The covid-19 pandemic is having a devastating impact on the approximately two billion informal workers around the world. As there is no social security net for the informal sector, workers have two choices; go to work and risk contracting and spreading the virus, or stay at home and face extreme poverty and starvation.
In response to this socio-economic crisis, a new report by the United Nations Development Programme (UNDP) suggests that access to cash could help fight covid-19 in developing countries.
In its paper Temporary Basic Income: Protecting Poor and Vulnerable People in Developing Countries, the UNDP proposes to give the “2.7 billion people living below or just above the poverty line in 132 developing countries” a guaranteed temporary basic income through direct cash payments. Chief Economist at UNDP George Gray Molina told CNBC:
“A more comprehensive cash payment program is important now because the coronavirus is spreading very quickly in the poorest countries, like Brazil, Mexico, Peru, South Africa, India, Bangladesh, Pakistan, and so on.”
These proposed “unconditional cash transfers” would pay for food, healthcare and education in the informal sector, thus enabling workers to stay at home. As a result, a program like this could prevent or at least slow down the ongoing spread of covid-19, as UNDP Administrator Achim Steiner explains:
“A Temporary Basic Income might enable governments to give people in lockdown a financial lifeline, inject cash back into local economies to help keep small businesses afloat, and slow the devastating spread of Covid-19.”
Many of the huge numbers of people not covered by social insurance programmes are informal workers, low-waged, women and young people, refugees and migrants, and people with disabilities – and they are the ones hardest hit by this crisis.
There is strong evidence for developing countries that, in the presence of unconditional cash transfers, human capital accumulation can be protected and boosted through expenditure on more and better diets, as well as on health and education services. (p. 5)
Moreover, by allowing people to meet their essential consumption needs, cash assistance could also lead to the protection and accumulation of productive assets and the diversification of livelihoods, and boost the entry into entrepreneurship. (p. 5)