Income Research Paper Series
An update on the Market Basket Measure comprehensive review

Summary

From September 2018 through April 2019, Statistics Canada conducted a broad consultation on the Market Basket Measure. The consultation objectives were to gather input on the development of an update to the Market Basket Measure. This paper will describe the consultations that took place, give highlights of what Statistics Canada heard, and describe next steps.^Note 

Introduction

On August 21, 2018, the Government of Canada released Opportunity for All, Canada’s First Poverty Reduction Strategy (Employment and Social Development Canada, 2018), which contained long-term commitments to guide current and future government actions and investments to reduce poverty, including:

• Establishing the Market Basket Measure, or MBM (Statistics Canada, 2016) as Canada’s Official Poverty Line
• Introducing poverty reduction targets using a baseline of 2015
  • Reduce the rate of poverty by 20% by 2020, and
  • Reduce the rate of poverty by 50% by 2030 (aligned with United Nations Sustainable Development Goals).
• Creating a National Advisory Council on Poverty
• A Data and Measurement Plan, which includes ongoing funding to develop and improve data to measure poverty and to inform policy decisions.

The Poverty Reduction Act included in the Budget Implementation Act I, 2019 (Bill C-97), legislates the commitments made in the Strategy. In addition, the Poverty Reduction Act mandates Statistics Canada to review the MBM on a regular basis “to ensure that it reflects the up-to-date cost of a basket of goods and services representing a modest, basic standard of living in Canada”. Accordingly, in 2018, Statistics Canada launched a comprehensive review of the Market Basket Measure, which will be completed in 2020.

During the course of this comprehensive review, Statistics Canada has consulted with Canadians, and federal, provincial, and territorial government officials, and worked jointly with Employment and Social Development Canada (ESDC) — the department responsible for the Poverty Reduction Strategy. This document describes the activities and results to date of the comprehensive review and discusses the work that lies ahead.

What is the Market Basket Measure, and what is the comprehensive review?

The Market Basket Measure (MBM) of low income develops thresholds of poverty based upon the cost of a basket of food, clothing, shelter, transportation, and other items for individuals and families representing a modest, basic standard of living (see Snapshot of the Market Basket Measure).

A family with disposable income less than the poverty threshold appropriate for their family’s size and region would be living in poverty. Disposable income is total income (including government transfers) after deducting not only income taxes but also several non-discretionary expenditures. These expenditures are Employment Insurance, Canada Pension Plan, Quebec Pension Plan and Registered Pension Plan contributions, union dues, child care expenses, support payments paid, public health insurance premiums and direct medical expenses including private insurance premiums. Disposable income is also adjusted for mortgage-free owners, as explained below.

Currently, the MBM offers poverty thresholds for 50 regions across the country, including 19 specific communities. What represents a modest, basic standard of living can change over time, so it was determined that the MBM methodology should be updated regularly, with every 5-years being a possible frequency.

Updates or “rebasings” of the measure are conducted following a comprehensive review and, where necessary, methodological changes are also made. At these times, the basket contents can also be adjusted to reflect contemporary circumstances. The MBM was last updated in 2008-2010 through “the first comprehensive review” (Hatfield, Pyper and Gustajtis. (2010)).

During that review, several aspects of the basket were changed. For example, the food and clothing baskets were updated to more contemporary standards, the transportation component was modified to allow for more transit passes per family, and a component was added to place mortgage-free homeowners, who have lower shelter costs than other families, on a more-comparable footing. This new methodology became the standard for the MBM through to the present.

The objective of the current comprehensive review is to update the MBM methodology, targeting 2018 as a new base year. As with the previous review, the current comprehensive review will ask what basket contents would need to be adjusted to reflect contemporary circumstances, what methodological adjustments should be made at this time, and what are the areas requiring further research.

This approach of anchoring the MBM to specific base years, yet updating it regularly to reflect changes in standards of living, is an underlying strength of the MBM. Trends in economic well-being are compared to a fixed, real living standard, yet the standard is updated from time to time so that, over time, it remains relevant.

The MBM consultation process

Over the past year, Statistics Canada undertook public consultations as part of the MBM review. These consultations consisted of three major components:

1. Talking with people with lived experiences of poverty
2. Reaching out to Canadians for their input
3. Connecting with NGOs, Academics, and Federal stakeholders and Provinces and Territories

Through these consultations, there was significant participation by Canadians, who brought forward their ideas about the MBM and poverty measurement in Canada.

Talking to people with lived experiences of poverty

From September to November 2018, Statistics Canada conducted 21 focus groups and 188 one-on-one interviews with participants in all provinces and territories to explore what Canadians living in low-income or poverty situations considered to be the necessary items in a basic basket of goods and services. These focus groups and interviews gathered information directly from people struggling to make ends meet on the main items represented by the MBM.

Speaking directly with these individuals provided valuable insight into the day-to-day lives of Canadians at risk of poverty. We heard from Canadians who were not able to buy the type and quantity of food they wanted. We heard directly from Canadians at-risk of poverty about their transportation needs, their living conditions and daily struggles. The messages were diverse – and different points of view were often expressed on the importance of things like having access to the internet or having private transportation. What they shared in common were their views on the importance of living a life with dignity, having opportunity to improve their circumstances, and having the resilience to handle difficult situations.

Reaching out to Canadians for their input

To offer all Canadians an opportunity to provide feedback to the MBM comprehensive review, Statistics Canada launched a voluntary anonymous survey on its website (Statistics Canada, 2018a). This survey was widely promoted through Statistics Canada’s Twitter account, through Reddit, and through extensive mail-outs using a mailing list of NGOs, other stakeholders and persons interested in poverty reduction.

The objective of this survey was to gather information to help direct Statistics Canada in its comprehensive review. The first part of the questionnaire asked participants if the existing 2008-base MBM thresholds for their family size and region were “too high, too low, or about right”. That is, were they still satisfactory in the context of 2018, and did they continue to reflect a modest, basic standard of living. Next, participants were asked several questions specific to life in 2018 which may be different than it was in 2008, such as the importance of information technology and public transit. Finally, the questionnaire added a comment box, where participants could share their thoughts.

Launched on October 9th, 2018 with an expectation of 1,500 responses, the questionnaire quickly surpassed its target, and in the end, received 9,666 responses by its planned closing date of January 31, 2019 (including 66 participants from the three territories who received a shorter questionnaire since no MBM thresholds presently exist in these regions). Most questionnaires were fully completed, and more than half of respondents chose to write a comment in the comment box.

Connecting with NGOs, Academics, and Federal, Provincial and Territorial Stakeholders

As part of the Comprehensive Review for the Market Basket Measure (MBM), and the development of a new 2018 base, a consultation workshop was held with government officials from the Provinces and Territories on October 29-30, 2018. A second workshop was held on November 19-20, 2018 with representatives from the academic community and from non-government organizations across the country. Discussions were held with federal departments on an ongoing basis throughout the process.

These discussions went into great depth on the methodology of the MBM. The discussions focussed on different ways the MBM could be measured, and what the concepts of “basic” and “modest” standards of living mean to Canadians. Statistical elements such as equivalence scales and the use of multipliers to capture different costs of living were also discussed.

There was discussion around items such as “how are child care expenses recognised in the MBM?”, “how are medical expenses recognised?”, and “is there recognition for the needs of persons with disabilities?” In addition, representatives from the three territories participated and shared their perspectives on what an MBM could look like for these regions of Canada.

As part of the Comprehensive Review for the Market Basket Measure (MBM), and the development of a new 2018 base, a consultation workshop was held with representatives of the Provinces and Territories on October 29-30, 2018. A second workshop was held on November 19-20, 2018 with representatives from the academic community and from non-government organizations across the country. Discussions were held with federal departments on an ongoing basis throughout the process.

These discussions went into great depth on the methodology of the MBM. The discussions focussed on different ways the MBM could be measured, and what the concepts of “basic” and “modest” standards of living mean to Canadians. Statistical elements such as equivalence scales and the use of multipliers to capture different costs of living were also discussed.

There was discussion around items such as “how are child care expenses recognised in the MBM?”, “how are medical expenses recognised?”, and “is there recognition for the needs of persons with disabilities?” In addition, representatives from the three territories participated and shared their perspectives on what an MBM could look like for these regions of Canada.

The MBM is meant to represent a modest, basic standard of living, and as a result, needs to be updated from time to time to make sure it continues to reflect contemporary standards. Major changes to the measure must not be taken lightly, and each must be studied in detail before the change is introduced.

During our consultations, we heard from many Canadians – everyday people and experts alike – about certain areas of the MBM they would like to see Statistics Canada study. Some of the items are more complex than others, and they need more study before they can be adopted. These are important questions which would form the basis for a forward-looking research agenda to help prepare for the next MBM rebasing exercise (see text box – A forward looking research agenda.).