Poverty in Canada
Poverty in Canada remains prevalent within some segments of society and according to a 2008 report by the Organisation for Economic Co-operation and Development, the rate of poverty in Canada, is among the highest of the OECD member nations, the world's wealthiest industrialized nations. There is no official government definition and therefore, measure, for poverty in Canada. However, Dennis Raphael, author of Poverty in Canada: Implications for Health and Quality of Life reported that the United Nations Development Program, the United Nations Children's Fund (UNICEF), the Organisation for Economic Co-operation and Development and Canadian poverty researchers[notes 1] find that relative poverty is the "most useful measure for ascertaining poverty rates in wealthy developed nations such as Canada." In its report released the Conference Board.
Currently, an income inequality measure known as low income cut-off (LICO) published by Statistics Canada is frequently used as a poverty rate and is 10.8% as of 2005. The Central Intelligence Agency uses the LICO as the relative measure results in a higher poverty figure than an absolute one. Statistics Canada has refused to endorse any metric as a measure of poverty, including the low-income cut off it publishes, without a mandate to do so from the federal government. Statistics Canada is looking into creating an initiative on how to better calculate the poverty line. The Government of Canada has announced that Market Basket Measure (MBM) will become the official poverty measure in Canada.
Some elements that work towards reducing poverty in Canada include Canada's strong economic growth, government transfers to persons of $164 billion per annum as of 2008, universal medical and public education systems, and minimum wage laws in each of the provinces and territories of Canada.
In recent times, after a spike in poverty and low-income rates around the 1996 recession, relative poverty has continued to decline. Certain groups experience higher low-income rates, including children, families with single-parent mothers, aboriginals, the mentally ill, the physically handicapped, recent immigrants, and students.
- 1 History
- 2 Measures of poverty in Canada
- 3 Poverty reduction strategies
- 4 Indigenous children in Canada
- 5 Assistance for poor people in Canada
- 6 Notes
- 7 See also
- 8 References
- 9 Further reading
- 10 External links
Reflecting the practice in the British Isles, organized assistance to the poor was largely the realm of churches. In the early 20th century, the Catholic Encyclopedia reported that there were eighty-seven hospitals in Canada under the control and direction of various Catholic religious communities.
After the Great Depression, Bennett and Mackenzie King spurred the first stages of Canada's welfare state, and the size and role of the government began to grow immensely over the next decades. Many social programs developed during this time designed to increase the Canadian citizen's quality of life.
According to one estimate, 15% of Canadians lived in poverty by 1961, while at the end of the Sixties, Statistics Canada estimated that the number of Canadians living in poverty (using measurements drawn up by Jenny Podoluk) had fallen from about 25% of the population in 1961 to about 18% in 1969. A Senate inquiry in 1969, however, estimated that as many as 1 in 4 Canadians were living in poverty that year. From 1969 to 1982, the proportion of families with incomes below the poverty line fell from 20.8% to 13.9%. According to one definition, nearly two-fifths of Canadians lived in poverty in 1951, falling slightly to more than one-fifth in 1961 and to slightly less than one-fifth by 1968.
In recent years, newly arrived immigrants have higher than average low-income rates, although each immigrant arrival cohort year experiences a declining low-income rate over time.
Measures of poverty in Canada
Market basket measure
The Government of Canada's Department of Human Resources and Skills Development Canada developed the Market Basket Measure (MBM) of poverty in 2003. MBM thresholds take into account community size, location and household and composition, estimating the disposable income required to meet basic needs. Forty eight Canadian communities have been included in the measure.
The government of Newfoundland and Labrador are now developing a market basket measure which is more granular, costing out a set of basic goods in over 400 communities in the province.
In August 2018, it was announced that the Government of Canada was going to use the MBM as the official poverty line.
Low-income cut-off (LICO) rates are often quoted by the media as a measure of poverty even though Statistics Canada has stated it is not a poverty measure. It is also used by statistics collators like the Central Intelligence Agency in lieu of an official measure, although the CIA also notes that it "results in higher figures than found in many comparable economies".
The measure has been reported by Statistics Canada since the 1960s. They were reported only in their "pre-tax" form until 2000, at which point Statistics Canada started to publish both pre and after-tax LICO rates. After-tax LICO rates have been retroactively calculated back to 1986. The measure is intended to represent an income threshold below which a family will likely devote a larger share of its income on the necessities of food shelter and clothing than the average family. As of 2011, 8.8% of Canadians are in a family whose income is below the after-tax low-income cut-off.
There are 7 family sizes and 5 community sizes, resulting in 35 total LICO groups, each one evaluated on a pre and after-tax basis (70 calculations in total). The LICO is currently set at 63% of the average family income within each group. This stems from the 1992 Family Expenditures Survey, which showed the average family spent 43% of its after-tax income on food, shelter and clothing, plus Statistics Canada added an additional 20% margin.
Statistics Canada prefers using the after-tax LICO over the pre-tax LICO "to draw conclusions about [families] overall economic well-being"; however, the pre-tax measures are needed depending on the study being conducted because some sources of data, such as the census, contain only pre-tax income information. It can also be useful to know the pre-tax income profile of groups before the effects of progressive tax rates.
Low Income Measure
The Low Income Measure is a purer measure of relative income. It is defined as 50% of median income, adjusted for family size. In effect, this measure indicates the percentage or number of people in the bottom income quartile.
It is considered an especially useful measure for international comparisons, and is popular with anti-poverty groups and some foreign governments (e.g., Ireland). It results in a higher measure of poverty compared to other measures. In 2017, it was estimated to be 12.9% on an after-tax basis.
The Gini coefficient is a measure of statistical dispersion most prominently used as a measure of inequality of income distribution or inequality of wealth distribution. It is defined as a ratio with values between 0 and 1: the numerator is the area between the Lorenz curve of the distribution and the uniform distribution line; the denominator is the area under the uniform distribution line. Thus, a low Gini coefficient indicates more equal income or wealth distribution, while a high Gini coefficient indicates more unequal distribution. 0 corresponds to perfect equality (everyone having exactly the same income) and 1 corresponds to perfect inequality (where one person has all the income, while everyone else has zero income). The Gini coefficient requires that no one have a negative net income or wealth.
Serious consideration of the Gini coefficient for public policy implications is rare in Canada. Discussion of income inequality in the Canadian media generally implies that income inequality should be continually reduced as an objective, whereas international economists evaluating Gini coefficients generally focus on the idea of targeting an optimal range for the Gini coefficient. Some researchers have suggested the optimal Gini coefficient range is about .25-.40 (Wolfgang Kitterer, 2006, More Growth through Redistribution?). As of 2004, the Gini coefficient for Canada was estimated to be 0.315 on an after-tax basis.
Poverty reduction strategies
Several Canadian provinces are introducing poverty reduction strategies, following the examples set by the European Union, Ireland and the United Kingdom. Newfoundland & Labrador, Nova Scotia, Quebec, Ontario and Manitoba are all developing provincial strategies. Quebec and Manitoba have enshrined their efforts in legislation. Newfoundland & Labrador has established a provincial ministry. Ontario has set a cabinet roundtable to address child poverty, as per the Liberals's campaign promise.
Because of these moves, each province is exploring the development of a measurement tool to track any progress made on reducing poverty, such as the use of a Deprivation Index.
As of August 2018, the Government of Canada has introduced the "Opportunity for All" which is being deemed Canada's first official poverty reduction strategy.
Indigenous children in Canada
According to a left-wing think tank, the Canadian Centre for Policy Alternatives, "Based on data from the 2006 census, this study found that the average child poverty rate for all children in Canada is 17%, while the average child poverty rate for all Indigenous children is more than twice that figure, at 40%." "50% — of status First Nations children live below the poverty line. This number grows to 62% in Manitoba and 64% in Saskatchewan." The study referred to used the Low Income Measure as their definition for poverty, which always shows a high rate. Nonetheless, the much higher LIM statistics for indigenous families indicates a much higher level of poverty among that demographic.
Assistance for poor people in Canada
Government transfers and intervention
Reduced tax burden
The Canadian income tax system is highly progressive. This can be seen by comparing the 2005 pre-tax low-income cut-off rate of 15.3% with the after-tax rate of only 10.8%. It is also evident in the Gini coefficient, which was estimated to be 0.428 on a pre-tax basis but only 0.315 on an after-tax basis. The Conference Board of Canada 2013 study noted the Canadian system provides relief to the poor which contributes to lowering poverty rates in Canada. Their 2013 report stated that without Canada's tax system and transfers, the poverty rate would have been 23 per cent not the current 12 per cent.
The Conference Board of Canada 2013 study noted "that due to the tax system and transfers to the poor, income inequality is 27 per cent lower than it otherwise would be." Canada has a wide range of government transfers to persons, which totaled $176.6 billion in 2009. Some of the transfers designed to assist low-income people in Canada include Welfare and Old age security. There is also an extensive mandatory Employment Insurance program designed to assist workers who have become unemployed to lessen the chance of them falling into poverty.
In addition to government transfers, there are number of other publicly funded services and social programs that benefit those with low-incomes like Medicare, Public education for grade school; subsidized post-secondary education, Subsidized housing, and Employment equity programs, which often target various groups of people who are deemed to be susceptible to having low-incomes.
Working income tax benefit
The WITB was introduced in 2007 to encourage low income people to enter the labour force, and to provide them with increased financial support. The WITB has been expanded considerably since its introduction. As of 2012, it is worth up to $970 for a single individual, $1762 for couples and single parent families. A person or couple must have at least $3,000 in employment income, and not be a student, to be eligible for WITB. Benefits increase, and then decrease, with income, and are completely clawed back at an income of $11,011 for singles, $15,205 for couples or single parents (in 2012).These credits are not taxed (see Income taxes in Canada#Income not taxed).
Low-income Canadians are eligible for the Canada Child Tax Benefit (a federal benefit), and provincial child tax credits or benefits and Québec family allowances. For example, Ontario pays a benefit scheduled to grow to $180 per month by 2011 for a family earnings less than $20,000 with two children. These credits are not taxed (see Income taxes in Canada#Income not taxed).
Minimum wage laws
Under the Constitution of Canada, the responsibility for enacting and enforcing labour laws including minimum wages in Canada rests with the ten provinces, the three territories also having been granted this power by virtue of federal legislation. This means that each province and territory has its own minimum wage. The lowest general minimum wage currently in force is that of the Nova Scotia ($10.85/hour), the highest is that of Ontario ($14.00/hour). Some provinces allow lower wages to be paid to liquor servers and other tip earners, and/or to inexperienced employees
Although listed here under assistance, some theories suggest that minimum wage laws are a net detriment to low-income people as a whole, because they reduce the attractiveness of hiring low-skilled staff (see Minimum wage#Debate over consequences).
- The Conference Board of Canada "uses the OECD's relative measure of child poverty, which calculates the proportion of children living in households where disposable income is less than 50 per cent of the median in each country." The Conference Board 2013 cautioned that Canada's high poverty rate, ranks among the worst of the 17 countries they compared. "Canada's child poverty rate was 15.1 per cent, up from 12.8 per cent in the mid-1990s. Only the United States ranked lower.
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