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Income grants

A guaranteed minimum income ensures that every citizen will be able to purchase a desired level of basic needs. One method is through a basic income (or negative income tax), which is a system of social security, that periodically provides each citizen, rich or poor, with a sum of money that is sufficient to live on. Studies of large cash-transfer programs in Ethiopia, Kenya, and Malawi show that the programs can be effective in increasing consumption, schooling, and nutrition, whether they are tied to such conditions or not. Employment subsidies go to those already employed and this has shown to have little effect on those at the lowest income levels. Proponents argue that a basic income is more efficient than a minimum wage and unemployment benefits, as the minimum wage effectively imposes a high marginal tax on employers, causing losses in efficiency. In 1968, Paul Samuelson, John Kenneth Galbraith and another 1,200 economists signed a document calling for the US Congress to introduce a system of income guarantees. Winners of the Nobel Prize in Economics, with often diverse political convictions, who support a basic income include Herbert A. Simon, Friedrich Hayek, Robert Solow, Milton Friedman, Jan Tinbergen, James Tobin and James Meade.

Income grants are argued to be vastly more efficient in extending basic needs to the poor than subsidizing supplies whose effectiveness in poverty alleviation is diluted by the non-poor who enjoy the same subsidized prices. With cars and other appliances, the wealthiest 20% of Egypt uses about 93% of the country's fuel subsidies. In some countries, fuel subsidies are a larger part of the budget than health and education. A 2008 study concluded that the money spent on in-kind transfers in India in a year could lift all India's poor out of poverty for that year if transferred directly. Additionally, in aid models, the famine relief model increasingly used by aid groups calls for giving cash or cash vouchers to the hungry to pay local farmers instead of buying food from donor countries, often required by law, as it wastes money on transport costs.

The primary obstacle argued against direct cash transfers is the impractically for poor countries of such large and direct transfers. In practice, payments determined by complex iris scanning are used by war-torn Democratic Republic of Congo and Afghanistan, while India modified its subsidies in favor of direct transfers. Central bank digital currencies are argued to be an efficient tool in direct cash transfers to the poor as it can reach the unbanked and be more cost effective without having to physically send money and without needing an intermediary such as a bank.