Common Front for Social Justice

How can poverty be measured?

How many persons live in poverty in New Brunswick? To be able to count them, we must divide the population into two groups: the poor and the non-poor. But where is the frontier drawn between these two groups?

In Canada, there is no official definitation of the dividing line between the poor and those who are not poor. There are many possible calculations of poverty, and numerous agencies propose their own...

Statistics Canada offers 3 measures that often serve as a point of reference allowing one to approach the scope of poverty in the country.

1. Pre-income tax Low Income Cut-offs (abbreviated as LICOs-IBT)

We have observed for some time that low-income households dedicated a larger part of their budget to vital necessities (food, clothing, housing) than do wealthier households.

This observation was the vital lead for Statistics to define low-income thresholds. Since 1968, Statistics Canada's Low Income Cut Offs define a low-income household as one which spends a disproportionate amount of its income (20 percentage points more than average) on the necessities of life: food, shelter, and clothing.

According to this method, are designated as poor all persons who dedicate 55% or more of their income on the necessities of life. In fact, the 1992 survey on household expenses revealed that Canadian families dedicate on average 35% of their incomes for food, clothing and housing.

LICO is based on income after government transfer payments such as the Canada Child Tax Benefit, Old Age Security pension, GST Credit, Employment Insurance benefits and provincial of territorial welfare payments but before federal, provincial or territorial income taxes are deducted.

LICOs vary by the size of the family unit and the population of the area of residence. The cut-offs are updated annually by Statistics Canada using the Consumer Price Index.

2. Post-income tax Low Income Cut-offs (abbreviated as LICOs-IAT)

Poverty being persistent, neo-liberal groups applied pressure to have statistics present a better picture. Since the end of the 90's, Statistics Canada calculates a new low-income threshold based on post-income tax income. Affluent families dedicate a larger part of their income to taxes than less-affluent families. By calculating the low-income thresholds on the post-income tax income, the proportion of households below the threshold was mecanically reduced.

Based on this method, are designed as poor all persons who dedicate 64% or more of their post-income tax income on essential needs (food, clothing, housing): that is, those who spend on these items 20% more than the Canadian average (44%).

3. Market Basket Measure (MBM)

Recently, Human Resources Development Canada (HRDC), jointly with Statistics Canada and provincial governments, developped a new measure, based on the actual cost of a series of items judged essential in different regions of the country.

Here is an estimate of what would be necessary for a family of 2 adults and 2 children in New Brunswick in 2000.

Low Income Statistics Based on the Market Basket Measure (MBM) for the reference family of two adults and two children.($)
Community size
Food Clothing &
Footwear
Shelter Transpor-tation Other Total
New Brunswick Rural 6 573 2 269 5 452 3 917 6 089 24 299
New Brunswick <30 000 6 573 2 269 5 785 3 917 6 089 24 632
Fredericton CA 6 491 2 269 7 803 1 344 6 033 23 940
Saint John CMA 6 499 2 269 6 087 1 340 6 033 22 233
Moncton CA 6 372 2 269 7 118 1 230 5 951 22 940

Source : Statistics Canada (SP569.pdf) : Understanding the 2000 Low Income Statistics Based on the Market Basket Measure

Comparision of the 3 measures for New Brunswick.

The measure of the Market Basket Measure recognizes that it costs more to live in rural regions of New Brunswick, which is not the case for the low-income threshold. The measure of the poverty rate according to the Market Basket Measure gives results very similar to those of pre-income tax low income for families, but not at all for persons living alone. But, it is these persons living alone who run the highest risk of being poor. The post-income tax low income reduces the incidence of poverty everywhere in New Brunswick.

Incidence of Low Income: New Brunswick - 2000
Market Basket Measure (MBM), Low Income Cut-Offs income after taxes (LICO-IAT), and Low Income Cut-Offs income before taxes (LICO-IBT.
 
MBM

LICO-IAT

LICO-IBT

All persons

13,8

8,8

14,1

All families

17,8

12,3

19,7

 
 
 
 

Non-elderly families

 
 
 

Two-parent families with children

11,4

6,0

 9,7

Lone-parent families

45,6

35,5

44,2

Female lone-parent families

52,7

41,5

51,1

 
 
 
 

Unattached individuals

34,7

26,6

42,1

Non-Elderly Male

36,3

32,7

40,2

Non-Elderly Female

42,3

39,5

47,6

All Elderly

26,4

 F

40,1

       
Source : Statistics Canada SP569.pdf

 

What to choose as measure?

The Common Front for Social Justice will continue to follow, in this field, the advice of the National Social Welfare Council. This agency has been publishing for years the most elaborate statistics based on the pre-income tax low income thresholds, thus allowing one to follow the evolution and tendencies year after year. Here are the thresholds updated by the Council:

National Council of Welfare

STATISTICS CANADA'S BEFORE-TAX LOW INCOME CUT-OFFS (1992 BASE) FOR 2002
Last updated in December 2003

Family Size
Community Size
Cities of 500,000+ 100,000-
499,999
30,000-
99,999
Less than 30,000 Rural Areas
1
19 261 $
16 521 $
16 407 $
15 267 $
13 311 $
2
24 077 $
20 651 $
20 508 $
19 083 $
16 639 $
3
29 944 $
25 684 $
25 505 $
23 732 $
20 694 $
4
36 247 $
31 090 $
30 875 $
28 729 $
25 050 $
5
40 518 $
34 754 $
34 512 $
32 113 $
28 002 $
6
44 789 $
38 418 $
38 150 $
35 498 $
30 954 $
7 et plus
49 060 $
42 082 $
41 788 $
38 882 $
33 907 $

The National Social Welfare Council wants to remind us that a poverty threshold is:

Some poverty thresholds are better than others, but none is perfect.



Your questions and comments are welcome.