Cash payments to 2.7 billion people living in poverty would slow the spread of Covid-19: report – CNBC

For many people living in poverty around the world, working from home amid the Covid-19 pandemic is not an option, even when showing up to work means potentially getting sick. But there is a solution to that problem, accordinga paper released Thursday by the United Nations Development Programme (UNDP): Give the poor cash so they can afford to stay home. That could help slow the pandemic, says the paper.

Entitled "Temporary Basic Income: Protecting Poor and Vulnerable People in Developing Countries," the paper suggests giving cash to the poorest 2.8 billion people in 132 developing countries.

In total, 1.07 billion people live below the international poverty line (which is considered $1.90 per day in South Asia and sub-Saharan Africa; $3.20 per day in East Asia and the Pacific, the Middle East and North Africa; and $5.50 per day in Europe, Central Asia, Latin America and the Caribbean),according to the authors of the paper,George Gray Molina, the chief economist at United Nations Development Programme, andEduardo Ortiz-Juarez, a researcher at King's College in London.

Another 1.71 billion people are defined as facing "a sizable risk of falling into poverty," according to the paper.

Taken together, these 2.78 billion people (44% of the population of the developing world) should get temporary cash payments that are not contingent on residence, citizenship or work status, but only on how much money a person is making what UNDP spokesperson Victor Garrido Delgado calls a "means-test."

"Digital social registries and means-testing are widespread in the developing world and have been for about 20 years now," Delgado says. A person's means is determined with census data, declared income and other signifiers, like whether they have running water, he says.

"A [temporary basic income] payment, because it addresses urgent needs for food, shelter and health, should go to everyone in a household (adults will collect on behalf of children)," Delgado says.

"In that sense it's meant to be comprehensive," Molina said on Tuesday on a video call with reporters.

Currently, "large portions of the population" are not covered by existing cash transfer systems that have already been deployed amid the pandemic, according to Molina. People who are typically excluded from these social support systems include "people in the informal sector of the economy, of self employed [workers], domestic workers and unpaid care work," he says.

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," he said.

"We do believe that this is one tool in the toolbox that can be useful to stop the spread of the virus," Molina said.

To be sure, a cash payment program for almost 3 billion people is extreme. But "unprecedented times call for unprecedented social and economic measures," said UNDP administrator Achim Steiner in a press release. "Introducing a Temporary Basic Income for the world's poorest people has emerged as one option. This might have seemed impossible just a few months ago."

Depending on the exact nature of the program, it would cost at least $199 billion per month, according to the report. The three proposals put forth in the paper include topping up existing incomes to a threshold decided by the country, lump sum cash transfers based on the median cost of living in a country or a lump sum cash transfer that is the same for every person no matter where they live.

The report proposes financing the program by temporarily putting on hold debt repayments for the countries included. Developing and emerging countries are forecast to spend $3.1 trillion in paying back their debts in 2020, the UNDP said in a press release.

Other possibilities for paying for the temporary basic income include redirecting fossil fuel subsidies or military expenditures, Delgado says.

"These are some options, but at the end of the day it is an issue for each country to consider how to pay," he says.

One consideration for countries considering a temporary basic income is that money put in the hands of the poorest people is generally spent on "immediate food and essential services," so the money will go back into the economy quickly, Delgado says.