Do they raise expectations unnecessarily?

One of the strongest arguments against cash grants is that they may create the expectation of long term cash support. In kind transfers such as agricultural equipment do not run the same risk.

The need to target

Cash grants should be carefully targeted. Policy instruments targeting the economically active population should have strong linkages to sustainable economic activity, for example public works programs that construct local economic infrastructure such as markets. The economically inactive such as children and the elderly are best reached through cash grants that do not set such preconditions.

Economies of scale and the multiplier effect

Donors argue that in kind transfers benefit from economies of scale because donors can negotiate better prices when purchasing in bulk. The downside of this argument is that such bulk purchases are often made outside the targeted communities and even outside the targeted countries. Such ‘external’ purchases negate the multiplier effect that communities would otherwise benefit from, were good purchased locally, albeit at a potentially higher price.

Your thoughts?

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When the Sweat of your Brow isn’t enough: How to get good pay and good work in Kenya

A recent paper by the International Poverty Center paints a familiar picture of unemployment in Kenya. Like many countries in Africa  under and undemployment is higher in rural than in urban areas; more women are affected by these phenomena than men; and the young and old working-age workers are more affected than the rest of the work force.

Eduardo Zebeda’s paper Addressing the Employment-Poverty Nexus in Kenya compares the effectiveness of a job-creation and a cash-transfer programme in alleviating the failures of the Kenyan labour market. He finds that cash-transfers are very effective in rural areas because of the high dependency ratio. He also finds that well designed job-creation programs are more effective in reaching extremely poor people in urban areas. They have the added advantage of creating local infrastructure.

However in the end Zebeda finds that a tertiary qualification and employment in the formal sector are the most important determinants of household income. In the long run, therefore, only the creation of formal sector employment and more and better tertiary education will provide a check on poverty in Kenya.

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