Income Research Paper Series
Technical paper for the Northern Market Basket Measure of poverty for Yukon and the Northwest Territories

Introduction

In November 2021, Statistics Canada published a discussion paper entitled "Construction of a Northern Market Basket Measure of poverty for Yukon and the Northwest Territories". The paper described a proposed methodology for producing Northern Market Basket Measure (MBM-N) baskets and a disposable income concept for Yukon and the Northwest Territories. It also encouraged readers to provide feedback and comments.

Following the release of the paper, there was a review period during which time Statistics Canada and Employment and Social Development Canada (ESDC) engaged with experts, stakeholders, Indigenous organisations, and federal, provincial and territorial officials to help validate the results.

This technical paper describes the results of the review period, including small adjustments to the disposable income amounts used in the previous discussion paper, and marks the end of the review period for the MBM-N for Yukon and the Northwest Territories by presenting the latest poverty estimates for reference year 2020.

An MBM-N for Nunavut

An upcoming discussion paper, "Construction of a Northern Market Basket Measure of poverty for Nunavut", will detail the proposed MBM-N methodology for Nunavut. It will provide and compare provisional Nunavut MBM-N thresholds and poverty rates, which were the result of collaboration between Statistics Canada, ESDC, and representatives of the Government of Nunavut.

Summary of review period

During the review period, Statistics Canada and ESDC engaged in several outreach activities to solicit and encourage feedback on the methodology outlined in the previous discussion paper. The scope of feedback and targeted audience were varied, and efforts were made to reach as many interested stakeholders as possible. The outreach activities can be grouped into three broad categories: (1) Social media campaign; (2) targeted solicitation to attend an information session, and (3) general promotion activities.

Following the release of the last MBM-N discussion paper for Yukon and the Northwest Territories, a social media campaign was initiated. Feedback and comments on the proposed methodology described in the discussion paper were requested using social media platforms where Statistics Canada has an online presence.^Note

In January 2022, following the release of the discussion paper, emails were sent to organizations and individuals inviting them to one of three information sessions.^Note Participants were presented the proposals outlined in the discussion paper and were encouraged to provide feedback and suggestions.^Note

Outreach in the form of general promotion activities was undertaken by ESDC and both Statistics Bureaus of Yukon and the Northwest Territories. The proposed methodology was, for example, presented to the National Advisory Council of Poverty (NACP),^Note which has been established as part of Canada’s first Poverty Reduction Strategy, as well as to the Provincial-Territorial Poverty Advisory Committee. In addition, the proposed methodology was presented to an anti-poverty round table in the Northwest Territories, which brought together a number of anti-poverty stakeholders as well as Alternatives North. Finally, at the time of the release, information on the proposed methodology was shared with all the Members of the Legislative Assembly (MLAs) for the Northwest Territories and the media.

The themes discussed during the information sessions varied widely, covering everything from more technical questions around how a certain component was estimated (e.g., the regression formula used in the shelter component), to concerns around indigenous people not being properly represented to questions around how the COVID pandemic will impact these thresholds, among others.

During the review period, in parallel to these outreach activities, a further evaluation of the proposed methodology was conducted by Statistics Canada and two modifications were made in the estimation of the disposable income measure.

Modifications

During the review period, the following two modifications^Note were made which affected the published poverty rate and Tenure Type Adjustments (TTA) for Yukon and the Northwest Territories as described in the publication "Construction of a Northern Market Basket Measure of poverty for Yukon and the Northwest Territories":

1. The first modification improved the proposed methodology for estimating the interest rate used in the production of the TTA for homeowners with a mortgage.
2. The second modification corrected the amount of medical expenses deducted from the disposable income.

Modification to the homeowners with a mortgage tenure type adjustment

In the proposed methodology described in the publication "Construction of a Northern Market Basket Measure of poverty for Yukon and the Northwest Territories", the amount of interest paid on the outstanding mortgage is obtained by multiplying the outstanding principal amount^Note of the mortgage by the 2016 five-year conventional mortgage interest rate published by the Canada Mortgage and Housing Corporation (CMHC), instead of the 2018 five-year conventional mortgage interest rate. The original calculation resulted in an overestimation of the amount of interest paid as the mortgage interest rate had decreased between 2016 and 2018.

The modification to the MBM-N methodology is to align it with Statistics Canada’s Consumer Prices Division’s (CPD) updated Mortgage Interest Cost Index (MICI) methodology,^Note which uses the monthly mortgage rates for both fixed (with different term lengths) and variable rates as obtained from nine of the largest banks and is aggregated to produce a monthly index.

The inclusion of multiple length fixed term rates and variable rates better reflects the options available to homeowners with a mortgage and, therefore, provides a better estimate for mortgage interest costs.

Impact of the modification to the tenure type adjustment for homeowners with a mortgage

This section shows the impact of changing the interest rate on the previously published TTA amount for homeowners with a mortgage and on estimated poverty rates.  The rate used in the publication (i.e., CMHC mortgage rate) was 3.7%, while the modified rate (i.e., based on CPD’s MICI) would be 2.9%. The difference is mainly due to the fact that the MICI rate includes fixed rates with shorter terms and variable rates that were lower than the five-year conventional rate published by CMHC.

Since the new rate is lower, it decreases the interest amount added to the shelter cost for homeowners with a mortgage and consequently increases the TTA for this tenure type (Table 1).



Increasing the TTA for homeowners with a mortgage would consequently increase the disposable income for families with mortgages. This is reflected by slightly lower estimates for poverty rates in 2018 compared to the previously published poverty rates (Table 2). The modification had no impact on the previously published poverty rates for 2019, because the adjustment was not large enough to increase any family’s disposable income, in the CIS sample, above their MBM threshold for reference year 2019.



Modification to the allocation of medical expense imputation amounts

The proposed methodology described in "Construction of a Northern Market Basket Measure of poverty for Yukon and the Northwest Territories" stated that if an adult^Note respondent to the Canadian Income Survey (CIS) was not linked to tax data or if their medical claim for tax purposes was zero,^Note it was proposed that a territorial-level imputation value would be used.

When calculating disposable income, the imputation amount was also inadvertently given to children which resulted in a higher disposable income for families. The modification will remove the medical expense imputation amount for children, as was intended.

The modification to the medical expense imputation amount aligns the Northern MBM methodology with the general MBM methodology.

Impact of the modification to the allocation of medical expense imputation amounts

This section shows the impact of the correction for inadvertently assigning the medical expense imputation amount to persons under 16 years of age. In general, the correction increased the disposable income for families with children, since less medical expenses were being removed. This is reflected by the lower poverty rate observed in 2018 (Table 3). The modification mostly affected the poverty rates for persons under 18 years and persons in economic families in 2018. It had no impact on the 2019 poverty rates, because the change to the disposable income caused by the modification was not large enough to increase any family’s disposable income in the CIS sample, above their applicable MBM threshold for reference year 2019.



The combined impact of the modifications on the poverty rate estimates

The combined modifications were large enough to increase the disposable income of some families above their MBM thresholds in both years, yielding either lower or equal poverty rates when compared to the previously published rates for all domains (Table 4). The updated poverty rates are still within the originally published 95% confidence intervals and none of the changes between 2018 and 2019 were statistically significant. The combined impact on the number of persons in poverty can be found in Appendix Table A.1.



Poverty estimates for reference years 2018, 2019 and 2020

With the incorporation of the latest modifications to the MBM-N methodology, this technical paper marks the end of the review period for the proposed methodology for MBM-N for Yukon and the Northwest Territories.

Table 5 provides the poverty estimates based on Canada’s Official Poverty Line (the MBM-N), and their respective confidence intervals for reference years 2018, 2019 and 2020. Estimates for 2020 take into account the modifications to the MBM-N methodology described above and incorporated into 2018 and 2019 estimates. The estimates for the number of persons in poverty, can be found in Appendix Table A.2 and the MBM-N threshold amounts for Yukon and the Northwest Territories for 2020 can be found in Appendix Table A.3. Territorial income estimates for 2020 have been published separately in Canadian Income Survey: Territorial estimates, 2020.

Statistics Canada is working towards applying MBM-N thresholds to incomes derived through the 2016 and 2021 Censuses (for income years 2015 and 2020, respectively).  In early 2023, custom tabulation of poverty indicators in the Yukon and the Northwest Territories will be possible, and the Census datasets housed at Statistics Canada’s Research Data Centres (RDCs) will be updated to make these indicators available.

Table 5 shows the modified 2018 and 2019 and the latest 2020 poverty rates as measured by the CIS using the MBM-N thresholds, for selected geographies and ages groups and family types. In 2020, according to the MBM-N, the poverty rate continued to decrease in these two territories, going from 10.2% in 2019 to 9.5% in 2020. For estimates on the number of persons in poverty, please see Appendix A.2.

The poverty rate in Yukon went down from 9.0% in 2019 to 8.8% in 2020, while the poverty rate in the Northwest Territories went from 11.2% to 10.2% over the same period. Estimates for small domains should be used with caution (For more information see text box – Survey error within territorial estimates).

For the combined Yukon and the Northwest Territories geography, these decreases, from 2019 to 2020, were mainly observed for seniors. Seniors^Note decreased 10.3 percentage points over that period, while persons aged 18 to 64 years old had a moderate increase in their poverty rates and the poverty rate for persons aged less than 18 years old decreased slightly.



Similarly, over the same period, persons living in families experienced a small decrease, while unattached individuals (i.e., persons not in an economic family) experienced a slight increase. Apart from the change for seniors, none of the other changes in Table 5 were statistically significant.

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Survey error within territorial estimates

Poverty estimates for Yukon and the Northwest Territories should be used in combination with their respective quality indicators. As these estimates are derived from a survey, they are subject to survey error (e.g., sampling and non-sampling errors).

In this paper, the quality indicator chosen to measure the variability caused by sampling error is a confidence interval based on a 95% level of confidence.

For more information on measuring survey error and the importance of considering an estimate’s quality indicator, please see the Measuring survey error and Survey error within territorial estimates section of "Construction of a Northern Market Basket Measure of poverty for Yukon and the Northwest Territories".

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Conclusion

This technical paper summarized the recent review of the proposed MBM-N methodology for Yukon and the Northwest Territories published in "Construction of a Northern Market Basket Measure of poverty for Yukon and the Northwest Territories" and described two modifications to this methodology.

In marking the end to the review period, this paper provides poverty estimates for these territories for reference year 2020, along with updated estimates for reference years 2018 and 2019, based on CIS data.

Although the review period for the proposed MBM-N methodology for Yukon and the Northwest Territories is now closed, we would like to continue to invite readers to provide feedback and comments in preparation for the next rebasing of the MBM-N (scheduled to begin in early 2023). Statistics Canada and ESDC value continual engagement with key stakeholders on this topic. We thus encourage readers to contact us to share their views, suggestions and feedback by sending an email to:

statcan.market.basket.measure-mesure.du.panier.de.consommation.statcan@statcan.gc.ca

If access to email is impractical or not possible, we can also be reached by contacting Statistics Canada’s general enquiries line:

• Toll-free number: 1-800-263-1136
• National TTY line: 1-866-753-7083

Appendix

  

References

Devin, Nancy, Burton Gustajtis, Keith Lam and Sarah McDermott (2021), “Construction of a Northern Market Basket Measure of poverty for Yukon and the Northwest Territories”. Catalogue no. 75F0002M2021007.

Djidel, Samir, Burton Gustajtis, Andrew Heisz, Keith Lam, Isabelle Marchand and Sarah McDermott (2020), “Report on the second comprehensive review of the Market Basket Measure”. Catalogue no. 75F0002M2020002.

Gustajtis, Burton, Keith Lam and Sarah McDermott (2021), “Proposals for a Northern Market Basket Measure and its disposable income”. Catalogue no. 75F0002M2021001.