Poverty

Key Messages

Putting poverty in context

The overarching goal of the Conference Board’s How Canada Performs is to measure quality of life in Canada and its peer countries. Poverty affects quality of life not only of the poor but of everyone in society. Poverty can lead to higher crime rates, illness, substance abuse, and poor educational outcomes, which, in turn, affect the economy through lost productivity. Poverty can also lead to discrimination, inequity, and social exclusion. As the OECD has concluded, “failure to tackle the poverty and exclusion facing millions of families and their children is not only socially reprehensible, but it will also weigh heavily on countries’ capacity to sustain economic growth in years to come.”¹

How is the poverty rate calculated?

Poverty can be measured in both absolute and in relative terms. Absolute poverty examines whether individuals are able to meet a basic threshold for survival. It is a set standard that typically does not change with time. For example, the share of the population that lives under $1.90 per day is an absolute measure of poverty used by the World Bank.² “The concept of absolute poverty is not concerned with broader quality of life issues or with the overall level of inequality in society. The concept therefore fails to recognize that individuals have important social and cultural needs.”³ Relative poverty, on the other hand, is defined “in relation to the economic status of other members of the society: people are poor if they fall below prevailing standards of living in a given societal context.”⁴

For our poverty indicator, we use low income measures (LIMs), which are relative measures of income, to assess how people fare compared with the general population. For a given country or region, the poverty line is calculated as 50 per cent of the national median income. The poverty rate is calculated as the share of the population with disposable incomes (after taxes and government transfers) below this poverty line.

The source of the poverty data for the peer countries, Canada, and the provinces is the OECD regional well-being database. Statistics Canada also produces relative poverty data for Canada and the provinces, but these data are not comparable to the OECD data because the OECD uses differing income concepts and components to arrive at its low income measures.⁵

How do the poverty rates in the provinces compare to those of Canada’s peer countries?

Alberta has the lowest poverty rate among the provinces and is a standout performer, scoring an “A” grade and ranking third overall. Alberta had a poverty rate of 7.2 per cent in 2013, which places it just behind Denmark (5.4) and Finland (6.8).

The next highest-ranking province, Saskatchewan, ranks a distant 14th overall and scores a “B” with a poverty rate of 11.3 per cent, just behind peer countries Belgium (10) and the U.K (10.7). Newfoundland and Labrador ranks just behind Saskatchewan and is a “C” performer with a poverty rate of 12.1 per cent.

Overall, Canada ranks 13th among the 16 peer countries and gets a “C” grade with a poverty rate of 12.6 per cent in 2013. Seven provinces also get “C”s and rank below the national average: Quebec (13.0), New Brunswick (13.3), Ontario (13.5), Manitoba (13.7), British Columbia (13.8), Nova Scotia (14.2), and P.E.I. (14.4). These provinces rank ahead of only two peer countries: Japan (16) and the United States (17.5).

How do the provinces perform relative to one another?

Alberta has the lowest poverty rate among all the provinces. Saskatchewan ranks second among the provinces, although its poverty rate of 11.3 per cent is 4 percentage points higher than that of top-ranked Alberta. Most provinces rank below the national average with poverty rates ranging from 13 to just over 14 per cent. P.E.I. had the highest poverty rate among the provinces in 2013—at 14.4 per cent, the province’s poverty rate was exactly two times higher than that of Alberta.

Keep in mind, however, that the reference year for these data is 2013, prior to the commodity shock that hit resource-dependent provinces Alberta, Saskatchewan, and Newfoundland and Labrador. Thus, when more current data become available, the provincial rankings will likely change.

Are there comparable poverty data for the territories?

No. Unfortunately, Statistic Canada’s Canadian Income Survey, the data source for OECD’s poverty calculations for Canada, does not include the territories. So, we are unable to gauge the performance of the territories relative to the peer countries on this indicator.

Examining the social outcomes in the territories is critical, however, especially given that poverty among Aboriginal populations is significantly higher than among non-Aboriginal populations. The territories have the largest shares of Aboriginal populations in the country (in Yukon, N.W.T., and Nunavut 23, 52, and 86 per cent, respectively, of the population is Aboriginal).⁶

The Conference Board plans to publish a standalone How Canada Performs report on social performance in the territories, which will examine their poverty rates and other key social measures, in spring/summer 2017.

How have the poverty rates in Canada and the provinces changed over time?

It is not possible to examine the historical performance for the indicator benchmarked in this report card because the OECD began collecting and disseminating poverty data at the regional level only recently. However, Statistics Canada’s low income measure (LIM) figures show that Canada’s poverty rate has remained fairly stable over the past few decades, hovering between 12 and 14 per cent. In fact, the rate in 1976 was the same as that in 2014, the most recent year for which data are available. Poverty in Canada dropped temporarily in the 1980s, reaching a low of 10.5 per cent in 1989.⁷

The poverty rates in resource economies Alberta, Saskatchewan, and Newfoundland and Labrador have trended downwards since the late 1970s. Ontario has seen movement in the opposite direction, with its highest poverty rates in the past decade.

Provincial poverty rates, and hence relative rankings, may vary greatly from year to year as a result of sampling variability, particularly for smaller provinces. For example, data for P.E.I. and Newfoundland and Labrador have a higher coefficient of variation, between 8 and 16 per cent (the coefficient of variation is between 4 and 8 per cent for most of the provinces). The data for Alberta also have a coefficient of variation of 8 to 16 per cent.⁸ There may be more variability in the figures reported for Alberta from year to year because fewer people are in low income in the province.

How do Canada and the provinces fare when it comes to child poverty and elderly poverty?

Using OECD data, we can examine performance on child and elderly poverty at the national level relative to the peer countries. But the OECD regional database reports on poverty only for the total population in each of the regions and does not collect data by age cohort. So, it is not possible to compare how the provinces fare relative to their international peers on child poverty and elderly poverty.

However, we are able to examine how the provinces do relative to one another using Statistics Canada’s Canadian Income Survey data. Looking at Statistics Canada’s low income measure (LIM) figures, we see that Alberta and P.E.I. had the lowest child poverty in 2014, the most recent year for which data are available, with poverty rates of 9 per cent. Manitoba and New Brunswick had the highest child poverty in 2014, using the LIM measure. At 22 per cent, Manitoba’s child poverty rate is two-and-a-half times the rate in top-ranked Alberta.⁹

The child poverty rate for Canada as a whole was 14.7 per cent in 2014. The national child poverty rate has been relatively constant for the past several decades, fluctuating between 14 and 17 per cent over the years.

Looking at OECD data (comparable data are not available at the regional level), we see that Canada’s child poverty rate relative to its peer countries is high. In fact, Canada has the second-highest poverty rate among the 16 peer countries—only the U.S. does worse.

When it comes to elderly poverty, Alberta is once again the top performer among the provinces, with a poverty rate of only 4 per cent in 2014. Ontario has the second-lowest elderly poverty rate among the provinces, at 9.2 per cent in 2014.

The Atlantic provinces are on the other side of the spectrum. Almost one-fifth of the population 65 and older in P.E.I. and Nova Scotia was in poverty in 2014 (using the LIM data), while Newfoundland and Labrador and New Brunswick had elderly poverty rates of 23.5 per cent and 21.6 per cent, respectively.

The national elderly poverty rate was 12.5 per cent in 2014. Between the late 1970s and mid-1990s, the elderly poverty rate dropped steadily, from over 30 per cent in 1977 to just under 4 per cent in 1995. However, the late 1990s through to 2011 saw increasing elderly poverty. The rate then dropped slightly in 2012 and 2013, before edging up again in 2014.

Canada’s performance relative to its peers is much better when it comes to poverty among the elderly population than it is for child poverty. Among the 16 countries, Canada has the fifth-lowest elderly poverty rate, ranking behind the Netherlands, France, Denmark, and Norway.

Do poverty rates vary by gender?

Poverty rates have remained higher for women than men over the years, and the difference is particularly notable for the elderly populations. In 2014, the overall poverty rate was 13.5 per cent for women and 12.5 per cent for men. For those aged 65 years and older, the poverty rate was 14.4 per cent for women and 10.3 per cent for men—a difference of just over 4 percentage points.¹⁰

Children raised in single-parent families headed by women are particularly vulnerable. In 2014, the poverty rate in Canada for children under 18 raised in single-parent families headed by women was 45 per cent.¹¹

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Is the low income measure the best way to assess poverty?
No. It is one way to assess poverty. The low income measure (LIM) is often used when making international comparisons. With the LIM, the poverty rate is calculated as the share of the population whose income is less than 50 per cent of the median family income in a given year. It is a relative measure that gives us information on how people are doing with respect to the median income of the general population.

The low income measure does not indicate whether people are able to meet basic human needs of food, clothing, and shelter. Furthermore, given that the median income in a region changes from year to year, the poverty threshold changes, according to the LIM, from year to year as well. This can be confusing to interpret during recessions when the median income falls, because incomes for those at the bottom may fall by less—so relative poverty could actually decline during a recession. Also, the LIM, by definition, implies that there will always be a share of the population in poverty—poverty will always exist according to this measure because there will always be people with income less than 50 per cent of the median family income.

Statistics Canada’s low income cut-off (LICO) is another relative measure of poverty. The LICO is the income level below which a family would devote at least 20 percentage points more than the average family of their income to food, clothing, and shelter.12 People are said to be in the low-income group if their income falls below this threshold.

For example, if the average family in a region spends 43 per cent of their after-tax income on food, shelter, and clothing, then the LICO would be 63 per cent. In other words, a family would be considered to be in poverty if 63 per cent or more of their income was being spent on these three basic needs.

Unlike the LIM, the LICO takes into account not only income but also the basic needs of food, shelter, and clothing. The 20 percentage point threshold is arbitrary, however. Also, the LICO is based on 1992 spending patterns. The LICO for a given year is calculated by multiplying the 1992 LICO by the consumer price index (CPI) inflation rate. Spending patterns have likely changed significantly in the past 20 plus years, particularly given technological advancements and increased use of and dependence on the Internet. So, it does not seem realistic to select a poverty threshold based on 1992 spending figures.

Statistics Canada also produces low-income data using the market basket measure (MBM) approach, based on concepts developed by Human Resources and Skills Development Canada. The MBM is a measure of the disposable income a family would need to be able to purchase a basket of goods that includes food, shelter, transportation, and other basic needs. The MBM is different from the other low-income measures in that it is more sensitive to “geographical variations in the cost of many typical items of expenditure.”13

While the LIM has drawbacks, the advantage of this relative measure is that it takes into account the issue of social exclusion. To fully participate in society, people need resources that are not too far below the norm in their community. Falling behind the average means exclusion from the normal life of society. Also, according to research based on data from the World Values Survey, changes in relative income have a much larger impact on happiness than do changes in absolute income.14 Finally, the LIM allows for international comparisons.

Three Ways to Measure Poverty

Measure	Advantages	Disadvantages
Low income measure (LIM): the poverty line calculated as 50 per cent of the median income of the population in that country or region	useful for international comparisons takes into account the issue of social exclusion	gives no indication on whether the population is able to meet its basic human needs of food, clothing, and shelter changes from year to year (as median income changes) may send unclear messages about poverty during recession periods implies, by definition, that poverty will always exist
Low income cut-off (LICO): the income level below which a family would devote at least 20 percentage points more than the average family of their income to food, clothing, and shelter The LICO is based on 1992 spending patterns. The LICO for a given year is calculated by multiplying the 1992 LICO by the consumer price index (CPI) inflation rate.	takes into account spending on basic needs: food, clothing, and shelter	uses an arbitrary cut-off is based on decades-old spending patterns does not take into account regional differences—e.g., differences in housing costs
Market basket measure (MBM): the disposable income a family would need to be able to purchase a basket of goods that includes food, shelter, transportation, and other basic needs	takes into account spending on basic needs takes into account geographical variations in the costs of items	cannot be used for international comparisons does not reflect social exclusion

A criticism of both absolute and relative poverty concepts is that they are focused only on income and consumption. They reflect either the income perspective or the basic needs perspective, but not the “capability (or empowerment) perspective.” A definition of poverty must also reflect a “lack of some basic capability to function” and should take into account not only the economic side but also social, political, and cultural aspects.¹⁵

Does performance over time and relative provincial performance vary greatly among the different poverty measures?

The LIM, LICO, and MBM produce different figures on the share of the population living in poverty. In 2014, according to each measure, the following numbers of Canadians were living in low income:

The three measures also tell different stories over time:

When comparing provincial poverty rates, each measure presents different results. In 2014, according to Statistics Canada’s LIM data, Alberta had the lowest poverty rate among the provinces by a large margin, followed by Saskatchewan. New Brunswick, Nova Scotia, and Manitoba had the highest poverty rates that year, according to the LIM figures.

Conversely, the LICO presents P.E.I. and Newfoundland and Labrador as having the lowest poverty rates in 2014, while Ontario, B.C., and Manitoba had the highest rates.

Finally, the MBM, like the LIM, presents Alberta as the province with the lowest poverty rate in 2014, followed by Quebec and Saskatchewan. According to MBM data, Nova Scotia and B.C. had the highest poverty rates that year.

What are Canada and the provinces doing to reduce poverty?

The federal government announced its commitment to developing a national poverty reduction strategy in 2016. The government plans to engage Canadians across the country in developing the strategy through “in-person roundtables with Indigenous organizations, businesses, community organizations, academic experts and, notably, Canadians who have a lived experience of poverty.”¹⁷ Individuals and organizations will also be able to submit their ideas online and participate in discussion forums and online townhalls with the Minister of Families, Children and Social Development.

When developing a poverty reduction strategy, the fact that certain groups are more at risk of poverty than others and that poverty affects diverse groups in different way must be taken into consideration. Women, in particular single parents and single elderly women, are more greatly affected by poverty. People with disabilities, Indigenous people, visible minorities, and recent immigrants are also disproportionately affected by poverty. Finding ways to address the gender wage gap, immigrant wage gap, and racial wage gap is a start.

Actual targets for poverty reduction are not easy to establish, given that there is no consensus on the best way to measure poverty. So, a first step will be to determine an appropriate measure of poverty. The federal government has indicated that it plans to solicit feedback and draw on expertise from the provinces and territories on how to improve the measure of poverty.¹⁸

In addition to announcing its plans to develop a national poverty strategy, the federal government announced initiatives in 2016 to help reduce poverty in Canada. The Canada Child Benefit was introduced, which provides up to $6,400 per year for eligible children under 6 years of age and $5,400 per year for eligible children aged 6 to 17.¹⁹ Measures to address elderly poverty include increasing the Old Age Security and the Guaranteed Income Supplement top-up for low-income seniors by $947 per year and cancelling the age of eligibility increase from 65 to 67. The government is also investing $200.7 million to increase affordable housing for seniors.²⁰ Poverty among people with disabilities is being addressed at the national level by developing accessibility legislation. Improving accessibility in the workplace will improve employment prospects and, hence, incomes for people with disabilities.²¹

A number of initiatives have been introduced to address poverty among Aboriginal populations. On the education front, starting in 2016–17, the government is investing $2.6 billion over five years for primary and secondary education on reserves and $969 million for school infrastructure on reserves. The government is also developing “an Indigenous Early Learning and Child Care Framework that recognizes the need for access to affordable, quality child care that is culturally appropriate for Indigenous parents and children.” With respect to housing, $554.3 million is to be invested over two years to improve housing conditions and reduce crowding in First Nations communities, and $177.7 million will be invested to help with urgent housing needs in Canada’s Northern and Inuit communities.²²

At the provincial level, almost all the provinces, except B.C. and P.E.I., have a poverty reduction strategy.²³ Saskatchewan introduced its first Poverty Reduction Strategy in 2016, which set a target to reduce the number of people in poverty in the province for two years or more by 50 per cent by the end of 2025. The strategy focuses on six areas: income security, housing/homelessness, early childhood development, employment, and health/food security.²⁴

There is growing interest in the notion of implementing a basic income guarantee (also known as guaranteed annual income) to reduce poverty. With a basic income guarantee, all residents receive an unconditional sum of money each year. A few provinces are looking into implementing basic income pilot projects. Ontario intends to introduce a plan for a pilot by April 2017.²⁵ In December 2016, P.E.I.’s legislature passed a motion to start working with the federal government to implement a universal basic income pilot project.²⁶ There is also interest in pursuing a basic income guarantee in Quebec; in January 2016, Premier Philippe Couillard appointed François Blais as the Minister of Employment and Social Solidarity and tasked him with improving the province’s income support instruments “in the direction of a guaranteed minimum income.”²⁷

Footnotes

1    OECD, Combating Poverty and Social Exclusion Through Work, Policy Brief (Paris: OECD, 2005).

2    World Bank, World Bank Open Data (accessed January 24, 2017).

3    UNESCO, Poverty (accessed January 24, 2017).

4    Ibid.

5    For example, in calculating disposable income, the OECD subtracts both income taxes and payroll taxes, whereas Statistics Canada subtracts only income taxes. Also, in the OECD figures, household income includes the value of goods and services produced for own consumption as an element of self-employment income. This is not the case with the Statistics Canada data. Furthermore, OECD sets any negative components of market income (e.g., negative investment income) to zero, whereas Statistics Canada includes the negative figures.

6    Statistics Canada, National Household Survey, Number and Distribution of the Population Reporting an Aboriginal Identity and Percentage of Aboriginal People in the Population, Canada, Provinces, and Territories, 2011.

7    Statistics Canada, CANSIM Table 206-0041, Low Income Statistics by Age, Sex, and Economic Family Type, Canada, Provinces, and Selected Census Metropolitan Areas (CMAs) (accessed September 28, 2016).

8    Ibid.

9    Ibid.

10    Ibid.

11    Ibid.

12    Statistics Canada, Low Income Cut-Offs (accessed September 23, 2016).

13    Statistics Canada, Market Basket Measure (MBM) (accessed September 28, 2016).

14    Richard Ball and Kateryna Chernova, “Absolute Income, Relative Income, and Happiness,” Social Indicators Research, 88, 2 (2007), 497.

15    UNESCO, Poverty (accessed January 24, 2017).

16    Statistics Canada, CANSIM Table 206-0041, Low Income Statistics by Age, Sex, and Economic Family Type, Canada, Provinces, and Selected Census Metropolitan Areas (CMAs) (accessed September 28, 2016).

17    Government of Canada, Towards a Poverty Reduction Strategy, Discussion Paper, October 2016, 4.

18    Ibid., 19.

19    Canada Revenue Agency, Canada Child Benefit—How Do We Calculate Your CCB.

20    Government of Canada, Towards a Poverty Reduction Strategy, Discussion Paper, October 2016, 25.

21    Ibid., 26.

22    Ibid.

23    P.E.I. had a three-year Social Action Plan to Reduce Poverty in place that expired in 2015. No announcements have been made yet as to whether or not it will be renewed or whether new poverty reduction initiatives will be introduced. Canada Without Poverty, 2016 Poverty Progress Profiles.

24    Government of Saskatchewan, Taking Action on Poverty: The Saskatchewan Poverty Reduction Strategy, February 2016, 8.

25    Government of Ontario, Basic Income Pilot Consultation (accessed February 20, 2017).

26    Legislative Assembly of Prince Edward Island, Motion No. 83: Universal Basic Income (accessed February 20, 2017).

27    Basic Income Earth Network, Quebec: Minister of Employment Appointed to Work on Basic Income, February 4, 2016 (accessed January 30, 2017).