Before we look at different ways of developing market baskets poverty lines, we need to look at possible sources of information about the spending habits of people. First of all, we should know what kinds of goods and services people actually buy in order to get a better idea of the items that could go into the market basket. We should also know if there are significant differences in spending patterns from one part of the country to another, so we know how many different market baskets to produce.
Some of the answers to these questions can be found in the Family Expenditure Survey (FAMEX) of Statistics Canada. Some of the information can be inferred from data in the Family Expenditure Survey. Some of the information is best obtained from more specialized surveys of the cost of specific goods and services.
Spending Habits in 1996
Most people think of food, shelter and clothing as the basic necessities of life, but the list is actually much longer. A reasonable market basket of goods and services would also include a host of other items such as household cleaning supplies, basic telephone service, soap and other personal care products, dental and eye care that is not covered by medicare, basic transportation, and a few toys for any children in the family.
As soon as we get beyond the absolute minimum items needed to survive and not one calorie or one cent above the absolute minimum, the list becomes quite lengthy. We believe that the vast majority of Canadians, given a detailed list of possible goods and services to choose from beyond basic food, shelter and clothing, would not hesitate to add many other items to a market basket.
To get a better idea of the items that could go into the market basket, we asked Statistics Canada for a detailed breakdown of the spending patterns of the poorest 20 percent of the population, as reported in the Family Expenditure Survey for 1996.
The results are presented in Table 2 on the next page. The spending patterns in the table show what the poorest people in Canada actually spent on different types of purchases in 1996. The figures may or may not reflect what they needed to spend.
The left-hand column for each household size in the table gives the percentage of households which reported a particular kind of spending, and the right-hand column shows average spending by those households. For example, only nine percent of the one-person households reported spending on education in 1996, but those who did spend on education spent $1,452 each on average.
Because not all people spend money in all categories every year, the columns do not add up to the figures near the bottom of the table in the rows for total current consumption and total expenditures.
The poorest 20 percent of one-person households reported average total expenditures for all items of $10,688 in 1996. By way of comparison, the Statistics Canada low income cut-off for a single person living in a city of half a million or more was $16,061. The poorest 20 percent of households with two or more persons had total expenditures of $22,868 in 1996. The average household size was 2.54 persons. The low income cut-off in a large city was $21,769 for a family of two and $27,672 for a family of three.
Here is a more detailed commentary on spending in each of the categories in Table 2. All in all, it is clear from the table that the vast majority of spending by poor people goes for items that are widely considered to be essential items.
Food: The vast majority of the money that poor people spent on food was for food purchased in stores rather than food purchased in restaurants or at snack bars. The one-person households who reported spending on restaurant food spent $427 on average in 1996, and the larger households with spending on restaurant food spent $694 on average.
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One-Person Households |
Households of Two or More Persons |
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Percent Reporting |
Average Spending |
Percent Reporting |
Average Spending |
|
Food |
100% |
$2,091 |
100% |
$4,325 |
|
Shelter |
100% |
$4,059 |
100% |
$6,131 |
|
Household Operation |
100% |
$753 |
100% |
$1,507 |
|
Furnishings & Equipment |
72% |
$299 |
92% |
$755 |
|
Clothing |
92% |
$394 |
99% |
$1,048 |
|
Transportation |
84% |
$801 |
96% |
$3,048 |
|
Health Care |
83% |
$350 |
95% |
$671 |
|
Personal Care |
99% |
$225 |
100% |
$540 |
|
Recreation |
84% |
$460 |
97% |
$1,183 |
|
Reading |
64% |
$141 |
78% |
$172 |
|
Education |
9% |
$1,452 |
36% |
$972 |
|
Tobacco & Alcohol |
61% |
$739 |
79% |
$1,067 |
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Miscellaneous |
81% |
$439 |
92% |
$663 |
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Total Current Consumption |
100% |
$10,082 |
100% |
$20,844 |
|
Personal Taxes |
46% |
$71 |
73% |
$1,250 |
|
Insurance & Pensions |
29% |
$255 |
61% |
$742 |
|
Gifts & Contributions |
63% |
$785 |
74% |
$885 |
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Total Expenditures |
100% |
$10,688 |
100% |
$22,868 |
|
Low Income Cut-off For A Large City |
$16,061 |
$21,769/$27,672 |
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Shelter: About 76 percent of the poorest one-person households were renters rather than home-owners, and roughly half of the renters had utility costs in addition to rent. About 57 percent of the larger households were renters, and about two-thirds of them had utility costs in addition to rent.
Household Operation: The major items in the category are telephone charges, cleaning supplies, paper products and child care. The one-person households in the table spent an average of $419 a year on telephones (including $260 on basic charges), $94 on cleaning supplies, and $112 on items such as paper towels, toilet paper and paper tissues. The larger households spent an average of $628 on telephones (including $263 on basic charges), $212 on cleaning supplies and $223 on paper products and similar items. Only ten percent of the households of two or more persons reported child care expenses, but those who did paid an average of $990 in 1996.
Furnishings and Equipment: There were no clear spending patterns for items in this large and diverse category.
Clothing: There is no thing as "typical" spending on clothing because of the huge range of items for men and women, boys and girls, and babies or very young children, but the amounts spent seem quite consistent for both types of households. Average spending for the one-person households was $394 in 1996. Average spending for the larger households was $1,048 or $413 per person when the total is divided by the average household size of 2.54.
Transportation: Seventy-two percent of the one-person households relied on public transportation, and their average spending on public transportation was $343 in 1996. In the larger households, there was a considerable overlap, with 74 percent of the households using private transportation and 63 percent using public transportation. The spending on private transportation was by and large for gas and oil, maintenance and repairs, insurance and license fees rather than for the purchase of a car or truck.
Health Care: The major items in the category are prescription and non-prescription drugs, eye care, dental care, hospital and other care not covered by medicare, and health insurance premiums, including premiums for public health insurance in Alberta and British Columbia. Most households reported spending on pharmaceuticals, and the average amounts spent were $167 in one-person households and $281 in larger households.
The percentage of households which reported spending on the other items in the category was shockingly low, considering how important the items are. It appears that many poor people were doing without essential health care items simply because they could not afford to pay for them.
Among one-person households, 21 percent had eye care expenses averaging $170, 20 percent had dental expenses averaging $316, seven percent had hospital and other non-insured expenses averaging $225, and eight percent had health premiums averaging $337. Among households of two or more persons, 37 percent had eye care expenses averaging $214, 35 percent had dental expenses averaging $354, 19 percent had hospital and other non-insured expenses averaging $195, and 22 percent had health premiums averaging $500.
Personal Care: The major items in the category include soap, cosmetics, shampoo, deodorant, toothpaste, razors, disposable diapers and haircuts.
Recreation: The category covers an array of sports, toys, hobbies and other forms of entertainment, including home entertainment, cable television and spectator events. Among one-person households, half had home entertainment expenses averaging $194 and 46 percent had cable TV at an average cost of $315. Among larger households, 74 percent had home entertainment expenses averaging $392, 61 percent had cable TV at an average cost of $343, and 81 percent attended spectator events at an average cost of $331.
Reading: The category includes newspapers, magazines and books.
Education: Relatively few of the poorest households reported spending on education, although average spending was sizable. The category includes books and supplies and tuition fees.
Tobacco and Alcohol: Forty percent of the people in the one-person households were smokers and 52 percent of the larger households had at least one smoker. About 44 percent of the one-person households and 64 percent of the larger households reported spending on alcoholic beverages.
Miscellaneous: The category includes interest charges, banking fees, union dues and various forms of gambling. Sixty-four percent of the one-person households had gaming expenses of $256 on average, and 73 percent of the larger households had gaming expenses averaging $235.
Personal Taxes: The category covers income taxes, but few other taxes. The totals in the table are misleading, because they include income taxes paid for 1996 minus any tax refunds. Fifteen percent of the one-person households paid taxes on their 1996 incomes that averaged $778, and 51 percent of the households of two or more persons paid income taxes averaging $2,080.
Insurance and Pensions: The category includes life insurance premiums, premiums for Employment Insurance and contributions to the Canada or Quebec Pension Plans.
Gifts and Contributions: Gifts refers to items or money given to other people, and contributions includes donations to both religious and charitable organizations.
Differences in Spending by Income Class
It should come as no surprise that the spending patterns of poor people often differ sharply from the spending patterns of people in other income groups. Table 3 on the next page shows the percentages of total current consumption spent on different categories of spending by the poorest 20 percent of all households, the middle 20 percent and the richest 20 percent in 1996.
As might be expected, poor households spend proportionately more of their available incomes on food and shelter than households with higher incomes. Conversely, they spend proportionately less than other households on clothing, transportation and recreation.
What is surprising about the data in Table 3, however, is the consistency in several major categories of spending. Spending on household operation, furnishings, health care, personal care and reading as a percentage of total current consumption were more or less than same in all three income classes.
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Poorest 20 Percent |
Middle 20 Percent |
Richest 20 Percent |
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Food |
20% |
18% |
16% |
|
Shelter |
35% |
25% |
22% |
|
Household Operation |
7% |
6% |
7% |
|
Furnishings & Equipment |
3% |
4% |
4% |
|
Clothing |
4% |
6% |
7% |
|
Transportation |
12% |
18% |
19% |
|
Health Care |
3% |
3% |
3% |
|
Personal Care |
3% |
3% |
2% |
|
Recreation |
5% |
7% |
9% |
|
Reading |
1% |
1% |
1% |
|
Other Items |
8% |
9% |
10% |
|
Total Current Consumption |
100% |
100% |
100% |
Spending Patterns Across Canada
The next logical question to ask is whether spending by poor people differs from one part of Canada to another. Unfortunately, that question cannot be answered on the basis of available data. The Family Expenditure Survey is not large enough to allow data to be broken down for poor people alone by region or urban centre. The sample sizes in the survey from individual cities are relatively small to begin with, and taking just the lowest 20 percent of the sample for each city would not produce reliable results.
The only available alternative is to look at variations in spending for all households based on the population of the area of residence or in spending for all households from one large city to another.
Table 4 on the next page shows the different categories of household spending by size of area of residence, from rural areas to cities of a million or more people. The first column of the table gives the total amount spent in dollars on current consumption. The rest of the columns show spending in each category as a percentage of total current consumption.
In terms of dollars spent, the big divide comes when the population hits 100,000. Areas with populations under 100,000 have total current consumption ranging from $30,510 to $31,697. Areas of 100,000 or larger fall into a higher spending group that ranges from $33,496 to $35,990. Coincidentally, a population of 100,000 is also the size chosen by Statistics Canada to start using census metropolitan areas. There were a total of 25 census metropolitan areas in the 1996 census.
The percentages of spending for each of the categories and populations reflect some interesting patterns. The percentages for different areas of residence are almost the same for food, household operation, furnishings, clothing, health care, and personal care. The big differences are in rented or owned housing, transportation and perhaps recreation and reading combined.
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  |
Total in Dollars |
Food |
Rented Housing |
Owned Housing |
Household Operation |
Furnishings & Equipment |
Clothing |
Public Transport |
Private Transport |
Health care |
Personal Care |
Recreation & Reading |
|
Rural |
$31 697 |
18% |
13% |
14% |
7% |
5% |
6% |
2% |
21% |
3% |
2% |
9% |
|
Under 30,000 |
$31 106 |
18% |
15% |
15% |
7% |
4% |
6% |
2% |
20% |
3% |
2% |
10% |
|
30,000-99,999 |
$30 501 |
17% |
18% |
18% |
6% |
4% |
6% |
2% |
19% |
3% |
2% |
9% |
|
100,000-249,999 |
$33 496 |
17% |
16% |
17% |
6% |
4% |
6% |
1% |
20% |
3% |
2% |
9% |
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250,0001-499,999 |
$34 579 |
17% |
19% |
19% |
7% |
4% |
6% |
2% |
19% |
3% |
2% |
9% |
|
500,000-999,999 |
$35 641 |
17% |
17% |
18% |
6% |
4% |
6% |
2% |
17% |
3% |
2% |
10% |
|
1 million or more |
$35 990 |
18% |
20% |
23% |
7% |
4% |
6% |
2% |
18% |
3% |
2% |
8% |
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  |
Total in Dollars |
Food |
Rented Housing |
Owned Housing |
Household Operation |
Furnishings & Equipment |
Clothing |
Public Transport |
Private Transport |
Health care |
Personal Care |
Recreation & Reading |
|
St. John's |
$36 348 |
18% |
13% |
14% |
7% |
5% |
7% |
2% |
20% |
3% |
3% |
7% |
|
Charlottetown |
$31 396 |
17% |
18% |
16% |
7% |
4% |
7% |
2% |
17% |
3% |
3% |
9% |
|
Halifax |
$34 694 |
16% |
18% |
16% |
7% |
4% |
6% |
2% |
18% |
3% |
2% |
9% |
|
Saint John |
$29 596 |
18% |
15% |
14% |
8% |
4% |
6% |
2% |
20% |
3% |
2% |
8% |
|
Quebec |
$30 821 |
20% |
13% |
17% |
6% |
4% |
7% |
1% |
19% |
4% |
3% |
9% |
|
Montreal |
$31 243 |
19% |
18% |
21% |
6% |
4% |
7% |
2% |
18% |
3% |
3% |
8% |
|
Ottawa |
$38 067 |
17% |
20% |
23% |
6% |
4% |
7% |
3% |
16% |
3% |
2% |
10% |
|
Toronto |
$39 273 |
17% |
21% |
23% |
7% |
4% |
6% |
3% |
19% |
2% |
2% |
8% |
|
Thunder Bay |
$36 468 |
16% |
17% |
15% |
6% |
4% |
6% |
2% |
20% |
2% |
2% |
10% |
|
Winnipeg |
$32 130 |
18% |
17% |
18% |
7% |
4% |
6% |
2% |
16% |
3% |
3% |
9% |
|
Regina |
$33 491 |
17% |
14% |
14% |
7% |
4% |
7% |
2% |
19% |
3% |
3% |
10% |
|
Saskatoon |
$33 912 |
17% |
15% |
16% |
7% |
5% |
7% |
2% |
18% |
3% |
3% |
9% |
|
Calgary |
$36 515 |
17% |
17% |
17% |
7% |
5% |
7% |
3% |
15% |
4% |
2% |
1% |
|
Edmonton |
$38 194 |
17% |
14% |
16% |
7% |
4% |
6% |
2% |
18% |
4% |
2% |
10% |
|
Vancouver |
$37 246 |
17% |
22% |
22% |
6% |
4% |
6% |
3% |
17% |
3% |
2% |
9% |
|
Victoria |
$34 803 |
16% |
21% |
21% |
7% |
4% |
6% |
3% |
15% |
4% |
2% |
9% |
The 1996 Family Expenditure Survey does not present detailed data for all of the 25 census metropolitan areas, but it does have details for one or more cities in each province. The data are presented on the previous page as Table 5.
The table shows that total spending is not always a function of size, since some of the biggest differences are found among the eight largest urban centres: Toronto, Montreal, Vancouver, Ottawa, Edmonton, Calgary, Quebec and Winnipeg. Statistics Canada reported that total current consumption in Montreal in 1996 was $31,243 on average, spending in Quebec City was $30,821, and spending in Winnipeg was $32,130. All three figures are far below the totals for Toronto, Vancouver, Ottawa and Edmonton, and substantially below the total for Calgary.
As in the previous table, sharp variations in spending as a percentage of total current consumption were found in housing, transportation and recreation. Food costs also varied noticeably, from 16 percent of total current consumption in Halifax, Thunder Bay and Victoria to 20 percent in Quebec City.
Altogether, the table adds weight to the idea of developing market baskets for each large city individually.
Other Sources of Information
There are alternative sources of data that could be used for the food and shelter components of a larger market basket of goods and services.
For a number of years, Agriculture Canada produced a "nutritious food basket" of 64 items and priced the basket in 18 cities. It also produced and priced a Canada-wide basket based on data originally obtained in the 18 cities.
Even though the baskets were widely used by health and social service agencies, Agriculture Canada stopped producing them in 1995. Health Canada has expressed interest in reviving the exercise and has been exploring options for national and provincial or regional food baskets. The goal is to develop baskets with a variety of foods that people like to eat and which meet accepted standards of nutrition.
Health Canada has priced a revised national nutritious food basket for a family a four in Ottawa at $123 a week or $6,396 a year in a "final" report published in March 1997. The amounts were for a family made up of one man and one woman between the ages of 25 and 50, a boy aged 13 to 15 and a girl aged seven to nine. Different baskets were suggested for 23 age and sex groups, including pregnant and nursing women.
For housing costs, one possible source of information is a survey by Canada Mortgage and Housing Corp. on average rents in different cities and towns. The survey covers rents in privately owned apartments consisting of at least three units. It does not cover housing in duplex units and "granny" or in-law suites in private homes. It also does not cover public housing, subsidized housing or housing in institutions.
More than 150 areas of 10,000 or more people are covered in the CMHC survey, and information is normally available on the average cost of a bachelor apartment and the cost of one-bedroom, two-bedroom and three-bedroom apartments.
Given the variations in housing costs that we saw earlier in this chapter and the variations in food costs among some of the largest cities, the CMHC data and an updated version of the Agriculture Canada nutritious food basket would be logical choices in any overall market basket of goods and services.
Last Update: 2001 02 14