Income concept

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The income concept is very similar for the three programs that produce micro-level income data (SLID, Census and T1FF). It is defined generally as income from all sources, before income taxes and other deductions are taken into consideration¹. There are several other notions that should be noted that are implicit in this concept. Because the income estimate is intended to provide an indication of the extent to which persons/families can, on an ongoing basis, meet their current needs for goods and services, the amounts included in income are intended to be those which are regular and recurring. Therefore, extraordinary amounts, such as inheritances or lottery winnings, would not be considered income. Capital gains are also excluded, for that same reason, from the income measure².As well, the income reported is that which is received as cash, or an equivalent of cash. That means that the value of things such as housing or vehicles provided by an employer,or of home-grown food, would not be regarded as income³. There are a few relatively minor differences in the income categories for these three programs; they are discussed later.

The concept of personal income for the SNA, however, differs in some very significant ways which explains why the income estimate for the SNA is much higher. Personal income is defined as: the sum of all incomes received by persons residing in Canada, whether factor earnings from current production or current transfers from other sectors, plus the investment income that associations of individuals accumulate on their own behalf or on behalf of persons. Associations of individuals include such things as charitable organizations, insurance companies and trusteed pension funds. The income of these associations of individuals would include amounts that would not be part of the income received by individuals, such as:

• the investment income of trusteed pension funds, which hold the assets of most employer pension plans. The investment earnings of these funds are not received directly by individuals (and therefore not included in their income) but are held in the funds until paid out in the form of a pension following retirement;
• government transfers paid to non-profit organizations.

Because the persons and unincorporated business sector is more broadly defined than simply persons, the total income received by this sector is also higher, by approximately $75 billion dollars, or roughly 20%. This difference will be more fully explained in section 5. 

There are two other major differences in the income concept used by the SNA which should be briefly noted here, although they will be discussed again below under the appropriate income category:

• income for the SNA is recorded when the money moves from one sector to another. Therefore, pensions from employers are not considered income at the time the pension is received, but at the time the contributions are made by employers in the corporate and government business enterprises sector. These employer contributions are part of supplementary labour income, which is reported together with wages and salaries. The pensions themselves are not considered income, as that money already "belongs" to the personal sector. Pension payments are regarded as a drawing down of assets.
• the SNA considers persons who own their home to be self-employed and attributes to them an imputed income equivalent to the rental income they would receive if they rented their dwelling. This is done to recognize the economic value of home ownership.

There is one other minor difference in terms of the amounts involved in the income measure used by the SNA. That measure also includes current transfers from non-residents (largely pensions paid by foreign governments) and transfers from corporations to persons (largely charitable donations). These are, for the most part, either not taxable (and thus difficult to measure for specific households) or paid not to persons but to "associations of persons" (and therefore would not be considered in the income estimate of the three other programs). These transfers (from non-residents and corporations) together total about $4 billion, less than half of 1% of personal income as measured by the SNA.

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Notes

1. These three income programs producing data at the micro-economic level (individuals, families or households) attempt to follow as much as is practical the principles elaborated in Final Report and Recommendations, Expert Group on Household Income Statistics –The Canberra Group, 2001. Divergences will be noted where possible.
2. Capital gains are however measured on several data sources and can be considered a component of income for certain analyses.
3. The use of administrative tax files to derive income estimates often entails accepting to count the valuation of several non-cash benefits provided by employers.