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INDEPTH: ECONOMY
How do we measure poverty?
CBC News Online | Updated Nov. 24, 2004
The Canadian Council on Social Development chose to use the phrase "persistent poverty" in its report on child poverty issued early in November 2002. The rather grim report suggested that childhood poverty was becoming more entrenched in Canadian society.
But, how do we measure poverty? There are conflicting views on this.
Whenever a Canadian news outlet uses Statistics Canada numbers to say a certain percentage of Canadians are "below the poverty line," Statistics Canada makes it clear that its numbers say no such thing.
The agency sends off letters stating that its low-income cut-off (LICO) figures are not a measure of poverty, but of income inequality. Despite this, many media companies and poverty activists use Statistics Canada's LICOs as Canada's "unofficial" poverty line.
The LICO counts the number of Canadians who spend 20 per cent more of their gross income on food, shelter and clothing than the average Canadian. So, if a family spends more than 55 per cent of its gross income on those necessities, it's below the LICO.
About 17 per cent of Canadians are below the low-income cut-off.
Critics of the use of the LICO as a benchmark for poverty say the 55 per cent level is arbitrary and doesn't translate to a state of destitute poverty.
A 2000 National Post editorial put it this way: "Say 54 per cent of a family's income goes to food, shelter and clothing, it still has 46 per cent to spend elsewhere. That's not poverty."
Poverty activists and left-leaning newspapers say they use the LICO because that's the only information available to them.
"If Statistics Canada would supply us with an official poverty figure, we'd be happy to use it," wrote Toronto Star editorial page editor Carol Goar in August 2000.
"LICOs are used by anti-poverty groups because they are readily available and capture their view that poverty is relative," wrote Richard Shillington of Campaign 2000 in 1997.
The November 2002 report on child poverty makes these observations:
Children in families described as "persistently poor" tend not to be as healthy as children in families that are not persistently poor.
Children in poor families do not do as well in school.
Children living in poverty are three times more likely to have a parent suffering from depression.
Some 300,000 children in Canada rely on food banks every month.
Children in poor families are much more likely to become runaways.
Children growing up in poverty are more likely to become foster children.
Between 1984 and 1999, the average net wealth of the top 20 per cent of couples with children increased by 43 per cent. For families at the bottom of the income scale, net wealth fell by more than 51 per cent.
Children living in persistent poverty are twice as likely to live in dysfunctional families, and twice as likely to live with violence.
Children who live in communities with plentiful resources – parks, libraries – score better on tests of physical, emotional, social and intellectual development. In the case of poor children, the opposite is true. A study in Edmonton found that poor children worry more about the safety than about lack of food.
As for measuring poverty, Statistics Canada says there is no internationally, or even nationally, accepted formula or definition of who is poor.
Statistics Canada finds itself in a no-win situation. If they do come up with a way of calculating the number of poor people in Canada –for example, using after-tax incomes – the number will undoubtedly be lower than the number calculated by the LICO. Anyone who uses the new number would be accused of using mathematical trickery to "reduce" the number of poor people in Canada.
Statistics Canada drew criticism from the right for updating the LICO in 2000 to reflect new spending patterns among Canadians. The previous cut-off level of $32,759 for a family of four was raised to $33,356, which put 1.4 per cent more Canadians below the cut-off.
Another feature of the LICO that causes controversy is that it's a relative measure of poverty. That is, as the economy grows and people make more money on average, the LICO moves up with it.
"Using the LICO to measure the poor means poverty can never be eliminated since there will always be a range of incomes in Canada – unless we adopt a Soviet-style command economy," the National Post said in 2000.
Poverty activists argue that it's possible to reduce relative poverty without moving to a completely communist system. "In reality, relative poverty will not be reduced by economic growth unless there is redistribution to the poor," Shillington wrote.
The Organization of Economic Co-operation and Development uses another relative measure of poverty. It takes all of the after-tax incomes in a particular country and finds the income such that half the people in the country make more and half make less. That's the median after-tax income. Anyone who makes less than half of that median income is considered poor. By that measure, Canada's poverty rate in the 1993-1995 period was 10.9 per cent. In the U.S., the rate is 16 per cent, while in Denmark, it's 4.7 per cent. Statistics Canada uses a similar calculation, called the Low Income Measures, which uses pre-tax incomes.
Another way to measure poverty is in absolute terms: how many people make less than what is needed to survive or lead a decent life?
Human Resources and Development Canada is developing such a measurement, called the Market Basket Measure, based on the cost of goods and services needed for people to eat a nutritious diet, buy clothing for work and social occasions, house themselves in their community and pay for other necessary expenditures, such as furniture, public transportation and entertainment. By that measure, most of the country's poverty is in Ontario and British Columbia, where the living costs are highest.
Nipissing University economics professor Christopher Sarlo developed another absolute measure of poverty for the 1992 study "Poverty in Canada." Sarlo defines poverty as lacking the means for the basic necessities of life, such as food, shelter and clothing.
The first version of his Basic Needs Index put the poverty rate at just four per cent. It was criticized for its frugality, though: Sarlo's weekly food budget for an elderly woman was $25. A revised version of the index was released in 2001, including such things as out-of-pocket medical expenses. That study put the poverty rate at eight per cent.
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