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Income of Canadians

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The Daily

Thursday, May 3, 2007

Median after-tax income rose slightly for most Canadian families in 2005, and remained stable for unattached individuals, according to new data from the Survey of Labour and Income Dynamics

The median after-tax income for Canadian families with two or more people rose 1.6% from 2004 to $56,000, after adjusting for inflation. This increase in after-tax income came on the heels of a 1.3% gain in 2004.

Though most family types shared in the increase in after-tax income, this was not the case for senior families and unattached individuals. Among senior families (those in which the main income earner was aged 65 and over) median after-tax income remained virtually unchanged at $40,400 in 2005. However, this represented a 15% increase in real terms relative to 1996 — mostly the result of a five year upward trend that started in 1997.

Median after-tax income of "unattached individuals," or singles, remained stable at $21,400 in 2005. About 14% of the population lived as unattached individuals in 2005, up from 11% two decades earlier.

Seniors living on their own had a median after-tax income of $19,600 in 2005, virtually unchanged from 2004.

Note to readers

This release examines economic family income and low income in Canada. The data prior to 1996 are drawn from the Survey of Consumer Finances. Beginning with 1996, the data are taken from the Survey of Labour and Income Dynamics.

Note that this report analyses family income on the basis of medians. The median is the point at which half of all families had higher income than the rest, and half had less. All income estimates are expressed in constant 2005 dollars to factor in inflation and allow for comparisons across time in real terms.

Market income is the sum of earnings from employment and net self-employment income, investment income (excluding capital gains), and private retirement income. It is also called income before taxes and transfers. After-tax income is the total of market income and government transfers, less income tax.

Statistics Canada's low-income rate measures the percentage of families below the low income cut-off (LICO). The LICO is a statistical measure of the income thresholds below which Canadians likely devote a larger share of income than average to the necessities of food, shelter and clothing. For further information, consult the article "On poverty and low income" (13F0027XIE) available free online.

A follow-up report, which will be published shortly, will focus on the low income experience of unattached Canadians aged 18 to 64.

Canadian families earned the lion's share of their total income from market income, which is the sum of earnings from employment, investment income and private retirement income.

Survey of Labour and Income Dynamics (SLID) data also show that, based on after-tax income, the percentage of Canadian families living below Statistics Canada's low income cut-off (LICO) remained unchanged in 2005.

An estimated 655,000 Canadian families were living in low income in 2005, 7.4% of all families. Some 788,000 children under 18 were living in low-income families, 11.7% of the total.

Market income remained virtually unchanged

Families and singles earned the lion's share of their total income from market income. Median market income of both families and singles remained virtually unchanged between 2004 and 2005.

In 2005, the median market income of two-parent families with children was $72,800.

The median market income of female lone-parent families, at $22,200, remained virtually unchanged from 2004. However, this was a huge increase compared with the 25-year low of $8,600 in 1996. Much of the gain during this last decade reflects higher earnings and a larger proportion of working mothers.

Stability in taxes and transfers

Median taxes and transfers changed little for both families and unattached individuals.

For every $100 in total income received by Canadian families in 2005, an average of $10 came from government transfers. This compared with the 25-year low of $8 in 1980, and highs of $13 in the early 1990s.

Families paid $17 of every $100 in personal income taxes in 2005, compared with a low of $15 in 1980 and a high of $20 in 1998.

These changes between 1980 and 2005 reflected factors such as economic recessions and booms, changes in tax and transfer programs, and changes in demographics such as family composition, student status and population aging.

Income inequality: Gap widens between the lowest- and highest-income families

To analyse income inequality, families were divided into five groups, or quintiles, in ascending order of families' after-tax income. Each quintile represented 20%, or one-fifth, of all families.

The gap between the families with the lowest and highest incomes, an indication of income inequality, widened during the past decade. The gap between the top and bottom quintiles started at $83,800 in 1980, and fluctuated between $79,500 and $84,500 until 1996. By 2005, the gap had reached $105,400.

Average after-tax income in 2005 was $128,200 for the 20% of families with the highest incomes, compared with $22,800 for the 20% with the lowest.

Though all quintiles benefited from the positive economic conditions that prevailed since the early 1990s, families in the top one-fifth gained the most. Since 1996, their average after-tax income rose 24% compared with about 18% for the other quintiles.

Highest 20% of income recipients pay almost 60% of personal income taxes

The 20% of families and unattached individuals who took home the highest amount of after-tax income in 2005 collectively paid almost 60% of all personal income taxes that year, up from 50% in 1980.

This change reflects, in part, increases in their share of total after-tax income and the redistributive nature of Canada's personal income tax systems.

Government transfers and federal-provincial-territorial income tax systems help redistribute income from higher income Canadians to lower income Canadians — hence reducing income inequality.

In 2005, the average market income for families in the highest quintile was 12.8 times higher than those in the lowest quintile. However, once all government transfers are distributed, this ratio fell to 6.9 times higher. After taxes the average income for families in the highest quintile was 5.6 times higher than their counterparts in the lowest.

Low-income rate remained unchanged for most family types

Statistics Canada's low-income rate measures the percentage of families below the low income cut-off (LICO). The LICO is a statistical measure of the income thresholds below which Canadians likely devote a larger share of income than average to the necessities of food, shelter and clothing.

In 2005, an estimated 655,000 Canadian families were below the LICO after taxes, representing 7.4% of all families, a proportion unchanged from 2004. The families in low income faced an average gap of $7,900, which represents the amount of income they required to bring their income above the cut-off.

Female lone-parent families saw a decline in their low income rates, from 36.0% in 2004 to 29.1% in 2005. This reflects an upward trend in market income in recent years driven by higher earnings and a larger proportion of earners.

Although this decline continued a four-year downward trend, the incidence of low income for female lone-parent families remained more than four times as high as that of two-parent family with children.

In 2005, about 3.4 million people were in low income. They accounted for 10.8% of all Canadians in 2005, compared with 11.4% in 2004 and well below the peak of 15.7% in 1996.

In 2005, the low-income rate among seniors remained stable at 6.1%.

An estimated 788,000 children under 18 years of age lived in low-income families in 2005, down from 1.3 million in 1996. About 11.7% of children lived in low-income families in 2005, well below the peak of 18.6% in 1996.

In 2005, 320,000 children, just under one-half of all the children in low-income families, lived in female lone-parent families. The low-income rate of children in female lone-parent families was more than four times higher than that of children living in two-parent families. However the low-income rate for these children fell from 40.4% in 2004 to 33.4% in 2005.

Provinces: Alberta families had highest median income for the second consecutive year

For the second consecutive year, Alberta families with two or more people had the highest median after-tax income.

Alberta families reported a median of $64,700 compared with $61,000 for Ontario families. Both were well above the national median of $56,000.

Incomes in Alberta and Ontario were virtually identical in 2003. Alberta families took the lead in 2004 and saw it increase in 2005.

Quebec families saw a 3.5% increase of their after-tax income to $50,400 in 2005. After-tax income was virtually unchanged in all other provinces. Families in Newfoundland and Labrador had the lowest after-tax income at $43,100.

Available on CANSIM: tables 202-0101 to 202-0107, 202-0201 to 202-0203, 202-0301, 202-0401 to 202-0411, 202-0501, 202-0601 to 202-0605, 202-0701 to 202-0706 and 202-0801 to 202-0807.

Definitions, data sources and methods: survey numbers, including related surveys, 3502 and 3889.

A more detailed report, Income in Canada 2005 (75-202-XWE, free) is available today from the Publications module of our website. This report contains analysis and 15 tables at the Canada and province level. The publication Income Trends in Canada, 2005 (13F0022XIE, $209) and the CD-ROM Income Trends in Canada, 2005 (13F0022XCB, $209), which will soon be available, provide 40 tables at the Canada and province level with some data at the census metropolitan area level.

For more information, or to enquire about concepts, methods or data quality of this release, contact Client Services (toll-free 1-888-297-7355 or 613-951-7355;, Income Statistics Division.

Tables. Table(s).