The debate in Canada on poverty lines goes back at least a decade and has produced much more heat than light. Most of the attacks on Statistics Canada's "low income cut-offs" or LICOs are ideologically motivated and ignore the four most basic facts about poverty and poverty lines:

! All poverty lines are relative.

! All poverty lines are arbitrary.

! Poverty lines are a research tool for measuring the incomes of groups of people, not a measure of individual need.

! Some poverty lines are better than others, but none of them is perfect.

     All poverty lines are relative. Our view of poverty in Canada is profoundly different than it was a century ago, and it is profoundly different from current views of poverty in Greece, Peru, Nepal, Somalia and most other countries of the world.

     A century ago, people in Canada would have considered someone poor if they did not have a horse or some other beast of burden for their work and basic transportation. Today, poverty is more likely to be measured in terms of reasonable access to buses or subways in cities or access to an automobile or truck in rural areas.

     Poverty is also relative in the sense that every culture has its own ideas about what is needed to be part of the mainstream of society. Being able to afford meat products is considered necessary in many western cultures, but it would not be considered very important in a country where most people are vegetarians because of their religious beliefs. Warm winter clothing and central home heating are vital in a country like Canada, and anything but a necessity in Honduras or Tahiti.

     All poverty lines are arbitrary. Some poverty lines are drawn statistically and some are drawn by measuring the cost of a "market basket" of essential goods and services. Both types of lines are equally arbitrary.

     In lines which are drawn statistically, someone has to decide what raw data to use and what methodology to use to get from the data to the poverty lines. One measure that is used in some international studies of poverty is one-half of median income or the half-way point for family income in each country. The decisions to use one-half rather than one-third of median income and to use median income rather than average income are both arbitrary.

     In lines which are drawn from market baskets of goods and services, someone has to decide what goes in the basket and what does not. That is not nearly as easy as it sounds. How many rolls of toilet paper would a family of four reasonably use every week? How much clothing, new or used, would that same family need to buy in a typical month? What is a reasonable budget for school supplies over the course of a year? The answers to these and a host of other questions determine the overall cost of the market basket.

     Poverty lines are a research tool for measuring the incomes of groups of people, not a measure of individual need. The primary limitation of both statistical poverty lines and market baskets of goods and services is that they cannot cover all the exceptions to the rule. Poverty lines work best when they are used to measure the incomes of large groups of people. They work worst when people try to apply them to individuals.

     Take the cost of housing, for example. Some people have mortgages and others do not. Some people live in government-subsidized housing. Some people live in well-insulated apartments where the rent includes heating, while others rent houses which are poorly insulated and have to pay sizable heating bills on their own. A couple with two young children might be able to manage with two bedrooms, but a couple with a teenage boy and a teenage girl would need three bedrooms.

     The people who draw poverty lines have to make compromises to keep the number of lines down to a reasonable total. The idea is to have poverty lines that cover the most common types of families in different parts of the country. All poverty lines are based on the number of people in the family, and some of them also take account of the size of the community where they live. Most poverty lines do not vary with the type of housing or the age of the people in the household.

     There will always be individual cases where family needs are not well covered by any given poverty line. That is the reason welfare programs use a "needs test" for each individual case. With a needs test, all the family's needs and all its sources of incomes are considered. Welfare entitlements can be increased to cover the added cost of prescription drugs for a child with asthma or additional transportation costs in a very remote area or the cost of child care to allow parents to work full-time in the paid labour force.

     Some poverty lines are better than others, but none of them is perfect. No matter how hard the experts try, they cannot escape the first three facts about poverty lines. Poverty lines will always be relative, poverty lines will always be arbitrary, and they will always be suitable for research and unsuitable as a measure of individual well-being. The most we can hope for is a useful research tool that is easily understood and widely accepted.

     Some poverty lines are better than others at measuring changes in poverty over time. That is a very desirable feature, because it allows researchers to see the impact of changes in economic conditions or changes in government policy. Statistics Canada's low income cut-offs are very good in reflecting the ups and downs of the economic cycle. However, poverty lines based on average or median income tend to change very little from year to year and are much less useful in measuring poverty over time.

     Some poverty lines are better than others because they focus on disposable income or cash on hand. The low income cut-offs are based on income after government transfer payments such as welfare, unemployment insurance or the Canada Child Tax Benefit but before income taxes. Most market basket poverty lines are after-tax measures that reflect the cost of sales taxes as well as income taxes. That is because people actually purchase the items in the market basket, and they have to pay any federal, provincial or territorial sales taxes on taxable items when they make their purchases.

     Some poverty lines are better than others because they are easily understood and therefore easily accepted. One of the problems that has dogged the low income cut-offs is the fact that the methodology used to derive the lines is not easily explained. Lines based on a market basket of goods and services are much more straight-forward and much more likely to be accepted as reasonable by the general public.

Why Have Poverty Lines At All?

     Given all the limitations and shortcomings, why should Statistics Canada or anyone else go to all the trouble of developing poverty lines? The answer to that question goes to the heart of our existence as a political and economic democracy.

     Canadians have a well-honed sense of fair play that dates from our beginning as a nation. In politics, we accept the principle of one person, one vote and the principle that governments derive their mandate to govern from the collective will of voters. In economics, we pride ourselves on the ideal of equal opportunity for all and in making it possible for everyone to share in the vast bounty that is Canada.

     Simply put, poverty lines are one measure of how well our democracy is working. They delineate that minority within the population that stands apart from the mainstream of Canadian life because of meagre income.

     The statistics that come from poverty lines are every bit as valuable as widely accepted statistics such as the unemployment rate and the Consumer Price Index, yet they always seem to instill fear in the hearts of governments. Governments are loathe to admit that poverty exists in a country like Canada, but everyone knows that poverty exists - with or without official government sanction.

     Poverty lines also give us the ability to take concrete steps to reduce the risk of poverty and to measure how good a job we are doing. The watershed in social policy is between the people who are content simply to count the number of poor people and those who use poverty statistics to champion better programs and policies for disadvantaged Canadians.

     The National Council of Welfare's biggest complaint with the very low poverty lines supported by the Fraser Institute of British Columbia, for example, has been that the institute's only apparent interest in poverty lines is to show that poverty is not a problem in Canada and does not warrant action by government.

     Our Council has maintained from the beginning that poverty statistics are only a first step. Having identified groups of people who are poor or most likely to be poor, we follow through by putting forward policy options to ease the burden of poverty and by promoting our proposals through our reports and our representations to governments.

     Our annual Poverty Profile reports track how well or how poorly Canada is doing in the fight against poverty and identify the groups of people who face the highest risks of poverty. Our other reports build on this data with detailed policy recommendations to governments.

Statistics Canada's Low Income Cut-offs

     The National Council of Welfare has long used the low income cut-offs or LICOs of Statistics Canada as its measure of poverty. Statistics Canada has consistently maintained that it does not regard the LICOs as poverty lines, presumably because the federal government does not want to give official recognition to poverty. Most social policy groups in Canada have consistently disagreed with the position of the federal government and continue to use the LICOs as poverty lines.

     Despite the long-running dispute over terminology, the low income cut-offs are by far the most widely used measure of poverty in Canada. The survey data and methodology used to generate the cut-offs are done by a federal government agency with an international reputation for high-quality work. Statistics produced using the LICO methodology are readily available to researchers inside and outside government year after year at modest cost. Coincidentally or not, the income levels of the LICOs are in the mid-range of the alternative poverty lines that have appeared from time to time.

     The LICOs for 1996 are shown in Table 1 on the next page. There are a total of 35 individual lines that vary with the size of the family and the population of the area of residence. These particular lines are known as 1986 base LICOs because they were first drawn from spending patterns in Statistics Canada's Family Expenditure Survey for the year 1986. The LICOs are updated every year using the Consumer Price Index.