Cash transfers more effective than workforce training in improving lives of Rwandans

In the direct comparison of a labor training program and direct money transfers for Rwandans, cash appears to be superior in improving the economic outcomes of unemployed youth, while training only outperforms cash in the production of business knowledge, according to a survey. new University of California San Diego study. The findings showed that both programs improved ownership of assets used for business and hours worked, but neither actually improved employment rates.

Conducted over an 18-month period, the study published in the Development Economics Magazine It involved 1,848 Rwandans with incomes averaging about $190 a year.

Despite the increase in formal education, youth unemployment rates in Rwanda remain high. For example, 40 percent of the country’s population is between 14 and 30 years old and 65 percent of these young people are unemployed.

“It is critical to understand the barriers in physical and human capital that prevent young people from being fully productive,” said study co-author Craig McIntosh, an economics professor in UC San Diego’s School of Global Policy and Strategy. “Despite this pressing need, policymakers have limited access to evidence-based interventions with a track record of effectiveness.”

Through cash benchmarking, the researchers made a direct comparison of the results of participants in the Huguka Dukore/Akazi Kanoze (HD) program – meaning “Let’s train and let’s work/work well done” in Kinyarwanda – with participants who received money transfers within a range around the expected cost of the employment program (about $332). The experiment compared the effectiveness of the staff training program to simply paying out the costs of the same program directly to the beneficiaries.

“We were trying to answer how policy spending can have the greatest effect and how money can be spent to create the greatest aggregate benefit in a fixed-budget pool,” wrote McIntosh and co-author Andrew Zeitlin, assistant professor at the McCourt of Georgetown University School of Public Policy.

The Huguka Dukore/Akazi Kanoze (HD) program, funded by the United States Agency for International Development (USAID) and administered by the Educational Development Center, is a five-year project (2017-2021) aimed at providing 40,000 vulnerable youth of employability skills in 19 of the 30 districts in Rwanda. The program targets young people aged 16-30 from poor households with less than secondary education, with an emphasis on women and young people with disabilities.

Study participants were randomly drawn into five categories: the HD program group; a smaller group that allocates money at the same cost as HD at $332; a money exchange and HD combined to test whether the interventions complement each other; a larger cash grant, which happened to be roughly equivalent to the cost of both the staff training program and the cash grant that was equivalent to approximately $845; and finally a group in which no program or direct money was offered at the time of study.

Work readiness improvements while cash prevailed across the board

The results of the HD program participants, collected 15 months after the program started and at least three months after the training ended, showed that Huguka Dukore has real benefits. While there was no overall improvement in employment rates, HD participants saw an increase in business knowledge and productive hours. In addition, the value of household assets (such as furniture and shop equipment, stocks and machinery for the production of agricultural goods) more than doubled and average savings increased by 60 percent. It also improved the participants’ well-being.

The money transfer group’s results indicated that after 14 months of the $332 direct payment, the participants had improvements on a wide range of economic and psychological outcomes. The one-time investment in seeds was found to boost monthly income, household and individual consumption, livestock value and overall wealth. The group also showed a significant increase of 6.5 more productive hours per week.

In addition, young people who received cash were more likely to become self-employed. In other words, they became more enterprising.

“These effects are significant for the beneficiaries and provide a meaningful return on the cost of intervention,” the authors wrote. “For example, USAID’s cost of the middle transfer would only be recouped in the income effects of the beneficiaries after about 26 months. These results provide more evidence that one-time unconditional transfers tend to be used in a careful and prescient manner by poor households in developing countries.”

Both unconditional cash grants of $332 and $845 were provided through mobile money through the US non-profit organization GiveDirectly; however, recipients of the lower cash prize benefited just as much as those who received the larger grants.

“Lower transfers seem to have lifted a barrier that really benefits households,” McIntosh said. “Our research has shown that transfers over $150 are needed to drive changes in productive outcomes in this environment, but here we see transfers over $400 have limited added value. This helps to capture the sweet spot ‘ for cash in this context.”

What surprised the researchers most about the study was the results of the combined group being offered both the HD work readiness program and the $410 cash grants. They found no evidence that the two complemented each other, and in any case, the combination appears to perform worse than would be expected by adding up the individual impacts of each of the two programs.

“Our results should not mean that it is impossible to design money and training programs in a complementary way, but rather than simply delivering them together, this does not automatically generate a whole greater than the sum of its parts,” the authors wrote.

Both the staff readiness and cash grant interventions had relatively consistent effects on rich and poor, men and women, the elderly and young, and on local labor market conditions.