Market Basket Measure 2018-base
Report on the second comprehensive review of the Market Basket Measure

by Samir Djidel, Burton Gustajtis, Andrew Heisz, Keith Lam, Isabelle Marchand and Sarah McDermott

Release date: February 24, 2020

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The second comprehensive review of the Market Basket Measure of low income

Statistics Canada and Employment and Social Development Canada (ESDC) have been conducting a comprehensive review of the Market Basket Measure (MBM) to ensure that the basket continues to reflect a modest, basic standard of living, that the costs of the contents of the basket in different geographical regions are estimated as precisely as possible, and that the income available to families to purchase the basket is appropriately defined and measured. The re-based MBM – referred to as the “2018-base MBM” – updates the existing 2008-base MBM developed between 2008 and 2010. This discussion paper is the final in a series of four papers which report on the progress of the review.

The purpose of this paper is to foster engagement with users, to explain what has been done as part of the review and to provide users with preliminary estimates of the impacts of the proposed changes to the MBM. This gives users the opportunity to ask questions, provide feedback and make suggestions for future work.

This discussion paper describes the proposed changes to be made to the MBM as part of the current review, as well as identifying research to be conducted in preparation for the next comprehensive review. The paper presents the preliminary 2018-base thresholds and poverty rates for reference years 2015 to 2018, and compares these to the 2008-base results.

Release of this discussion paper will be followed by a period during which Statistics Canada and ESDC will engage experts, stakeholders, federal, provincial and territorial officials, and other interested parties to validate the results. Transition to the MBM 2018-base will take effect at the end of June 2020.

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 MBM 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 received Royal Assent in June 2019 and legislates commitments made in the Strategy including entrenching the MBM as Canada’s Official Poverty Line.

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.” In 2018, Statistics Canada launched a comprehensive review of the MBM, which will be completed in 2020.

To date, the comprehensive review has consisted of several related activities. From September 2018 through April 2019, Statistics Canada with the participation of Employment and Social Development Canada (ESDC) conducted broad consultations with Canadians, poverty experts, other stakeholders and officials from provincial, territorial and federal governments, which were summarised in An update on the Market Basket Measure comprehensive review (Heisz, 2019).

Next, in the spring of 2019, Statistics Canada and ESDC prepared a work plan to test various methodological changes to the MBM arising from the comments received during the consultations. This work went through the summer and fall of 2019. The process has been collaborative, with Statistics Canada responsible for launching and conducting the comprehensive review and for the statistical methodology of the MBM, and with ESDC responsible for setting the scope of the comprehensive review and for the policy direction of the MBM.

Currently, the MBM offers poverty thresholds for 50 regions across the provinces: 19 specific communities (referred to as urban MBM regions) and 31 population centre size and province combinations. Proposed changes to the MBM methodology have been presented in two discussion papers released in December 2019. The MBM basket was the subject of Towards an update of the Market Basket Measure (Djidel et al., 2019a) discussion paper and the disposable income concept was the subject of the Defining disposable income in the Market Basket Measure (Djidel et al., 2019b) discussion paper.

As indicated in An update on the Market Basket Measure comprehensive review, Statistics Canada is also working with the Northwest Territories, Yukon and Nunavut to develop territory-specific MBM thresholds for these regions. In addition, Opportunity for All announced a commitment to consult with Indigenous peoples to identify and co-develop indicators of poverty and well-being, including non-income-based measures of poverty, that reflect the multiple dimensions of poverty and well-being experienced by First Nations, Inuit and Métis. That discussion is proceeding independently from this comprehensive review.

This document is the final in the series of four discussion papers describing the progress of the MBM review. It reports on the quantitative impacts of the proposed changes outlined in the previous discussion papers, and presents the updated thresholds and related poverty statistics for the 2015 to 2018 period as measured using the proposed 2018-base MBM. As mentioned previously, the purpose of this paper is to foster engagement with users, to explain what is being proposed to update the MBM measure, and to provide users with preliminary estimates of the impacts of the proposed changes. This gives users the opportunity to ask questions, provide feedback and make suggestions for future work. Release of this discussion paper will be followed by a period during which Statistics Canada and ESDC will engage experts, stakeholders, and federal, provincial and territorial officials and other interested parties to validate the results. Transition to the new MBM will be effective at the end of June 2020.

While this paper focusses on results, the three preceding discussion papers provided additional detail, rationale, background and context for the various proposals to update the MBM methodology. Therefore, it is recommended that readers refer to the previous three discussion papers along with this document for a more complete understanding of the comprehensive review.

Discussion papers reporting on the comprehensive review

This study represents the last of four discussion papers which were released as part of the comprehensive review. Other papers in the series include:

July 2019: An update on the Market Basket Measure comprehensive review

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 discussion paper describes the consultations that took place, gives highlights of what Statistics Canada heard, and describes next steps.

December 2019: Towards an update of the Market Basket

The Market Basket Measure basket is comprised of five major components: food, clothing, transportation, shelter and other necessities. This discussion paper describes considerations for updating these five components and the changes to the methodology for calculating these five components.

December 2019: Defining disposable income in the Market Basket Measure

According to the MBM, a family is in low income if its disposable income is less than the Market Basket Measure threshold for a family of its size in its region. This discussion paper describes some of the considerations for updating the disposable income concept for the new MBM.

In the tables and analysis which follow, the current MBM methodology, which was last updated between 2008 and 2010 is referred to as the “2008-base MBM”, while the new, proposed methodology is referred to as the “2018-base MBM”.

This discussion paper will proceed as follows:

Summarize proposed changes to the MBM;
Compare the 2008-base MBM thresholds and poverty rates to preliminary estimates of thresholds and poverty rates derived using the 2018-base MBM, and;
Discuss the forward-looking research agenda.

Additional analysis and background tables using the provisional 2018-base MBM estimates can be found in the appendices.

Summary of proposed changes to the MBM

The MBM establishes poverty thresholds based on the cost of a basket of food, clothing, shelter, transportation and other necessities. Families with disposable income less than the applicable thresholds, given family size and region of residence, are deemed to be in poverty. The following are the proposed changes to the MBM methodology as part of the 2018-base MBM. More detail on these proposals is provided in the previous discussion papers as well as in the appendices.

Proposed changes to the MBM basket components (described in Towards an update of the Market Basket)

MBM regions

Population growth announced in the 2016 Census would result in the following three new population centre size regions: Newfoundland and Labrador - 30,000 to 99,999; Ontario - 500,000+; and Manitoba - 30,000 to 99,999. The addition of these three regions would bring the total number of MBM regions to 53.

Shelter component

The MBM shelter component of the proposed 2018-base MBM would be based upon the rental of a 3-bedroom dwelling, rather than a 2- or 3-bedroom dwelling as was the case with the 2008-base MBM. In addition, the rental prices for a dwelling would be updated using the results of the 2016 Census.

Clothing component

The clothing component would be updated to reflect the Social Planning Council of Winnipeg and Winnipeg Harvest Acceptable Living Level (ALL) 2012 clothing basket for a family of four.

Food component

The food component would be updated to use Heath Canada’s 2019 National Nutritious Food Basket (NNFB).

Transportation component

The transportation methodology would be changed to better reflect transportation consumption patterns and needs of people living in cities, especially those who require private transportation to get to work. According to the 2016 Census, some lower-earning families drive to work while others use public transit. The proposed 2018-base MBM would recognize this reality by accounting for both modes of transportation in the pricing of the transportation component in cities.

Other component

An amount would be added to the “other expenses” component to reflect the widespread need for cellular telephone services.

Proposed changes to the MBM disposable income component (described in Defining disposable income in the Market Basket Measure)

Tenure Type Adjustment

To recognize the lower shelter costs faced by homeowners without a mortgage, the 2008-base MBM made an adjustment to disposable income, which was called the Mortgage-Free Advantage (MFA). The MFA added the difference between the cost of the shelter component of the MBM basket (based on renters) and the typical shelter costs for mortgage-free homeowners, to the disposable income of mortgage free homeowners, placing homeowners without a mortgage on a more equal footing with renters in regards to their shelter costs, when evaluating their poverty status.

For the 2018-base MBM, it is proposed that the MFA concept be extended to homeowners with a mortgage and subsidized renters; thereby, putting all families’ shelter costs on a more equal footing when determining poverty estimates, regardless of their tenure type. This new concept would be referred to as the Tenure Type Adjustment (TTA).

Medical expenses

The amounts used to account for out-of-pocket medical expenses, when no tax information is available, would be updated to use more recent survey data.

Capital Gains

The 2008-base MBM does not include the values of capital gains or losses in disposable income, but it does deduct out of disposable income the taxes paid on capital gains. To address this inconsistency, capital gains taxes would no longer be deducted from pre-tax income in the proposed 2018-base MBM. This would prevent families with large capital gains (and therefore large capital gains taxes) from appearing to be in poverty.

2018-base MBM thresholds and poverty rates compared to 2008-base MBM thresholds and poverty rates

In this section we describe the effect that adopting this set of proposed changes would have on the measures of poverty. To reiterate, the rebased poverty measure is referred to as the “2018-base MBM”, while the existing measure is referred to as the “2008-base MBM”. Also, as previously mentioned in this discussion paper, because the comprehensive review is not yet complete, these results should be treated as preliminary.

Table 1 shows the MBM thresholds for a four-person family for each MBM region under the 2008-base MBM and 2018-base MBM methodologies for reference year 2018. As expected, the overall threshold would be higher under the 2018-base than the 2008-base for all MBM regions. For example, for Vancouver, the MBM threshold for a family of four under the 2008-base methodology was $40,644, while under the 2018-base MBM methodology it would be $48,677 according to our preliminary estimates in Table 1. This would be an increase of $8,033.

The increases from the 2008-base methodology to the 2018-base methodology differ from MBM region to MBM region. Roughly 2 in 5 MBM regions would change by less than $4,000, while another 2 in 5 would change by more than $5,000. The smaller changes tend to be concentrated in rural areas while the larger changes tend to be concentrated in urban areas.

All five components that comprise the overall MBM threshold would be rebased in the 2018-base MBM. However, the largest contributor to the increase in the 2018-base MBM threshold compared to the 2008-base MBM would be the change in the shelter component. For example, for Vancouver in reference year 2018, the shelter component would increase from $13,671 under the 2008-base MBM to $19,125 under the 2018-base MBM, an increase of $5,454. The other major contributors to the increase in the threshold for Vancouver would be the proposed changes to the transportation component (an increase of $1,281) and to the other necessities component (an increase of $1,197). See Appendix A tables for results by MBM component.

Table 1
Differences between 2008-base and 2018-base MBM thresholds, by MBM region, four person family, 2018
Table summary
This table displays the results of Differences between 2008-base and 2018-base MBM thresholds. The information is grouped by MBM Geography (appearing as row headers), Current Dollars, 2008-base, 2018-base and Difference, calculated using dollars and percent units of measure (appearing as column headers).
MBM Geography		Current Dollars
		2008-base	2018-base	Difference
		dollars			percent
Province	Region
Newfoundland and Labrador	rural	39,802	42,539	2,737	6.9
	< 30,000^{Table 1 Note 1}	40,375	42,926	2,551	6.3
	30,000 to 99,999^{Table 1 Note 2}	Note ...: not applicable	44,167	Note ...: not applicable	Note ...: not applicable
	St. John's	38,536	44,808	6,272	16.3
Prince Edward Island	rural	38,338	41,520	3,183	8.3
	< 30,000	39,184	42,283	3,099	7.9
	Charlottetown	37,591	43,205	5,614	14.9
Nova Scotia	rural	38,741	41,588	2,847	7.3
	< 30,000	38,927	42,494	3,567	9.2
	30,000 to 99,999	36,607	42,800	6,193	16.9
	Halifax	37,816	45,197	7,381	19.5
	Cape Breton	35,524	41,533	6,009	16.9
New Brunswick	rural	38,713	40,766	2,053	5.3
	< 30,000	39,297	42,284	2,987	7.6
	30,000 to 99,999	38,707	42,058	3,351	8.7
	Fredericton	39,675	43,906	4,231	10.7
	Saint John	37,302	41,700	4,397	11.8
	Moncton	36,212	42,026	5,814	16.1
Quebec	rural	35,096	37,804	2,708	7.7
	< 30,000	35,186	37,397	2,211	6.3
	30,000 to 99,999	33,115	37,442	4,326	13.1
	100,000 to 499,999	34,163	37,940	3,777	11.1
	Québec	34,835	39,601	4,765	13.7
	Montréal	35,640	40,160	4,520	12.7
Ontario	rural	38,057	40,576	2,519	6.6
	< 30,000	37,847	41,250	3,403	9.0
	30,000 to 99,999	34,932	40,769	5,838	16.7
	100,000 to 499,999^{Table 1 Note 1}	37,800	42,933	5,133	13.6
	500,000+^{Table 1 Note 2}	Note ...: not applicable	44,851	Note ...: not applicable	Note ...: not applicable
	Ottawa	41,546	47,233	5,688	13.7
	Hamilton/Burlington	38,337	43,517	5,180	13.5
	Toronto	42,101	48,142	6,041	14.3
Manitoba	rural	36,091	38,954	2,863	7.9
	< 30,000^{Table 1 Note 1}	37,528	40,780	3,252	8.7
	30,000 to 99,999^{Table 1 Note 2}	Note ...: not applicable	40,842	Note ...: not applicable	Note ...: not applicable
	Brandon	35,121	40,404	5,284	15.0
	Winnipeg	37,510	44,030	6,521	17.4
Saskatchewan	rural	37,533	40,280	2,747	7.3
	< 30,000	38,634	42,003	3,369	8.7
	30,000 to 99,999	35,791	42,208	6,418	17.9
	Saskatoon	37,849	45,652	7,803	20.6
	Regina	37,873	44,833	6,959	18.4
Alberta	rural	40,183	45,047	4,864	12.1
	< 30,000	41,598	46,158	4,560	11.0
	30,000 to 99,999	40,371	44,874	4,504	11.2
	100,000 to 499,999	38,630	45,468	6,838	17.7
	Edmonton	38,584	47,869	9,285	24.1
	Calgary	40,452	48,349	7,897	19.5
British Columbia	rural	38,527	41,463	2,936	7.6
	< 30,000	38,543	42,608	4,065	10.5
	30,000 to 99,999	35,795	42,829	7,034	19.6
	100,000 to 499,999	39,846	47,111	7,266	18.2
	Vancouver	40,644	48,677	8,033	19.8
... not applicable Note 1 Differences should be viewed with caution, as the region has been redefined under the 2018-base. Return to note 1 referrer Note 2 New MBM region Return to note 2 referrer Note: 2018-base MBM thresholds are preliminary. Source: Statistics Canada. Custom tabulation.

Table 2 shows the effect of the proposed changes on the poverty rate for 2018. As expected, the increases in the MBM thresholds would translate to an increase in the poverty rate. At the Canada level, the 2008-base poverty rate was 8.7% in 2018, while the 2018-base poverty rate would be 11.0% in the same year, an increase of 2.3 percentage points.

By way of reference, the last time the MBM poverty rate was updated, during the comprehensive review that took place between 2008 and 2010, the 2008-base MBM yielded a poverty rate that was 2.2 percentage points higher than the previous 2000-base MBM for reference year 2008. This is frequently the case for poverty lines like the MBM when they are updated to reflect more contemporary norms – poverty thresholds increase and therefore measured poverty levels increase (Statistics Canada, 2019).

As shown in Table 2, poverty rates as measured using the proposed 2018-base MBM increase relative to the 2008-base poverty rates for all provinces, age groups and family types.

Table 2
Percentage and number of persons in poverty, 2008-base and 2018-base, Canada, provinces and selected demographic groups, 2018
Table summary
This table displays the results of Percentage and number of persons in poverty Percentage of persons in poverty, Number of persons in poverty, 2008-base, 2018-base and Difference, calculated using percent, percentage point and in thousands units of measure (appearing as column headers).
	2008-base	2018-base	Difference	2008-base	2018-base	Difference
	Percentage of persons in poverty			Number of persons in poverty
	percent		percentage point	in thousands
Geography
Canada	8.7	11.0	2.3	3,173	3,983	810
Newfoundland and Labrador	9.7	11.2	1.5	50	58	8
Prince Edward Island	9.1	11.9	2.8	14	18	4
Nova Scotia	10.3	13.3	3.0	96	124	28
New Brunswick	7.9	10.0	2.1	58	74	16
Quebec	7.9	9.7	1.8	655	812	157
Ontario	9.5	11.6	2.1	1,351	1,658	307
Manitoba	9.3	10.9	1.6	117	137	20
Saskatchewan	8.8	11.2	2.4	96	122	26
Alberta	7.3	9.4	2.1	316	403	87
British Columbia	8.9	12.1	3.2	421	577	156
Age group
Persons under 18 years	8.2	10.8	2.6	566	748	182
Persons 18 to 64 years	10.3	12.5	2.2	2,392	2,883	491
Persons 65 years and over	3.5	5.6	2.1	216	352	136
Family Types
Persons in economic families	5.8	7.6	1.8	1,759	2,313	554
Persons not in an economic family	24.6	29.0	4.4	1,414	1,670	256
Persons in couple families with children	5.4	7.5	2.1	691	953	262
Persons in lone-parent families	21.7	26.3	4.6	345	417	72
p.p. percentage point Note: Estimates based on the 2018-base MBM thresholds are preliminary. Source: Statistics Canada. Custom tabulation.

Table 3 shows 2008-base poverty rates and preliminary estimates of 2018-base poverty rates for the 2015 to 2018 period. According to the 2008-base MBM, the poverty rate fell from 12.1% in 2015 to 8.7% in 2018, a decline of 3.4 percentage points. According to the proposed 2018-base MBM, the poverty rate fell from 14.5% in 2015 to 11.0% in 2018, a decline of 3.5 percentage points.

Table 4 shows results for the number of people in poverty according to the two measures. According to the 2008-base MBM, the numbers of people in poverty fell from 4.238 million in 2015 to 3.173 million in 2018, a decline of 1.065 million. According to the proposed 2018-base MBM, the numbers of people in poverty fell from 5.074 million in 2015 to 3.983 million in 2018, a decline of 1.091 million.

The changes proposed in the rebasing would result in a “parallel shift” upwards in measured poverty rates, with no significant change in the measured trend in poverty over time.

Similar results are observed for different provinces and age groups.

Table 3
Percent of persons in poverty, 2008-base and 2018-base, Canada, provinces and selected demographic groups, 2015 to 2018
Table summary
This table displays the results of Percent of persons in poverty 2008-base, 2018-base, 2015, 2016, 2017 and 2018, calculated using percent units of measure (appearing as column headers).
	2015	2016	2017	2018	2015	2016	2017	2018
	2008-base				2018-base
	percent
Geography
Canada	12.1	10.6	9.5	8.7	14.5	12.8	11.7	11.0
Newfoundland and Labrador	12.1	10.8	9.7	9.7	13.1	12.4	11.4	11.2
Prince Edward Island	14.0	11.3	10.1	9.1	14.8	11.8	13.3	11.9
Nova Scotia	13.8	12.9	12.8	10.3	17.0	16.2	15.0	13.3
New Brunswick	14.0	11.8	9.7	7.9	16.1	13.6	12.1	10.0
Quebec	10.9	8.6	9.0	7.9	13.7	10.9	10.8	9.7
Ontario	12.9	11.8	10.2	9.5	15.1	13.6	12.2	11.6
Manitoba	12.0	9.4	8.7	9.3	14.0	12.3	11.0	10.9
Saskatchewan	10.7	9.2	9.5	8.8	12.7	11.5	12.2	11.2
Alberta	8.2	8.6	6.8	7.3	10.0	10.8	9.0	9.4
British Columbia	14.8	12.0	10.3	8.9	17.8	15.3	13.6	12.1
Age group
Persons under 18 years	13.3	11.0	9.0	8.2	16.4	14.0	11.6	10.8
Persons 18 to 64 years	13.4	11.9	11.1	10.3	15.7	14.0	13.2	12.5
Persons 65 years and over	5.1	4.9	3.9	3.5	7.0	7.0	6.0	5.6
Note: Estimates based on the 2018-base MBM thresholds are preliminary. Source: Statistics Canada. Custom tabulation.

Table 4
Number of persons in poverty, 2008-base and 2018-base, Canada, provinces and selected demographic groups, 2015 to 2018
Table summary
This table displays the results of Number of persons in poverty 2008-base, 2018-base, 2015, 2016, 2017 and 2018, calculated using in thousands units of measure (appearing as column headers).
	2015	2016	2017	2018	2015	2016	2017	2018
	2008-base				2018-base
	in thousands
Geography
Canada	4,238	3,739	3,413	3,173	5,074	4,543	4,188	3,983
Newfoundland and Labrador	63	56	50	50	68	64	59	58
Prince Edward Island	20	17	15	14	21	17	20	18
Nova Scotia	127	119	118	96	156	149	139	124
New Brunswick	102	86	71	58	117	99	89	74
Quebec	890	706	744	655	1,118	896	888	812
Ontario	1,757	1,624	1,436	1,351	2,062	1,883	1,706	1,658
Manitoba	146	115	108	117	169	151	137	137
Saskatchewan	114	98	103	96	135	123	133	122
Alberta	341	362	286	316	415	453	379	403
British Columbia	678	557	481	421	812	707	638	577
Age group
Persons under 18 years	900	755	622	566	1,115	958	803	748
Persons 18 to 64 years	3,049	2,701	2,553	2,392	3,565	3,180	3,026	2,883
Persons 65 years and over	289	284	238	216	394	405	360	352
Note: Estimates based on the 2018-base MBM thresholds are preliminary. Source: Statistics Canada. Custom tabulation.

The thresholds presented in Table 1 are developed for the reference family of four (two adults and two children). To arrive at thresholds for different family sizes, the MBM-methodology uses a square root equivalence scale, which is a very commonly used method to adjust incomes for family size, and is recommended for use in poverty measures (UNECE, 2011). To compute threshold values for different family sizes, values from Table 5 can be used.

Table 5
Square-root equivalence scale
Table summary
This table displays the results of Square-root equivalence scale. The information is grouped by Family size (appearing as row headers), Square root
scale and Multiply the
threshold value by (appearing as column headers).
Family size	Square root scale	Multiply the threshold value by
1	1.0	0.5
2	1.4	0.7
3	1.7	0.9
4	2.0	1.0
5	2.2	1.1
6	2.4	1.2
x	$\sqrt{X}$	$\sqrt{X} / 2$

This method of equivalizing thresholds for different family sizes should only be applied to the total threshold value and should not be applied to individual threshold components.^Note The next section of this discussion paper describes areas for future research, including research into alternative ways to compare thresholds and incomes of families of different sizes and types.

Finally, while Table 1 presented threshold values for 2018, values for 2015 to 2017 are presented in Appendix E. These threshold values were obtained by adjusting the 2018-base components’ thresholds using the methodology described for each component in Appendix A.

A forward looking research agenda

During the consultations for this MBM review, as well as during the analysis leading to the four discussion papers, certain topics were identified as requiring further study in preparation for the next MBM rebasing exercise.

Communications technology. Statistics Canada will look at how a separate “communications” component could best be added to the MBM. Presently, this need for communication goods and services is reflected in the “other” component.

Child care expenses. Currently, child care costs are represented in the MBM as a direct deduction from disposable income. This way, a family’s needs are compared to an income measure that reflects their available resources. Experts have asked Statistics Canada if this is the best way to deal with child care expenses in the MBM. Could child care costs instead be treated as a basket item?

Remoteness. Statistics Canada will research whether adjustments should be made to the MBM to account for –higher costs faced by families living in remote regions and communities to derive (for example) better estimates for the northern parts of provinces.

Different family sizes. Currently, Statistics Canada estimates MBM thresholds for a family of four, and then uses the square root equivalization scale to derive thresholds for families of different sizes. Does this method lead to the best possible thresholds for smaller families and unattached individuals? Additional study could also be conducted on whether it might be appropriate to construct separate basket values for families of the same size but with different compositions (e.g., lone parent family with three children versus a couple with two children) or other characteristics (e.g., age of family members).

The other component. The “other necessities” component is meant to represent the costs of goods and services other than food, shelter, transportation and clothing. The list of items that could potentially be included in the other component is large and could vary depending on the structure, age, location or other circumstances of a family. Ongoing research on the methodology underpinning the other component could verify whether the current method for setting the value of the other component is adequate or needs to be improved.

Poverty reduction index. Anchoring the MBM to specific base years, yet updating it regularly to reflect changes in the standards of living to ensure it remains relevant is an underlying strength of the MBM. However, periodically rebasing the MBM leads to the creation of various poverty lines which can make it difficult to track poverty trends over longer time periods. To improve transparency and to help track poverty trends over longer time periods, the implementation of a poverty reduction index will be considered.

Conclusion

This paper is the final discussion paper documenting the second MBM comprehensive review, which started in 2018 and will conclude in 2020. It has presented proposed new 2018-base MBM thresholds and compared these to the existing 2008-base thresholds which are currently in use.

The paper has also presented a forward looking research agenda, outlining topics that Statistics Canada and ESDC could study in preparation of the next comprehensive review.

The purpose of this paper is to foster engagement with users, to explain the changes to the MBM that have been proposed, and to provide users with preliminary estimates of the likely impacts of these proposed changes. We encourage users to ask questions, provide feedback and make suggestions for future work.

Following the release of this paper, there will be a period during which Statistics Canada and ESDC will engage experts, stakeholders, and federal, provincial and territorial officials to validate the results. The review period is expected to end by June 2020. Users are welcome to ask questions or share their feedback. Persons interested in contacting us are encouraged to do so by sending an email to: statcan.market.basket.measure-mesure.du.panier.de.consommation.statcan@canada.ca.

Appendix A: Proposed changes to the MBM components and disposable income

Proposed changes to the MBM components

The MBM basket consists of five components: clothing, food, shelter, transportation and other expenses. There are proposed changes to each of these components for the 2018-base MBM.

Clothing component

The 2008-base MBM clothing component is based on the 2001 Social Planning Council of Winnipeg and Winnipeg Harvest Acceptable Living Level (ALL) Basket. The basket contains goods specifically for a reference family of two adults and two children and provides clothing and footwear for most common work, school and social occasions.

The 2018-base MBM clothing component would adopt the most recently available 2012 ALL clothing basket schedule of items (Appendix B). The basket is more contemporary and responds to some concerns regarding the datedness and gender-stereotypes found in the previous basket, such as including the same quantity of runners for men and women. It features a list and replacement schedule that is similar to the one found in the previous (2001) basket. Overall, the number of clothing items in the 2012 ALL basket is similar to the 2001 ALL basket, but some quantities have changed; for example, there is an increase in the quantity of socks and a decrease in the quantity of women’s nylons.

Prices are collected from outlets annually in one representative city in each province,^Note and the arithmetic average of the three lowest price observations in each city is calculated for each item in the basket. In addition, a three-year average of item prices is taken to ensure that item price volatility is minimized. These prices, combined with specified quantities and a replacement schedule result in the cost of the clothing component. The pricing methods for the 2018-base MBM are similar to the 2008-base MBM.

For the 2008-base MBM, direct pricing of clothing items was conducted in each year, and the clothing component was updated accordingly. For the 2018-base MBM, after directly pricing clothing items for the 2018 base year, the clothing component thresholds would be updated to other years using the provincial Consumer Price Index (CPI) for “clothing and footwear”. It is proposed that price indexation replace the annual direct pricing method, since the latter was deemed to add an undesirable amount of variability to the thresholds. In addition, indexing the thresholds will also make the year-over-year movements more transparent and predictable, while reviewing the MBM basket regularly will ensure the basket continues to represent contemporary norms.

Table A.1
Differences between the 2008-base and 2018-base MBM clothing and footwear thresholds, by MBM region, four person family, 2018
Table summary
This table displays the results of Differences between the 2008-base and 2018-base MBM clothing and footwear thresholds. The information is grouped by MBM Geography (appearing as row headers), Current Dollars, 2008-base, 2018-base and Difference, calculated using dollars and percent units of measure (appearing as column headers).
MBM Geography		Current Dollars
		2008-base	2018-base	Difference
		dollars			percent
Province	Region
Newfoundland and Labrador	rural	2,234	2,160	-74	-3.3
	< 30,000^{Table A.1 Note 1}	2,234	2,160	-74	-3.3
	30,000 to 99,999^{Table A.1 Note 2}	Note ...: not applicable	2,160	Note ...: not applicable	Note ...: not applicable
	St. John's	2,234	2,160	-74	-3.3
Prince Edward Island	rural	2,104	2,227	123	5.8
	< 30,000	2,104	2,227	123	5.8
	Charlottetown	2,104	2,227	123	5.8
Nova Scotia	rural	2,188	2,207	19	0.9
	< 30,000	2,188	2,207	19	0.9
	30,000 to 99,999	2,188	2,207	19	0.9
	Halifax	2,188	2,207	19	0.9
	Cape Breton	2,188	2,207	19	0.9
New Brunswick	rural	2,561	2,422	-139	-5.4
	< 30,000	2,561	2,422	-139	-5.4
	30,000 to 99,999	2,561	2,422	-139	-5.4
	Fredericton	2,561	2,422	-139	-5.4
	Saint John	2,561	2,422	-139	-5.4
	Moncton	2,561	2,422	-139	-5.4
Quebec	rural	2,079	2,226	146	7.0
	< 30,000	2,079	2,226	146	7.0
	30,000 to 99,999	2,079	2,226	146	7.0
	100,000 to 499,999	2,079	2,226	146	7.0
	Québec	2,079	2,226	146	7.0
	Montréal	2,079	2,226	146	7.0
Ontario	rural	2,145	2,157	12	0.6
	< 30,000	2,145	2,157	12	0.6
	30,000 to 99,999	2,145	2,157	12	0.6
	100,000 to 499,999^{Table A.1 Note 1}	2,145	2,157	12	0.6
	500,000+^{Table A.1 Note 2}	Note ...: not applicable	2,157	Note ...: not applicable	Note ...: not applicable
	Ottawa	2,145	2,157	12	0.6
	Hamilton/Burlington	2,145	2,157	12	0.6
	Toronto	1,750	1,846	96	5.5
Manitoba	rural	2,050	2,042	-8	-0.4
	< 30,000^{Table A.1 Note 1}	2,050	2,042	-8	-0.4
	30,000 to 99,999^{Table A.1 Note 2}	Note ...: not applicable	2,042	Note ...: not applicable	Note ...: not applicable
	Brandon	2,050	2,042	-8	-0.4
	Winnipeg	2,050	2,042	-8	-0.4
Saskatchewan	rural	2,314	2,236	-78	-3.4
	< 30,000	2,314	2,236	-78	-3.4
	30,000 to 99,999	2,314	2,236	-78	-3.4
	Saskatoon	2,314	2,236	-78	-3.4
	Regina	2,314	2,236	-78	-3.4
Alberta	rural	1,834	1,858	24	1.3
	< 30,000	1,834	1,858	24	1.3
	30,000 to 99,999	1,834	1,858	24	1.3
	100,000 to 499,999	1,834	1,858	24	1.3
	Edmonton	1,834	1,858	24	1.3
	Calgary	1,834	1,858	24	1.3
British Columbia	rural	1,907	2,074	167	8.7
	< 30,000	1,907	2,074	167	8.7
	30,000 to 99,999	1,907	2,074	167	8.7
	100,000 to 499,999	1,907	2,074	167	8.7
	Vancouver	1,907	2,074	167	8.7
... not applicable Note 1 Differences should be viewed with caution, as the region has been redefined under the 2018-base. Return to note 1 referrer Note 2 New MBM region Return to note 2 referrer Note: 2018-base MBM thresholds are preliminary. Source: Statistics Canada. Custom tabulation.

Food component

In the 2008-base MBM, the food component is based on the 2008 National Nutritious Food Basket, developed by Health Canada. Food prices are collected from 38 cities in order to provide the annual cost of purchasing the basket in the 50 regions. For some items, prices are collected for more than one product to enable pricing of both a branded and a generic item. Prices are collected from selected stores in each city and the geometric mean of each item is calculated for each city.

The 2018-base MBM would use the 2019 National Nutritious Food Basket (NNFB, Appendix C) to calculate the cost of the food component. The foods in the updated NNFB are consistent with the new Canada’s Food Guide and are commonly consumed nutritious foods that Canadians reported consuming in the 2015 Canadian Community Health Survey-Nutrition, the most recently available survey of food consumption. The 2019 NNFB includes fresh, frozen and canned food formats to balance considerations of cost, access and availability. As for the 2008 NNFB, 5% is added to the total cost of the 2019 basket for miscellaneous foods and beverages such as coffee, tea, herbs, spices and condiments.^Note

Food prices will still be collected by Statistics Canada in 38 cities across Canada. However, given the recent release of the new NNFB, some provisional prices have been used for the food component, and Statistics Canada will evaluate whether a revision to these figures is required during the coming months. As with the clothing component, annual direct pricing of the food basket would be replaced by the provincial CPI food price index to determine the change in the price of the food basket over time for the 2018-base MBM.

Table A.2
Differences between the 2008-base and 2018-base MBM food thresholds, by MBM region, four person family, 2018
Table summary
This table displays the results of Differences between the 2008-base and 2018-base MBM food thresholds. The information is grouped by MBM Geography (appearing as row headers), Current Dollars, 2008-base, 2018-base and Difference, calculated using dollars and percent units of measure (appearing as column headers).
MBM Geography		Current Dollars
		2008-base	2018-base	Difference
		dollars			percent
Province	Region
Newfoundland and Labrador	rural	12,972	13,141	169	1.3
	< 30,000^{Table A.2 Note 1}	12,972	13,141	169	1.3
	30,000 to 99,999^{Table A.2 Note 2}	Note ...: not applicable	13,141	Note ...: not applicable	Note ...: not applicable
	St. John's	12,441	12,521	80	0.6
Prince Edward Island	rural	12,476	12,470	-6	0.0
	< 30,000	12,476	12,470	-6	0.0
	Charlottetown	12,476	12,470	-6	0.0
Nova Scotia	rural	12,117	12,528	411	3.4
	< 30,000	12,117	12,528	411	3.4
	30,000 to 99,999	12,117	12,528	411	3.4
	Halifax	11,558	12,001	443	3.8
	Cape Breton	11,816	11,750	-66	-0.6
New Brunswick	rural	12,496	12,563	67	0.5
	< 30,000	12,496	12,563	67	0.5
	30,000 to 99,999	12,496	12,563	67	0.5
	Fredericton	12,498	12,499	1	0.0
	Saint John	12,413	12,198	-215	-1.7
	Moncton	11,349	11,757	408	3.6
Quebec	rural	11,248	11,322	74	0.7
	< 30,000	11,248	11,322	74	0.7
	30,000 to 99,999	11,248	11,322	74	0.7
	100,000 to 499,999	11,248	11,322	74	0.7
	Québec	11,154	11,476	322	2.9
	Montréal	11,344	11,578	234	2.1
Ontario	rural	10,518	10,560	42	0.4
	< 30,000	10,518	10,560	42	0.4
	30,000 to 99,999	10,518	10,560	42	0.4
	100,000 to 499,999^{Table A.2 Note 1}	11,045	10,994	-51	-0.5
	500,000+^{Table A.2 Note 2}	Note ...: not applicable	10,994	Note ...: not applicable	Note ...: not applicable
	Ottawa	11,390	11,399	9	0.1
	Hamilton/Burlington	10,821	10,738	-83	-0.8
	Toronto	10,903	10,803	-100	-0.9
Manitoba	rural	11,037	10,983	-54	-0.5
	< 30,000^{Table A.2 Note 1}	11,037	10,983	-54	-0.5
	30,000 to 99,999^{Table A.2 Note 2}	Note ...: not applicable	10,983	Note ...: not applicable	Note ...: not applicable
	Brandon	11,037	10,983	-54	-0.5
	Winnipeg	11,318	11,377	59	0.5
Saskatchewan	rural	11,023	11,101	78	0.7
	< 30,000	11,023	11,101	78	0.7
	30,000 to 99,999	11,023	11,101	78	0.7
	Saskatoon	11,072	11,308	236	2.1
	Regina	10,880	11,204	324	3.0
Alberta	rural	12,354	12,255	-100	-0.8
	< 30,000	12,354	12,255	-100	-0.8
	30,000 to 99,999	12,354	12,255	-100	-0.8
	100,000 to 499,999	12,354	12,255	-100	-0.8
	Edmonton	11,080	11,410	330	3.0
	Calgary	11,390	11,510	120	1.1
British Columbia	rural	11,256	11,380	124	1.1
	< 30,000	11,256	11,380	124	1.1
	30,000 to 99,999	11,256	11,380	124	1.1
	100,000 to 499,999	12,155	12,112	-43	-0.4
	Vancouver	11,652	11,586	-66	-0.6
... not applicable Note 1 Differences should be viewed with caution, as the region has been redefined under the 2018-base. Return to note 1 referrer Note 2 New MBM region Return to note 2 referrer Note: 2018-base MBM thresholds are preliminary. Source: Statistics Canada. Custom tabulation.