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Deciding where poverty starts: as with many countries, there is no official measure of poverty in Canada, but there are several different ways of measuring low income.

Canada's standard method of calculating the country's poverty rate since the 1970s has been Statistics Canada's Low-Income Cutoff (LICO). It comes out of complicated and sometimes baffling calculations that not everybody is pleased with. The LICO, which varies by family size and location, is the level at which people spend so much of their income on basic necessities such as food, shelter, and clothing that they are living under what is described as "straightened circumstances."

Statistics Canada figures that anyone who spends 20 percent more of their gross income than the average Canadian on food, shelter, and clothing is struggling financially. Surveys have shown that the average family spends about 35 percent of its gross income (total income from all sources before tax) on these essentials, so a family that spends 55 percent of its income on these three items is considered poor. At that level, there is little left to spend on other necessities such as transportation, health, personal care, education, household operation, recreation, or insurance.

These calculations have been criticized though for low-bailing the extent and depth of poverty. This is because Aboriginal reserves, homes for the aged, prisons, and the Yukon, Northwest Territories, and Nunavut are excluded from the data.

As the Canadian Research Institute for the Advancement of Women pointed out in 2002: "Anyone who has spent any time in Vancouver's Downtown East Side, the Jane-Finch corridor in Toronto, the North End of Winnipeg, the St. Henri district of Montreal, rural communities of New Brunswick, or some Aboriginal communities which don't have sewage systems or clean, running water, could not deny the existence of deep and persistent poverty within this abundant and prosperous nation."

Anti-poverty advocates say that most measures only estimate the frequency of poverty. They ignore the depth (how far below the poverty line a family's income is) and the duration of their financial suffering, both of which are necessary to give a complete picture of poverty.

In 2003, Statistics Canada introduced a new system, the Market Basket Measure (MBM).

It covers food, clothing, shelter, transportation, and sundries such as telephone service and postage stamps for a four-member family consisting of two adults and two children--a 13-year-old boy and a nine-year-old girl.

* For food, the MBM uses Agriculture Canada's Nutritious Food Basket, which is priced for 18 urban centres across the country.

* For clothing, it uses 75 percent of the amount budgeted for by the Social Planning Council of Metropolitan Toronto in 1991, and subsequently updated for cost changes.

* Shelter costs are calculated for a three-bedroom apartment using rental information for locations in Canada with populations above 10,000 people. The median rent in each location is used for the MBM.

* Other essentials such as personal care, household needs, furniture, a telephone, public transportation, reading, recreation, entertainment, and school supplies are allocated an amount equal to 60 percent of that recommended for food and clothing.

* The cost of the MBM is related to geography because prices for shelter, for example, are way higher in Vancouver, than they are in rural Saskatchewan. The figures are also adjusted according to family size and age of children, and are calculated for 19 urban areas plus an additional 29 different community sizes in ten provinces.

According to the MBM, a family's disposable income is its gross income, minus income taxes and other payroll deductions, child support and alimony payments made to another household, actual out-of-pocket not reimbursed) child care expenses, and actual out-of-pocket spending recommended by a health professional.

By the new measure, 13.1% (almost four million) of Canadians are living in poverty. That's way up from the LICO measurement of 10.9%. Other findings using the MBM were:

* Children under 18 made up a higher share of the low-income population in 2000 using the MBM (29.5%) compared to the after-tax LICO (26.6%);

* There is a higher share of low-income children living in two-parent families using the MBM (61.8%) compared to the after-tax LICO (56.3%);

* The measure still shows a lower percentage of children in two-parent families living in low income (22.6%) than the proportion living in female lone-parent families (43.3%);

* Seniors 65 and over made up a lower portion of the 2000 low-income population (5.2%) compared to the after-tax LICO (8.1%);

* Single adults living alone formed a smaller portion of the low-income population using MBM (26.1%) compared to the after-tax LICO (35.1%).

Government departments, academic experts, nongovernmental organizations, and advisory bodies to Statistics Canada all contributed to developing the measure. The MBM is designed for use with the Low Income Cut-Offs (LICOs) and the post-tax Low Income Measure (LIM, which is equal to half the median after-tax income adjusted for family size and composition) to track low-income trends among families with children in Canada. Used together, it's thought that these measures provide a more complete picture of low-income Canadian families raising children.

The general public has its own opinion of what constitutes poverty. A 1997 Gallup poll asked people what they thought was the least amount of money a family of four needs each week to get along in their community. The average response was $500 a week, or $26,000 a year. That was $2,100 lower than Statistics Canada's LICO. However, analysts suggest that most people polled were referring to disposable (after-tax) income, which would bring the totals closer. A year later an Ekos survey revealed that Canadians felt a family of four would need an annual gross (before-tax) income of about $40,500 to meet its basic needs.

SUGGESTED ACTIVITIES:

1. When the Fraser Institute, a conservative think-tank, measures poverty it comes up with lower rates than the government; its numbers would cut Canada's poverty rate by 75 percent. But, critics say no one other than the Fraser Institute uses the calculations which some compare to a basic, Third World measure of poverty that provides little more than short-term physical survival of a family. Research and discuss the Fraser Institute's methods and conclusions.

2. In February 2005, the B.C. Public Interest Advocacy Centre, on behalf of a coalition of 15 organizations from communities across B.C, filed a complaint with the province's Ombudsman about the Ministry of Human Resources because of concerns about unfair practices experienced by poor people who need assistance from the Ministry. BCPIAC is a non-profit, public interest law office. Created in 1981, it believes "that it should not only be the rich and powerful that are represented before our courts and regulators. For those bodies to function as they should, they must hear from all of those affected by their derisions. Our task is to provide representation to groups that would not otherwise have the resources to effectively assert their interests." Open a file to follow up on the Centre's progress with its complaint and/or research other issues this group, or one in your own province or territory, has raised in defence of the poor.

3. Discuss the following contrasting views: "The United Nations designated 1996 the International Year for the Eradication of Poverty. Sadly, poverty statistics for 1996 show that Canada came nowhere near to meeting that goal." Poverty Profile 1996: A Report by the National Council of Welfare;

"The fact is that poverty, as it has been traditionally understood, has been virtually eliminated. It is simply not a major problem in Canada." Christopher Sarlo, Poverty in Canada.
Before-Tax Low-Income Cut-Offs (LICOs), 2003

Population of Community of Residence

Family 500,000 + 100,000- 30,000- Less than Rural
 Size 499,999 99,999 30,000

 1 $19,795 $16,979 $16,862 $15,690 $13,680
 2 $24,745 $21,224 $21,077 $19,612 $17,100
 3 $30,774 $26,396 $26,213 $24,390 $21,268
 4 $37,253 $31,952 $31,731 $29,526 $25,744
 5 $41,642 $35,718 $35,469 $33,004 $28,778
 6 $46,031 $39,483 $39,208 $36,482 $31,813
 7+ $50,421 $43,249 $42,947 $39,960 $34,847

Income refers to total pre-tax household income. So, as an
example, a family of four living in a large Canadian city
with a before-tax income of less than $37,253 in 2003 would
have been living below the poverty line.

Source: Prepared by the Canadian Council on Social
Development using Statistics Canada's Low-Income
Cut-Offs.

Market Basket Thresholds (of disposable income)
for a two-parent, two-child (ages nine and 13)
family in communities across Canada (2000)

 MBM
 thresholds
Communities ($)

St. John's, NL $24,095
Charlottetown, PEI $25,434
Halifax, NS $24,607
Moncton, NB $22,940
Quebec City, PQ $22,156
Montreal, PQ $22,441
Ottawa, ON $26,503
Toronto, ON $27,343
Winnipeg, MB $22,750
Saskatoon, SK $22,814
Calgary, AB $24,180
Vancouver, BC $27,791


LOW-INCOME VERSUS POVERTY

While after-tax income is a key indicator of a family's standard of living, wealth, or net worth, is another important measure of financial well-being. Once families have built up their financial assets, a mortgage-free home for example, then they're in a much better position to be able to handle the shock of economic stress such as the loss of a job, sickness, or divorce.

In other words, not all low-income people are poor. If they own a home, they have substantially reduced their cost of shelter, a major portion of living costs.

Other financial assets might include savings, investments in stocks, bonds, or mutual funds, RRSPs, vehicles, business equity, and real estate other than the primary residence. Obviously, the most vulnerable families are tow-income families with no or only modest financial assets.

FACT FILE

To establish the low. income cut-off, Statistics Canada includes 35 low-income thresholds based on size of households and size of community (because urban settings are generally more costly places to live).

The Market Basket Measure did not create a huge drop in poverty rates as many people expected; the anticipated drop in poverty was expected to be about a third simply by using the MBM instead of before-tax LICOs.

In all areas of Ontario, single persons and parents working full time at minimum wage would be below the MBM standard; a family of four in Toronto would need to work 4,000 hours a year at minimum wage rates to get out of poverty.

Websites

Mapleleafweb (Poverty)--http://www.mapleleafweb. com/features/general/ poverty/

The Fraser Institute (Measuring Poverty in Canada)--http://www.fraserinstitute. ca/shared/readmore.asp? sNav=pb&id=216

Public Justice Resource Centre (A Measure of Poverty in Canada)--www.cpj.ca/pjrc/ research/02_poverty.pdf
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Title Annotation:POVERTY--DEFINITION
Publication:Canada and the World Backgrounder
Geographic Code:1CANA
Date:Mar 1, 2005
Words:1760
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