Cash transfers, particularly in low and middle-income countries, directly target groups like the elderly but also ripple through and affect the labor behaviors of younger individuals. These effects underscore the interconnectedness of labor decisions across generations, especially in childcare and job mobility.
The Cash Transfers and Labor Supply: New Evidence on Impacts and Mechanisms by Cuong Viet Nguyen & Finn Tarp looks at how cash transfers, especially if the recipients are elderly, affect the labor supply
Scope: This research focuses on the impact of cash transfers from Vietnam’s social assistance policy on individual labor supply.
Data Source: Insights were drawn from the Vietnam Household Living Standard Surveys (VHLSS) spanning 2012 to 2020.
Policy Context: The Vietnamese government has instituted monthly cash transfers to support social protection beneficiaries, including infant children, individuals with disabilities, and elderly members from financially disadvantaged households.
Cash Transfers and Production:
- Developing nations’ households grapple more with credit and liquidity challenges than their developed counterparts.
- Cash transfers find applications in enhancing both farm and non-farm outputs.
- Several studies detected an uptick in non-farm self-employment courtesy of these transfers. However, this research didn’t mirror those findings.
- This initiative plays a role in guiding individuals from self-employment avenues toward salaried professions.
- Its effects are prominent among women of childbearing age, especially if they cohabit with children, but are less so among men.
- Exiting the workforce allows older individuals to adopt childcare roles, enabling younger family members to pursue wage-earning prospects.
- A notable trend in Vietnam is that 30% of children below age six reside with their grandparents, influencing labor supply decisions of different age groups.
Education, Labor Market, and Childcare:
- There’s potential for cash transfers to fortify the formal childcare sector. However, no tangible evidence connects such transfers to an uptick in adult labor market involvement via improved childcare.
- Cash transfers don’t notably shift labor force participation or hours clocked in by those aged 15-64.
- Rural and ethnic minority groups register a more pronounced program effect than urban populations, possibly owing to the scarcity of structured childcare in rural territories.
- While tertiary education holders, many of whom are salaried, seem unaffected, those with vocational or secondary education credentials display significant labor shifts.
Elderly Labor Dynamics:
- These transfers often go hand-in-hand with decreased labor engagement among the elderly, especially those involved in agricultural self-employment.
- Given the typically modest agricultural earnings among older demographics, cash transfers can offset income when they opt out of work.
Grandparenting and its Impact:
- Transitioning to grandparent roles often correlates with decreased labor participation.
- The elderly, especially from rural and ethnic minority backgrounds, respond more dramatically to the cash transfer scheme, showing a propensity to trade work for childcare responsibilities.
The Big Picture
Vietnam’s cash transfer program, intended for specific beneficiaries, echoes throughout the socioeconomic spectrum. Directing funds to the elderly impacts them and influences younger generations regarding employment and childcare responsibilities.
Our thoughts: There is a growing body of research showcasing the importance of elderly members in their children’s ability to achieve their fertility intentions, and what’s particularly interesting is that cash transfers enable grandparents to help out with their grandchildren’s childcare and their adult children.