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Why we need to fix Canada's new measure of poverty

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The government’s new tool for measuring poverty is flawed, failing to acknowledge such key factors as child care fees and actual housing costs.
Author: 
Biss, Michèle
Publication Date: 
24 Dec 2018
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How many people in Canada live in poverty? As a representative of a national anti-poverty organization, I am asked this question all the time — and the answer ought to be straightforward. In actuality, the ways in which we measure poverty in Canada are complex and often largely inaccessible to the public. But they speak volumes about our priorities as a country.

Statistics Canada currently assembles income and poverty data based on three measurements: the low-income cut-off (LICO), the market basket measure (MBM) and the internationally comparable low-income measure (LIM). Without a single measure designated as an “official” poverty line for Canada, federal, provincial and territorial governments and civil society organizations have been using a mélange of these measurements to determine poverty rates. This practice makes it difficult to compare regional and national progress (or lack thereof).

But the measurement of poverty is finally set to change, and the impacts — and consequences — are serious. With the release of Canada’s first poverty reduction strategy in August 2018, the federal government has dedicated itself to creating the country’s first official poverty line, based on the MBM. The MBM will be balanced with a “dashboard” of other indicators of poverty that will be used to track and measure the progress of the strategy in meeting its reduction targets. Until January 31, Statistics Canada is conducting online and in person consultations to strengthen the MBM.

However, there are serious gaps in the MBM. If we don’t fix them, it will be more of a barrier for people living in poverty than a tool to help them. Our focus as a country should be on our human rights obligations to create an environment in which people have an adequate standard of living. The current design of the MBM is less than helpful as Canada strives to fulfill these obligations.

The MBM differs from other measurements of poverty — and official poverty lines in other countries — in that it is an absolute and not a relative measure of poverty. Rather than setting a percentage of median income to indicate relative deprivation, the MBM provides a region-specific snapshot of the estimated cost of a “basket of goods” to meet the basic needs of a family of two adults and two school-aged children. The MBM measures poverty by identifying the percentage of households whose income falls below the level that would be necessary to buy this basket of goods.

The basket includes categories one would expect to see under an umbrella of basic needs: housing, food, clothing and transportation, plus “other expenses.” The total cost varies from community to community; in 2015, in some parts of Quebec, this number was under $33,000, whereas in some places in Alberta it was $41,000.

But some vital daily costs don’t even make it into the basket; some, like child care or prescription medication, are designated as “out of pocket” expenses, not basic needs. While these are costs that many families in Canada consider indispensable, the MBM does not treat them as such.

The MBM may help Statistics Canada to show changes in poverty on tables and spreadsheets, but in its current form, it could harm the very people who live in poverty. That is because service providers across the country will use the cost of the basket, with all its flaws, to measure eligibility, meaning people may not qualify for services they need. Additionally, rates for social programs may be set based on the cost of the basket; for example, in Quebec, social assistance eligibility is currently calculated at 49 percent of the basket. If the basket is too small and does not include critical household costs, social assistance rates will fall short of what families need to survive.

"Without child care in the MBM basket, our national picture of poverty does not include a basic need that for many households is second only to rent as the highest expense."

Consider the situation of a single mother in Toronto who spends half of her monthly income on child care. In Toronto, the median cost of child care is $1,758 a month for infants. Without child care in the MBM basket, our national picture of poverty does not include a basic need that for many households is second only to rent as the highest expense. What’s more, with next year’s federal budget using gender-based analysis plus and focusing on economic competitiveness, female workforce participation and retention should be a priority. Child care is mandatory for women who work, not a discretionary frill.

The MBM falls short in a number of other ways. Housing costs, for example, are calculated at unrealistically low levels. In Vancouver, the basket’s estimated cost for a two-bedroom apartment is $1,400. According to a recent Pad Mapper survey, the cost of a two-bedroom unit in the city can be upwards of $3,160 per month, varying with location.

"A poverty measure that ignores the financial realities of the inaccessible housing markets in cities like Vancouver and Toronto, coupled with the lack of available housing across the country, is a recipe for disaster."

The MBM’s current assumptions about housing costs do not reflect the government’s language in its own poverty reduction strategy, which emphasizes a goal of ensuring everyone can live in dignity. A poverty measure that ignores the financial realities of the inaccessible housing markets in cities like Vancouver and Toronto, coupled with the lack of available housing across the country, is a recipe for disaster.

Finally, other significant costs and expenses are completely absent from the MBM calculation. There is no recognition of post-secondary education or debt payments — major expenses for many households. The ratio of household debt to personal disposable income was 66 percent in 1980, but in 2011, that ratio passed 150 percent. Even more recent numbers show that the average person in Canada owes about $1.70 for every dollar of income they earn per year after taxes, making debt a significant concern for most households. For those in poverty struggling to overcome payday loan debt or student loans, the MBM must accurately show the largest costs that keep them from being able to pay necessary bills, let alone get ahead.

To live in poverty is to be fundamentally deprived of human rights. It means making choices between paying the utility bills and putting food on the table. It is the experience of systemic discrimination at every turn when trying to access services and programs. The way we create Canada’s official poverty line will hugely affect the lives of people by determining whether they qualify for legal services, social assistance programs to help pay rent or programs to feed their children.

It is laudable for the government to seek a tool that will allow us to measure where we are, where we’ve come from and where we are going as we work to meet the United Nations Sustainable Development Goal of eradicating poverty by 2030. But for millions of people in Canada, the wrong choice of methodology could mean the difference between life and death. It is vital that in our work to address poverty in Canada, we don’t set aside the poverty experience. Every quantitative measurement must be contextualized by the real, lived experience of people who know what poverty is like first-hand. Fixing the market basket measure is our opportunity to get this right.

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Entered Date: 
16 Jan 2019
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