by Matthew Kredell
Increasing poverty rates among the elderly have led more than 40 countries to introduce non-contributory pensions. And in many countries across Africa and elsewhere, the money is disbursed every two months – instead of monthly – because it’s more cost-effective for governments.
However, research from USC Price School of Public Policy Assistant Professor Emma Aguila indicates that monthly disbursements provide greater health benefits. She presented these findings in June at the International Network for Pensions, Aging and Retirement Research (INPARR) Conference on Pensions at the OECD (Organisation for Economic Co-operation and Development) in Paris.
With policymakers and scholars from African, Asia, Europe and Latin America in attendance, the conference centered on the theme of “Consistency amid Complexity: Navigating the Future of Pensions and Retirement.” Aguila’s presentation was titled “Improving Wellbeing of Older Adults: Payment Frequency and Delivery Method for Non-Contributory Pension Programs.”
Leading a randomized control trial in the State of Yucatan, Mexico, Aguila found that the elderly pension recipients have difficulty rationing their consumption between pay cycles, with regard to both food consumption and health care usage.
“When the money is disbursed every month, we see improved health in many different aspects, including improved lung function and overall level of frailty,” Aguila said. “When a larger chunk is disbursed every two months, we find they spend the money the first few weeks, not only on food but things like cell phones and bicycles.”
Implications for practice
According to Aguila, following the presentation, several directors of pension systems in Africa and Latin America discussed how the findings of her research could be applied to their countries’ cases.
“What was great about the conference is that there were not only people from academia but also policymakers,” Aguila said. “It was interesting to be able to show research for which policymakers could provide feedback, and could also take it into account.”
Also during the OECD presentation, Aguila elaborated on another facet in her research: the effects of disbursing money in cash or by debit card. Although she’s still analyzing the data, preliminary observations indicate that many older people – unable to withdraw money from an ATM either due to lack of mobility to access the machines or a lack of knowledge on how to use technology – rely on family members to withdraw the money; in which cases, the full amount may not always reach them.
Though the research focused on the elderly, Aguila believes the result indicating increased effectiveness for monthly disbursements has relevance for other poverty alleviation programs.
“Sometimes we see indicators in countries that poverty levels haven’t changed despite these programs, and we wonder why,” Aguila said. “I’m trying to provide evidence for policymakers on how to best implement this program.”