We have already shown some of the different ways of drawing market basket poverty lines and expressed some concerns about the poverty statistics that would arise from any new measures. In this chapter, we raise a number of other issues that we believe should be addressed by governments before they proceed any further.

     How Many Poverty Lines? One of the big questions left to answer is how many lines should we have - or how many lines could we tolerate. It seems clear that the number would increase substantially in any move to market basket lines.

The low income cut-offs of Statistics Canada consist of one set of 35 different lines. The spending patterns discussed earlier in this report suggest that it would be reasonable to have separate sets of lines for each of the 25 census metropolitan areas in Canada and separate lines for all other areas of each province. That would give us 35 sets of lines for starters. Further research would be necessary to tell whether any of these lines could be combined. For example, it may be reasonable to have one set of lines for all the eight census metropolitan areas in Ontario aside from Toronto and Ottawa rather than eight different sets of lines.

     Each set of lines would have to be adjusted for different household sizes. The current LICOs provide for household sizes ranging from one person to seven or more persons. Seven different household sizes and 35 different geographical areas multiplied together would give us a total of 245 poverty lines. That sounds like far too many, but it may not be unmanageable. From the requests we receive in our office on a regular basis, it is clear that the vast majority of callers are interested in the poverty lines for their home towns and really do not care about the lines elsewhere.

     Adding New Areas. One of the Statistics Canada surveys used to get data on poverty every year is done in conjunction with the Labour Force Survey, which specifically excludes Indian reserves and the territories. The National Council of Welfare urges Statistics Canada to consider including all these areas in any new system based on market basket poverty lines.

     Statistics Canada now does a Survey of Household Spending every year instead of the Family Expenditure Survey every four years. The new survey covers spending patterns in Whitehorse, Yellowknife, the new Nunavut capital of Iqaluit, and smaller communities in the territories on a rotating basis. We hope that Statistics Canada will take whatever additional steps are necessary to collect and publish poverty statistics for the North as well as statistics on spending patterns.

     The National Council of Welfare also believes that Indian reserves should be included in all surveys that deal with poverty in Canada. Poverty among Aboriginal peoples has long been a problem, and we do ourselves no service by failing to measure the extent of the problem. Collecting data and calculating poverty statistics in reserve communities should be no more difficult than current efforts to produce information on poverty in small towns and rural areas.

     Family Size and Type. Most poverty lines start out with a typical household - often a family of two adults and two children - and then make adjustments for other sizes of households.

     The low income cut-offs make these adjustments in a simple and straight-forward manner, and the result is seven different sets of lines based on family size. The low income measures or LIMs developed by Statistics Canada took a different approach by distinguishing between the adults and the children in a family. Instead of one set of lines for a family of five persons, for example, the LIMs had four different sets of lines for the following household types: five adults, four adults and one child, three adults and two children, and two adults and three children (alternatively, one adult and four children).

     We would hope that Statistics Canada never again tries such convoluted arrangements. There are probably no more than a handful of households in Canada that consist of four adults and one child, and it seems ridiculous to have unique poverty lines for such an untypical group.

     A similar problem arises with the Agriculture Canada nutritious food basket, which varies with the sex of the adults in the family and the age of the children. We would hope that standard baskets could be developed that would relate exclusively to family size. To do otherwise would require separate poverty lines for a host of different family types, a requirement that we believe would be unworkable.

     Adjustments to After-Tax Income. The poverty statistics from Statistics Canada are produced by comparing the incomes of different families in the Survey of Consumer Finances with the appropriate poverty line for each family and then projecting the results to the population as a whole.

     With the current low income cut-offs, the comparison is between the poverty line and family income before income taxes and after government transfers such as welfare, Employment Insurance, Old Age Security and the Canada Child Tax Benefit.

     Income after income taxes would be the logical starting point for calculating poverty statistics under market basket poverty lines. HRDC raises the idea of having Statistics Canada use income after income taxes and also after contributions to the Canada and Quebec Pension Plans and premiums for Employment Insurance. Both types of levies are required by law, both are paid by literally millions of Canadians, and both can make a huge difference in the amount of income a family has available to spend on other items. The HRDC proposal therefore makes sense to us.

     Where the Department is on very shaky ground is its related proposals to deduct child care expenditures, maintenance payments, medically necessary health expenditures and work-related expenses from the after-tax income to be compared to the poverty line.

     This may sound appealing and logical at first blush, but it would become a nightmare of mammoth proportions and could wind up discrediting all the work that has been done on market basket poverty lines.

     Take the example of child care. Families which pay for child care out of their own pockets have less available income than families without children or families with relatives that provide child care free of charge or families which receive child care that is fully subsidized by government. Only ten percent of the households of two or more people in the lowest 20 percent of the population reported day care expenses in 1996, and the average outlay was only $990. Making adjustments in the poverty statistics for the small portion of the population with relatively modest out-of-pocket expenses makes no sense at all in our view.

     The issue is not whether child care is a worthwhile expenditure or a logical consideration in the calculation of available household income. The issue is that poverty lines should apply to large groups of people within the general population. They should not be tailored to each and every possible variation in family circumstances.

     Once you start making adjustments, it is almost impossible to stop. There are many other spending items that are equally important, but which should not be considered in the calculation of poverty statistics. Homeowners without mortgages tend to have much lower outlays on housing than homeowners who still have mortgages. People in some rural areas drive long distances to work and have higher than normal transportation expenses. People with allergies have special dietary needs that are more expensive than the food in the average food basket. People with employer-sponsored health insurance plans have much lower outlays on drugs and dental care and eyeglasses than people without insurance. People going to college and university have tuition fees and expenses on textbooks and school supplies that most other people do not have.

     Updating Market Basket Lines. One of the other problems with the low income cut-offs is that the base year for the LICOs changes from time to time. The changes can cause a noticeable break or "notch" in the historical series of poverty statistics and make it more difficult to do comparisons over long periods of time. Between changes in the base year, the LICOs are updated using the Consumer Price Index.

     With market basket lines, the items in the basket could be priced by Statistics Canada every year. If housing prices in Vancouver or elsewhere changed dramatically from one year to the next, the changes would be reflected in the poverty lines.

     Some of the other items in a market basket of goods and services could be based on spending patterns in the new annual Survey of Household Spending. Rather than updating the basket based on the Consumer Price Index, Statistics Canada could simply use the cost of items from the most recent survey.

     A more touchy issue is how to adjust the actual items in the market basket over the longer haul. Spending on leisure-time activities, for example, has changed dramatically during the last generation. Black-and-white television was a luxury item in 1949, but colour TV is the norm at all income levels in 1999. Eating habits have also changed over the years, with people eating less fatty food today and drinking more low-calorie beverages.

     There is no perfect way of making sure that a market basket is kept up to date. On the other hand, Statistics Canada itself adjusts the items that it prices in its Consumer Price Index from time to time. It should not be impossible to make comparable changes in a market basket of goods and services.

     An Official Measure of Poverty. One of the sillier debates about poverty lines arises because of the federal government's continuing refusal to give any official recognition to the existence of poverty in Canada. As a result, the National Council of Welfare and most other social policy groups simply regard the low income cut-offs as poverty lines. We could call them the not-much-money lines or the cut-off-from-the-mainstream-of-society lines or the having-difficulty-finding-enough-money-to-pay-the-rent-at-the-end-of-the-month lines, but we find it much more direct and much more honest to call them poverty lines.

     Assuming that governments and ordinary Canadians reach some reasonable consensus, we should all agree to call them poverty lines.

     Full Consultations with Interested Parties. Like many other ventures undertaken by governments these days, the work on market basket measures of poverty was started behind closed doors a number of months ago and continued in secret for months on end. We believe the secrecy was totally unnecessary and may ultimately make it harder for ordinary people to support changes in the status quo.

     The National Council of Welfare would like to see governments consult widely and openly with people outside government who are interested in poverty. First and foremost, this means that people who are poor and anti-poverty groups everywhere in Canada should have a large say in how governments define and measure poverty. Poor people have a detailed understanding of poverty from their personal experiences, and it would be stupid for governments to ignore this valuable source of expertise. Beyond this, it would be wrong for elected officials or bureaucrats who are tens of thousands of dollars away from any definition of poverty to decide unilaterally whether the poverty line for a poor family of four living in a large city should be $31,862 a year before taxes or $25,414 a year after taxes.

     We would like to see the experts at Statistics Canada play an active, day-to-day role in the research being done for the federal, provincial and territorial governments on market basket measures. Their expertise in survey methodology and data collection and processing is a natural complement to the expertise at Human Resources Development Canada and could ultimately determine whether any new measures of poverty are viable in the long term.

     Once the best options for market basket measures are found, we would like Statistics Canada to publish poverty lines and detailed data free of charge for a full economic cycle to allow people to assess the usefulness of the new measures and to root out any anomalies in the poverty lines or the statistics that arise from them.

     We envisage the entire process taking a minimum of three years. Then and only then should governments decide whether to use the new measures and abandon the low income cut-offs. Then and only then could ordinary people be satisfied that the search for new measures of poverty was begun to assist governments in the fight against poverty rather than allowing them another excuse for doing so little.

Last Update:  2001 02 14