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Stability continued in median after-tax income
Provincial stability continued
After-tax income was also unchanged across quintiles
Year-over-year upward absolute income mobility lessened
Short-term relative mobility lessened but longer-term relative mobility is unchanged
The building blocks of after-tax income also remained stable in 2010
Change in median income taxes for non-senior families
Little change in low income at the national level
Few changes in low income across the provinces
Crossing the low-income lines
This report examines the incomes of families and unattached individuals, as well as low income, income mobility and low-income dynamics in Canada in 2010. It is based on information provided by participants in the Survey of Labour and Income Dynamics (SLID). Because a large portion of SLID participants have provided information for several years, a closer look at how income changes over time is possible.
The pre-1993 data are drawn from the Survey of Consumer Finances (SCF). From 1998 onward, the data are taken from the Survey of Labour and Income Dynamics (SLID). For the 1993-to-1997 period, estimates are based on a combined sample from SCF and SLID.
This release is accompanied by a historical revision for 2006 to 2009. The SLID estimates for 2006 and the years following are now produced on the basis of population counts from the 2006 Census of Population, instead of the 2001 Census. As a result, tables and charts presented in this report which cover 2006 to 2009, as well as all those in the CANSIM 202 series, have been revised for that period. While the actual levels of the estimates have changed in many cases, generally the trends shown by the data remain very similar. Note that survey estimates prior to 2006 were not revised. For more information about the impact of this revision, please refer to the What's new section of the survey documentation.
This report analyzes family income on the basis of medians. The median is the point at which half of all families had higher income and half had lower. All figures in this report are sample survey estimates, unless otherwise stated. All income estimates are expressed in constant 2010 dollars to factor in inflation and enable comparisons across time in real terms.1
While the global financial crisis had far-reaching impacts on the economies of the world, the 2008–2009 recession in Canada was less severe than those of 1981–1982 and 1990–1992 (Cross, 2011b). Despite the decline in global trade flows and drop in corporate incomes and spending, the Canadian economy responded to policy measures in Canada and abroad, and began to stabilize in mid-2009. Additionally, job loss was smaller as employers also lowered their monthly labour inputs by reducing workweeks. SLID provides some insight into how these changes were reflected in Canadians' incomes.
Stability continued in median after-tax income
Median after-tax income2 for Canadian families of two or more persons was $65,500 in 2010, virtually unchanged compared with 2009. This was the third consecutive year without significant change in after-tax income, after a period of growth which began in 2004.
Non-senior families, those where the person with the highest income was younger than 65, had a median after-tax income of $70,700 in 2010, virtually unchanged from 2009. Also unchanged were other family types, although the amounts varied by family type (Figure 1). In 2010, two-parent families with children had a median after-tax income of $78,800; female lone-parent families, $38,700 and senior families, $46,800.
Median after-tax income for unattached individuals also remained unchanged from 2009 to 2010. Non-seniors received $27,500; seniors, $23,400.
Across the provinces, median after-tax income was unchanged for families of two persons or more. Among family types by province, non-senior families in Ontario saw a $2,400 increase to $74,400 in 2010, at least partly explained by increases in government transfers in that province.
Noticeable differences are apparent in median after-tax income of families among the provinces and among selected census metropolitan areas (CMAs), as shown in Figure 2. As in previous years, median after-tax income was significantly higher in Ontario and westward than in Quebec and Atlantic Canada. Since 2004, Alberta has had the highest median after-tax income for economic families with two persons or more—$78,100 in 2010.
At the CMA level, median after-tax income for families living in Ottawa-Gatineau, Toronto, Hamilton, Winnipeg, Regina, Edmonton, Calgary and Victoria was higher than the national median of $65,500.3
Analysis can be done at a finer level by breaking down the population of individuals into five equal-sized groups, or quintiles, from lowest after-tax income to highest after-tax income.4 The average after-tax income did not change significantly in any quintile from 2009 to 2010 (Table 1). It was also the case between 2008 and 2009. In contrast, in 2006 and 2007 all five quintiles posted increases in average income.
1. Indicates significant change from the previous year.
Source: Survey of Labour and Income Dynamics, catalogue no. 75-202-X2010000 (CANSIM Table: 202-0707).
Year-over-year upward absolute income mobility lessened
The previous sections examined and compared annual income statistics: the dynamics or the mobility of individuals' income over time are also worth examining. Since a higher rate of income mobility tends to ease income inequality in the long run and, conversely, a lower rate of income mobility tends to preserve inequality, information on mobility helps us to better understand how income inequality would develop (Fields, 2010).
Income mobility can be gauged in a relative or an absolute manner. Absolute mobility measures the changes in individuals' income over time.5 It tells us how many people experienced an increase in income and how many incurred a decrease. An increase in income represents absolute upward mobility; a decrease represents absolute downward mobility.6
To study income mobility (relative or absolute, downward or upward), data on the income of the same person over at least two time periods are compared. Longitudinal data from SLID make possible the analysis of income mobility.
|Period||Proportion of people whose after-tax income decreased*||Decrease in their average after-tax income||Proportion of people whose after-tax income increased||Increase in their average after-tax income|
* This includes those whose income remained the same both years.
Source: Survey of Labour and Income Dynamics, catalogue no. 75-202-X2010000.
SLID data suggest that year-over-year upward absolute income mobility lessened. Between 2009 and 2010, 52.8% of Canadians experienced an income increase. In comparison, for the time period before the recession (2006-2007), 62.4% of Canadians saw their income increase. From 2009 and 2010, 47.2% of Canadians experienced a decrease in their after-tax income, compared with 37.6% in the 2006-2007 period.
Despite the lessened upward absolute mobility, the magnitude of the upward change in income remained constant. Among those who incurred an increase between 2009 and 2010, average after-tax income rose 18.7% from 2009 to 2010, which is not statistically different from the 19.6% gain observed from 2006 to 2007. In contrast, among those who incurred a decrease, average after-tax income dropped 16.3% from 2009 to 2010, lower than the 18.3% drop in the 2006-2007 period.
While absolute mobility refers to the change in the income of the same person, relative income mobility depends on changes in both the person's income and those of others. It captures the movements of an individual's rank, measured by their quintile in the income distribution, between two periods.7
Shorter-term relative income mobility lessened (Table 3). The 31.0% total relative mobility in the 2009-to-2010 period was lower than in 2008-to-2009 (35.2%), and also lower than the 32.6% mobility observed in 2006-to-2007, prior to the recession.
|Length of period||Period||Quintile||Proportion of persons who moved to a||Total mobility|
|higher quintile||lower quintile|
|Source: Survey of Labour and Income Dynamics, catalogue no. 75-202-X2010000.|
In contrast, longer-term relative income mobility has been stable over time. From 2005 to 2010, 55.9% of individuals moved from one income quintile to another, virtually unchanged from the 1999-to-2004 period.
Between 2009 and 2010, 16.2% of Canadians moved up to a higher income bracket relative to their position a year earlier, while 14.8% moved down.
After-tax income comprises market income, government transfers and income tax. With few exceptions, the stability in median after-tax income discussed in previous sections was a result of the lack of movement in its components (Figure 3).
Market income—comprising earnings, private pensions, income from investments, and other sources—is closely linked to labour market conditions. Despite the employment growth in some sectors,8 median market income for families with two persons or more saw no change from 2009 to 2010 ($64,900). This follows the drop from $66,500 to $64,500 from 2008 to 2009, the first drop since the early nineties.
Among the unattached, median market income was $20,800 in 2010, unchanged from 2009. It was stable for both unattached seniors ($7,700 in 2010) and non-seniors ($27,400).
The median amount of government transfers9 received by Canadian families and unattached individuals did not change from 2009 to 2010. Families received a median amount of $6,500 and the unattached received a median of $1,800.
The median amount of government transfers received by different family types varied widely (Figure 4). For non-senior Canadian families, median government transfers were $4,000 in 2010, up $300 from 2009. For senior families, the median was unchanged at $25,300.
Among the unattached, those under 65 saw a $200 increase in median transfers to $600; the median for unattached seniors was unchanged at $16,000.
In 2010, almost 20 million persons aged 16 and over received some form of government transfers, up 11.7% from 2009. This increase was driven by non-seniors: the number of non-senior recipients grew 14.5%; the number of senior recipients, 3.1%.
This increase for non-seniors coincides with the introduction of a new program in Ontario in 2010. Ontario Sales Tax Transition Benefit payments were made in June and December 2010 to 6.6 million families and single people (Government of Ontario, 2010). Non-senior families in Ontario saw a $700 increase in government transfers to $4,000 in 2010; the unattached non-seniors saw an increase of $300 to $800. Among Ontario seniors, median transfers were unchanged in 2010—$26,000 for families and $16,600 for the unattached.
In Nova Scotia, among all family types (including both families of two or more and the unattached), the median transfers received increased by $900 to $7,000 in 2010. This may be, in part, due to new provincial programs introduced in Nova Scotia in 2010.10
Change in median income taxes for non-senior families
Among families of two persons or more, the median income tax paid in 2010 was $8,200, unchanged from 2009 (Figure 5). However, non-senior families saw an increase. The median amount of income taxes paid by these families rose from $9,700 in 2009 to $10,000 in 2010. An estimated 4.6 million owner-occupied households were eligible to claim the Home Renovation Tax Credit in 2009 (Department of Finance, 2010), but in 2010 the program was no longer available. This may be related to the subsequent increase in median income tax paid in 2010.
Little change in low income at the national level
For a fuller picture of low income,11 this report uses two low-income indices—incidence and gap ratio12 —and three complementary low-income lines: Statistics Canada's Low Income Cut-off (LICO), Low Income Measure (LIM) as well as the Market Basket Measure (MBM) developed by Human Resources and Skills Development Canada (HRSDC).13,14While each looks at low income from a different angle, they give a generally consistent picture of low income over time. No one measure is best: each has its strengths and weaknesses in the study of low income (Zhang, 2010). Indeed, a detailed and exhaustive examination of low income using all lines and all indices over the 1976-to-2009 period has been produced (Murphy et al., 2012). To better understand low income, one should examine all lines in parallel, but a simplified approach is used throughout the next sections.15
According to the after-tax LICO, or LICO-AT, 3 million Canadians lived in low income in 2010, virtually the same number as in 2009, accounting for 9.0% of the population (Figure 6). This was the third consecutive year of stability after the generally downward trend that began in the mid-1990s. Also unchanged was the average gap ratio at 33% in 2010.
A longer perspective: fewer Canadians were living in low income in 2010 than in 2000 (9.0% versus 12.5%).16
About 546,000 or 8.1% of children younger than 18 lived in low-income families in 2010. For those children in low-income families, the average gap ratio was 25%. While both of these indices were unchanged from 2009, the incidence declined from 2000, when 13.8% of children lived in low-income families.17 However, the average gap ratio was unchanged between these two years.
In 2010, 187,000, or 21.8%, of children living in female lone-parent families were in low income. This was unchanged from 2009 but markedly lower than the 40.1% in 2000.18 For those in low income, the average gap ratio was 25% in 2010.
Among children living in two-parent families, the incidence of low income was 5.7% in 2010, down from 7.3% in 2009 and 9.5% in 2000.19 The average gap ratio for those in low income was 23% in 2010.
In 2010, 1.7% of seniors living in families were below the LICO-AT; for those in low income, the average gap ratio was 38%. Among seniors living in families, the incidence has remained low—for most of the past 20 years, it has been below 3%. Indeed, the incidence and the average gap ratio in 2010 were unchanged compared to 2000.20
About 1.3 million unattached individuals, or 26.9%, had income below the LICO-AT in 2010, virtually unchanged from 2009. As in 2009, low income unattached individuals had an average gap ratio of 39%, compared with 33% in 2000.
Among unattached persons under 65 years old, 31.3% lived in low income in 2010, twice that of unattached seniors (14.3%). Unattached persons under 65 in low income had, on average, after-tax income 44% lower than their low income cut-off, compared with 13% for unattached seniors. These two groups of the unattached saw no change in the incidence or average gap ratio from 2009 to 2010.21 However, both saw lower incidences than in 2000—37.3% for non-senior unattached and 20.6% for senior unattached a decade ago.22 Additionally, the average gap ratio for unattached seniors was lower in 2010 than the 16% posted in 2000.23
In 9 of 10 provinces, the incidence of low income, measured by the MBM, was unchanged from 2009 to 2010 (Figures 7a and 7b). The exception was Alberta, where the incidence of low income declined from 10.1% in 2009 to 8.4% in 2010. Additionally, persons living in low income saw a change in the average gap ratio in only two provinces (Figure 8). In Manitoba, those living in low income had a MBM-disposable income 33% lower than their MBM threshold compared with 27% in 2009. In Alberta, the MBM-disposable income for persons living in low income was, on average, 31% lower than their MBM thresholds compared with 38% in 2009.24
While incidences using the MBM for almost all provinces showed no statistically significant change from 2009 to 2010, the 2010 incidences were, in some provinces, lower than at the start of the decade.
In Newfoundland and Labrador, 11.6% of persons lived in low income in 2010, as defined by the MBM, compared with 20.5% in 2000.25In the other Atlantic provinces, incidences of low income were unchanged when comparing 2000 to 2010: Prince Edward Island at 11.7%, Nova Scotia at 12.8%, and New Brunswick at 12.0%.26In Quebec, the 2010 incidence was 9.4%, lower than the 11.6% seen at the beginning of the decade.27
Ontario and Manitoba saw no significant change in the incidence of low income between 2000 and 2010 as measured by the MBM: Ontario's was 9.5%, Manitoba's, 8.7% in 2010.28
Saskatchewan's incidence of low income, measured by the MBM, was lower at the end of the decade, 8.8%, than at the beginning, 13.2%.29 The incidence in Alberta was also lower in 2010 than 2000—8.4% and 11.0%, respectively.30 This was also the case in British Columbia where, in 2010, 12.4% of persons lived in low income, compared with 16.8% in 2000.31
Despite some decreases in the incidence of low income as defined by the MBM, the average gap ratio in almost all provinces remained stable in 2010 compared to 2000: Prince Edward Island being the only exception. While the proportion living in low income remained stable when comparing 2000 and 2010, those in low income in PEI had MBM-disposable income on average 22% lower than their MBM threshold, down from 30% in 2000.
Family income can change from one year to the next for many reasons. Family members may change their labour market involvement: they may start or end a job, or change the number of hours they work. They may get a promotion or lose their job. Additionally, changes to the composition of the family, such as a birth, death or separation, may change the resources available or the number of persons sharing the resources. A family may move to a larger city, which may affect the threshold that their income is compared with. For these and other reasons, individuals may move into or out of low income. SLID's longitudinal nature enables observation of such patterns.
Individuals follow one of four transitions between two adjacent years.32 The rate at which they enter into low income (the 'entry rate') is the proportion of people who fell into low income in a year as a share of those who were not in low income the previous year. The 'exit rate' measures the proportion of individuals who exit low income as a share of those who were in low income the previous year. The 'immobility rate' measures those who were in low income in both years as a share of those who were in low income the first year. The 'resistance rate' measures the proportion of the population who remained out of low income in both years as a share of those who were not in low income the first year (Murphy et al, 2012).
Comparing the transitions from 2009 to 2010 and those from 2008 to 2009, none of the four transition rates showed significant change (Figure 9).33 However, when comparing across the full time period available in SLID, the entry rate was lower in 2010 (2.9%) than in the mid-1990s (about 5%). Since the late 1990s, about one-third of people who were in low income based on the LICO-AT were able to exit from low income the following year.
Besides the year-to-year transitions, SLID enables examination of low income on a longer-term basis. Individuals can be categorized by the number of years they experienced low income during a six-year period.
|Period||In low income ...|
|0 years||1 year||2 to 5 years||all 6 years||at least 1 year||at least 4 years|
1. Indicates significant change from 2005/2010.
Source: Survey of Labour and Income Dynamics, catalogue no. 75-202-X2010000 (CANSIM Table: 202-0807).
Over six-years, low income is largely transitory: 82.7% of individuals remained out of low income in all years from 2005 to 2010, and 17.3% experienced low income in at least one of the six years (Table 4). Fewer, 4.1%, were in low income for at least four of the six years and even fewer, 1.5%, were persistently in low income in all years from 2005 to 2010.
Comparing the period 2005 to 2010 to the period 1993 to 1998, a higher proportion remained out of low income for all six years (82.7% and 75.5% respectively). Fewer were in low income in at least four of the six years and in all six years.
Chen, Wen-Hao. 2009. "Cross-national Differences in Income Mobility: Evidence from Canada, the United States, Great Britain and Germany." Review of Income and Wealth. Series 55, no 1.
Cross, Philip. 2011a. "2010 in review". Canadian Economic Observer, 11-010-X. Vol 24, no. 4. http://www.statcan.gc.ca/pub/11-010-x/2011004/part-partie3-eng.htm
Cross, Philip. 2011b. "How did the 2008-2010 recession and recovery compare with previous cycles?" Canadian Economic Observer, 11-010-X. Vol 24, no. 1. http://www.statcan.gc.ca/pub/11-010-x/2011001/part-partie3-eng.htm
Department of Finance. "Archived – Tax expenditures and evaluations 2010". http://www.fin.gc.ca/taxexp-depfisc/2010/taxexp1001-eng.asp#tocpart1-01 (accessed April 25, 2012).
Fields, Gary. 2006. "The Many Facets of Economic Mobility". ILR School Articles & Chapter, Paper 230, Cornell University, Ithaca, NY.
Fields, Gary. 2010. "Does income mobility equalize longer-term incomes? New measures of an old concept". Journal of Economic Inequality. Vol 8. No 4.
Government of Ontario. 2010. "2010 Ontario Budget: Budget Papers". http://www.fin.gov.on.ca/en/budget/ontariobudgets/2010/papers_all.pdf
Hatfield, Michael, Wendy Pyper and Burton Gustajtis. 2010. "First Comprehensive Review of the Market Basket Measure of Low Income". Applied Research Branch paper. Human Resources and Skills Development Canada. Summer. http://publications.gc.ca/site/eng/372293/publication.html
Murphy, Brian, Xuelin Zhang and Claude Dionne. 2012. "Low Income in Canada: a Multi-line and Multi-index Perspective". Income Research Paper Series. 75F0002MIE. http://www.statcan.gc.ca/pub/75f0002m/75f0002m2012001-eng.pdf
Organisation for Economic Co-operation and Development. 2008. "Growing Unequal? Income Distribution and Poverty in OECD Countries". http://www.oecd.org/document/53/0,3343,en_2649_33933_41460917_1_1_1_1,00.html
Statistics Canada. 2012. "Low Income Lines, 2010–2011". Income Research Paper Series. 75F0002MIE http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=75F0002M&chropg=1&lang=eng
Zhang, Xuelin. 2010. "Low Income Measurement in Canada: What Do Different Lines and Indexes Tell Us?" Statistics Canada. Income Research Paper Series 75F0002MIE
1. Throughout Income in Canada, differences between estimates are reported only where they are statistically significant at the 95% confidence interval.
2. After-tax income is calculated as follows: market income (earnings, investments, private pensions, other income) plus government transfers less income taxes. After-tax income is used throughout much of this analysis because it reflects income redistribution through transfers and taxes.
3. Only CMAs with a population of at least 175,000 persons and a survey sample of at least 300 economic families are included in this analysis.
4. This section examines income at the person level, where individuals are represented by their adjusted after-tax household income. This adjustment yields indicators that reflect after-tax income defined on a per-person basis. The adjusted income is calculated by dividing the household income by the square root of the household size. This adjustment takes into account the economies of scale present in larger households. It also enables the combining of families and unattached individuals for analysis.
5. Mobility is examined at the person level, where individuals are represented by their adjusted after-tax household income in 2010 constant dollars (see Note 4).
6. The absolute mobility is measured as follows: an increase in income occurs when the income of the second year is higher than the income of the first year; a decrease occurs when an income is smaller or equal to the income of the first year. Incomes are exactly equal in both years on very few occasions.
7. Researchers have proposed several complex mobility indexes, but have not agreed on the interpretations of these indexes (Fields, 2006). We focus on the transition matrix approach, in which, for each year, we divided the population into five quintiles according to their adjusted household after-tax income. We then estimated how many individuals moved to higher quintiles, how many moved to lower quintiles and how many stayed in the same quintile in both years. The estimates are referred to as the relative upward mobility, downward mobility and immobility, respectively. Total relative mobility is the sum of the upward and downward mobility, or one minus the immobility.
8. Services, professional and related services, trade, accommodation and food, finance and real estate and government services (Cross, 2011a).
9. Government transfers are programs such as Employment Insurance, the Canada Pension Plan and Quebec Pension Plan, Old Age Security, Guaranteed Income Supplement, Social Assistance, Canada Child Tax Benefit and various provincial programs.
10. The programs were the Nova Scotia Affordable Living Tax Credit and the Nova Scotia Poverty Reduction Tax Credit.
11. Low-income statistics are reported at the individual level, where individuals are represented by their family income (for the LICO and the MBM) or household income (for the LIM). In this way, the statistics are not distorted by variations in the size of families in the various groups of interest. For example, instead of talking about the incidence of low income in lone-parent families, we talk about the incidence of low income among individuals who live in lone-parent families.
12. For individuals in low income, the gap ratio is the difference between their family income (for the LICO and the MBM) or household income (for the LIM) and their low-income threshold, expressed as a percentage of that threshold. For example, if a family had an income of $20,000 and their threshold was $25,000, their gap ratio would be (25,000-20,000)/25,000 or 20%.
13. The LICOs represent income thresholds below which a family would likely devote a larger share of its income to necessities (food, clothing and shelter) than an average family would. The LIM is defined as a fixed percentage, 50%, of the median income of all individuals. Each individual's income is represented by their 'adjusted' household income. The adjustment is made to reflect the fact that household needs increase based on their size. The MBM is an estimate of the cost of a specific basket of goods and services representing a modest, basic standard of living defined at a sub-provincial level. This cost is then compared with disposable income to determine if families are in low income. See Statistics Canada (2012) for a detailed description of how these lines are defined.
14. The shelter component of the MBM is being reviewed by HRSDC.
15. The approach used in this analysis is as follows: For the national picture, the primary threshold utilized is the LICO-AT. When examining the provincial picture, the primary threshold utilized is the MBM. In these two sections, results using the primary threshold are reported in the text, with changes over time mentioned if they are statistically significant. If the changes in the indices are also significant using other thresholds, this is reported in footnotes.
16. Using the MBM, the incidence declined from 11.9% in 2000 to 9.9% in 2010.
17. Using the MBM, the incidence declined from 14.0% in 2000 to 9.9% in 2010.
18. Using the MBM, the incidence declined from 40.4% in 2000 to 27.3% in 2010.
19. Using the MBM, the incidence declined from 9.7% in 2000 and 8.7% in 2009 to 6.9% in 2010.
20 The exception to this was the incidence using the LIM-AT. Measured against this threshold, the incidence increased from 3.1% in 2000 to 6.5% in 2010.
21. This holds for all three low-income thresholds.
22. The incidence for the unattached seniors was higher in 2010 than in 2000 when using the LIM—27.2% and 18.2% respectively.
23. For those whose disposable income was lower than the MBM, their income averaged 19% lower than their cut-off in 2000, compared to 13% in 2010.
24. Using the LICO-AT, it was 33% (39% in 2009) and using the LIM, it was 29% (38% in 2009).
25. All low income lines show declines in the incidence of low income—using the LICO-AT, the incidence fell to 6.5% in 2010 from 13.2% in 2000; using the LIM, the incidence decreased to 14.4% in 2010 from 21.4% in 2000.
26. When using the LICO-AT, all four Atlantic provinces saw decreases in the incidence when comparing 2000 to 2010.
27. There was also a decline using LICO-AT to 10.0% from 14.8% in 2000.
28. In Ontario, both the LICO-AT and LIM showed change when comparing 2000 and 2010. Using the LICO-AT, the incidence was 10.8% in 2000 and 8.8% in 2010. Using the LIM, it was 10.1% in 2000 and 12.3% in 2010. This is the only case (province and low-income line) where the incidence was higher in 2010 than 2000. In Manitoba, the incidence using the LICO-AT declined from 13.4% in 2000 to 9.2% in 2010.
29. Declines were seen using the LICO-AT and the LIM (10.9% in 2000 to 6.4% in 2010 and 16.8% in 2000 to 11.9% in 2010 respectively).
30. The LICO-AT also showed a lower incidence in 2010 than in 2000 (6.8% and 11.1% respectively).
31. A similar decline was seen using the LICO-AT (11.5% in 2010 from 15.1% in 2000).
32. The four types of transitions are calculated differently from what had been presented in previous editions of Income in Canada. See (Murphy et al., 2012) for more details.
33. Using the MBM and disposable income, the entry rate declined from 4.3% in 2008/2009 to 3.4% in 2009/2010. This in turn meant the resistance rate increased accordingly.