Income Research Paper Series – Research Paper
Low Income Lines, 2008-2009
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Statistics Canada has a long history of publishing data on the low income of Canadians. The low income cut-offs (LICOs) were first published in 1967 as part of the 1961 Census monograph series and are by far Statistics Canada's most established and widely recognized approach to estimating low-income cut-offs. LICOs are income thresholds below which families devote a larger share of income to the necessities of food, shelter and clothing than the average family would.
Following the practice of many international organizations, Statistics Canada began to publish before- and after-tax low income measures (LIMs) in 1991. LIMs are particularly convenient for making international comparisons, since estimating the cut-offs requires only data on household1 incomes within a country. As such, they require no adjustments using exchange rates or purchasing power parity indexes as would be necessary to make meaningful comparisons of absolute levels of income between countries.
The Market Basket Measure (MBM) was developed by Human Resources Development Canada (HRSDC) to represent a standard of living that is a compromise between subsistence and social inclusion that reflects differences in living costs across the country (HRSDC, 2010). The thresholds are produced for a reference family of two adults and two children for all sizes of area of residence in each province and for several cities. While HRSDC is responsible for defining the components of the basket and the related concepts, Statistics Canada is responsible for the costing the components and producing low income statistics.
Media, researchers and policy-makers interested in measures of low income are typically concerned with the extent to which individuals in the population are living in poverty. Unfortunately, defining poverty is far from straightforward. The underlying difficulty is that poverty is a question of social consensus, defined for a given point in time and in the context of a given country. Decisions on what defines poverty are subjective and ultimately arbitrary2. Given this, Statistics Canada has always referred to the low income lines as indicators of the extent to which some Canadians are less well-off than others based solely on income and as such, are low income and not poverty measures.
Other statistical organizations are also sensitive to the use of the word 'poverty'. Eurostat refers to its measure (similar to the LIM) as an 'at risk of poverty' measure. In the United States, where an official poverty measure exists, the poverty rates are qualified as being calculated according to a specified definition, allowing that other measures are possible.
The purpose of this document is to provide the dollar cut-offs used to define the low income population. Low income status is determined using family or household income. The family concept used is the economic family, that is, all persons living in the same dwelling and related by blood, marriage, common-law relationship or adoption. A household is defined as a person or group of persons residing in a dwelling.
- Previously, LIMs were calculated at the economic family level. Beginning with this release, LIMs are calculated at the household level to meet the international standard.
- Refer to 'On poverty and Low income' (Fellegi) and 'Describing the Distribution of Income: Guidelines for Effective Analysis' (Skuterud, Frenette, and Poon) for a more detailed discussion on poverty and low income.