Income Research Paper Series – Research Paper

    Low-income Dynamics and Determinants under Different Thresholds: New Findings for Canada in 2000 and Beyond

    Low-income Dynamics and Determinants under Different Thresholds:  New Findings for Canada in 2000 and Beyond

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    The existing studies on Canadian low-income dynamics are mainly based on 1990s data from the Longitudinal Administrative Database or the Survey of Labour and Income Dynamics (SLID). These studies typically rely on a single low-income threshold. Our work extends the existing studies beyond 1999 by using SLID data from Panel 3 (1999 to 2004) and Panel 4 (2002 to 2007). We consider all three low-income thresholds established by federal departments: Statistics Canada's low-income cut-off (LICO) and low-income measure (LIM), and the market basket measure (MBM) of Human Resources and Skills Development Canada.

    We find that two-thirds of low-income Canadians and 97% of non-low-income Canadians stay in their respective states from one year to the next, while about one-third of low-income Canadians move out of low income and 3% of non-low-income Canadians move into low income. Women in general are more likely to be in low income for various durations than men are. However, gender does not appear to play a significant role in determining persistent low income after we control for other confounding factors. The overall assessment of low-income dynamics changes little under each of the three low-income thresholds.

    We also find that transitory low income is very much a life cycle phenomenon, with transitory low income being more prominent in certain age groups and among unattached people. Therefore, age and family composition play an important role in transitory low income. These findings are quite robust under all three low-income thresholds and across the two SLID panels.

    While a small percentage of the total population experience persistent low income, we find that large percentages of high-risk groups (such as lone mothers, recent immigrants, members of visible minorities, people with less education and people with activity limitations) suffer more from persistent low income.

    Finally, we find that low-income persistence improved over time for several vulnerable groups, such as women and lone parents. But the overall low-income duration worsened slightly from Panel 3 to Panel 4, no matter which threshold is used.

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