• A new Rwanda-based study compared investment in training with the benefits of giving people the cash.
  • Cash transfers proved to be the most effective way of improving outcomes for young underemployed people in Rwanda.
  • Workforce training outperformed cash only in creating business knowledge.

Youth unemployment was a global concern even before the COVID-19 pandemic hit. Now it threatens to become a crisis as millions worldwide lose their jobs in the economic fallout from the virus.

The impact is being felt significantly in poorer countries, according to the International Labour Organization. But as politicians struggle to create policies to get people back to work, could a new study based in Rwanda offer some hope for a solution?

The new multi-agency report, backed by the United States Agency for International Development, compared the effectiveness of workforce training programmes with direct cash transfers.

This is what it found.

What did the study look at?

Researchers at the University of California, San Diego took an 18-month snapshot of a five-year programme (known as Huguka Dukore, or “Get Trained”) that aimed to help 40,000 young Rwandans develop skills needed to join the labour market.

Participants lived in 19 of the country’s 30 districts and the initiative particularly looked to help women and young people with disabilities.

With 65% of Rwandans aged between 14 and 30 unemployed, and scant evidence on which programmes best alleviate unemployment, researchers took nearly 2,000 participants who had incomes of about $190 per year to compare two initiatives.

One offered targeted workforce training. The other simply handed them a one-off cash payment.

Unemployment work training cash incentives Rwanda
Handouts increased levels of subjective well-being.

A ‘meaningful return’

While neither strategy led to greater employment rates over the course of the study, there was a marked increase in entrepreneurialism, well-being and productivity within the cohort that received only cash.

The value of their assets used for business – such as furniture, retail equipment and agricultural machinery – increased, as did that of their livestock. Their savings also rose.

Workforce training, meanwhile, outperformed cash only in creating business knowledge.

“These impacts are substantial for beneficiaries and provide a meaningful return on the costs of intervention,” the authors wrote.

The study also established the optimum funding ceiling and floor – more than $150 and no more than $400.

Mobile solution

With many emerging-market populations under-banked, the scheme transferred the cash via mobile payments. The technology also removed the need for virus-mitigation measures around the handling of cash.

Mobile payment systems are growing in popularity in Africa, where services such as Kenya’s M-Pesa are bringing banking services and micro credit that’s unlocked entrepreneurialism in many parts of the continent.

Despite the effectiveness of the cash payments in the Rwanda study, the authors said their findings didn’t show training was ineffective at alleviating unemployment among the young. And they were surprised to find that combining training and cash payments didn’t appear to create any extra benefits.

They are planning a follow-up survey to look at the longer-term effects of the study.