5-1 Measuring Poverty

Vocabulary

Academic Word List

Other Vocabulary

Pre-Reading

1. What do you think it means to be poor? What factors would you use to determine that one person is poor but another is not?
2. What is the situation with poverty in your country? Is it a visible problem? What do you think is causing this situation in your country?

Reading

Previewing and Predicting

1. If there is a title or headline, be sure to read it carefully and stop to consider what it could mean for what comes next.
2. If there are any pictures or section headings (on tables as well) throughout the text, read them in the order they are presented to get an idea for how information is arranged in the reading.
3. Skim the text for key vocabulary such as names in capital letters, data like numbers, and other details that seem to be repeated often.

• How is the reading organized?
• Who was the reading written for, the audience?
• What is the purpose of the writer in presenting the reading this way?

Measurements of Poverty in Canada

A: Nearly anyone asked feels confident that they know what poverty is, what it looks like, which type of people are most likely to be afflicted by it. There's no denying that it is a negative condition that even the most conservative of politicians will agree must be dealt with and lessened as much as possible. Unfortunately, it is not always clear what poverty actually is and trying to find a definition can seem as hard as dealing with the problem itself. There are a number of working definitions of poverty in Canada, but the best way to look at what poverty means is by looking at how organizations have created different methods of measuring the phenomena and the aspects that are considered. Only then can Canada's current situation regarding poverty and who Canada's poor are be fully discussed.

B: Given the task of describing what poor people look like, the image that springs to mind for most individuals might be that of a scene of sickly, starving children living in dirty conditions lacking proper sanitation and housing. Perhaps it is that image that keeps Canadians away from the issue because that is not a scene painted in most areas in developed countries where poverty occurs. What is there is less visible and is based on deprivation and need. In Canada, poverty is linked far less to physical circumstance than a lack of income, or too little income to sufficiently ensure people's basic needs are being met. To a poor Canadian, it may be difficult to find money to cover basic necessities such as food, shelter, and clothing. These people rely on charitable organizations and food banks to make up the extra that they can not supply. Their housing may be extremely overcrowded or even substandard in terms of safety and protection from the elements outside. In the extreme cases, those who can not make enough money may even end up on the streets.

C: It is clear that society's stereotype of what poverty looks like is not an adequate indicator that allows for an accurate determination of whether someone in Canada is poor or not, which is why various systems to measure poverty have been developed. None of them are as precise as experts would like and provide more of a general survey of the number of poor and where they live, yet depending on which system is used that number will differ. What is agreed upon by all systems that measure poverty is that there needs to be a poverty line. While it's true that classifying a person as impoverished or not is not black and white, having a definitive line, where someone under is poor and over is not, is a necessity in order to compile the statistics required. By properly defining a poverty line and a measurement of it, experts can determine not only the incidence of poverty, the total number of poor, but also how poor these people are as well as how long they have been in that condition. Some systems measure poverty in quite absolute terms in that they look at a persons ability to meet a specific need or not. Others are far more relative and look at poverty as being an unacceptable distance from the mainstream and its norms.

Of the commonly used measures of poverty, there are three that are used to great effect in Canada and abroad. These systems are:

• The Low Income Cut-Offs (LICOs)
• The Low Income Measure (LIM)
• The Market Basket Measure (MBM)

The Low Income Cut-Offs (LICO)

D: Developed by Statistics Canada (StatCan) in 1959, the Low Income Cut-Offs (LICO) are the most widely used and quoted of low-income statistics in Canada. StatCan claims that they should not in themselves be used as a measurement of poverty as they simply define a line under which someone would be living a life worse off than the average due to lower income. A low-income household, according to the LICO guidelines, is one in which members are spending a much larger proportion of their income on the basic necessities (food, shelter, and clothing) compared to the average household. To arrive at this figure, there is a Survey of Household Spending each year run by StatCan which collects detailed information on household expenditures as well as information about income, demographic makeup, housing type, and various types of household equipment. From this information, the Low Income Cut-Off line is set by taking the percentage an average family spends on basic necessities and adding 20 percentage points to it. As of 2013, the average household spent about 37% of its income on necessities. Therefore, if a family spends the adjusted amount of 57% or more on the same items, they are, according to the LICO, living in poverty. Of course, there is a vast difference in the cost of necessities depending on family size as well as location, so the LICO are broken up into seven different family sizes across five sizes of community, thus giving LICO lines in 35 different possible categories. In 2011, the poverty rate in Canada was 12.9% according to the LICO measurement. The 2011 before- and after-tax LICO lines are presented in Table 1 below.

Low Income Measure (LIM)

E: In contrast to Low-Income Cut-Offs, which base their poverty line on proportion of income spent, the Low-Income Measure (LIM) uses income directly. To calculate LIM poverty lines, first the median gross income is determined, where half of the population is above and the other half is below a certain level. This forms the base LIM for an individual and the LIM is adjusted according to the total members in a household, but no adjustment is used for the size of community or the type of housing as with LICO. The benefit of using LIM instead of LICO is that it becomes easier to make comparisons internationally because the LIM for each country is relative to it's economic prosperity. Low-Income Measures are calculated before and after tax is taken off of income and in this way the effects of taxation can also be taken into account. The data in Table 2 shows the 2008 LIM values for a single person household. These values are adjusted up and down for other families by multiplying the base value by the square root of the family size. For example, for a family of four, as shown, the values are multiplied by the square root of 4, which is 2, so the figures are double that of a single person household. The result is poverty lines that are similar to, but still distinct from those created by using LICO calculations.

Market Basket Measure (MBM)

F: A third poverty indicator is the Market Basket Measure (MBM) which is more recent than LICO or LIM having been developed as recently as 2003 by Human Resources Development Canada (HRDC). The MBM is designed to complement other poverty measurements and is based much more on regional or provincial statistics and includes 48 different regions over all 10 provinces, as of yet none of the Territories. Rather than merely calculating the minimal that is needed for survival, this system looks at what would be necessary for a "creditable" standard of living. The term "basket" actually refers to just that: a basket of goods and services that a family would need to buy to maintain a certain standard of living. This "basket' includes:

• food that is adequately nutritious
• the clothing that would be needed for a family of two adults with two children
• the average cost of renting housing equivalent to a two or three bedroom unit, including all utilities
• charges for transportation in an urban centre, either public transit or a moderately-priced vehicle
• a variety of miscellaneous expenses such as school supplies, personal care products, and the like (StatCan, 2013).

G: Based on this list, the MBM defines low-income households as those that do not have enough disposable income to get the items outlined. It is also calculated only on income after tax and some other key expenses such as child care. Because of this, it tends to have a lower cut-off for its definition of poverty, as can be seen in Table 3 for three key urban centres in Canada.

H: The three measurements of poverty in Canada (LICO, LIM, and MBM) can in one way assist officials in determining just which people and how many of them are technically poor. The hope would be that this information could be taken and acted upon through effective government policy to help eradicate the problem. What needs further discussion is whether it is best for the government to use more absolute measures such LICO and LIM based on income or relative ones based on consumption such as MBM. Depending on which is used, or if they are used in conjunction with each other, the individuals targeted for assistance could be quite different. Canada has these guidelines but, sadly, has no official poverty line, and perhaps this makes it less likely that it will act on them. All three measurements have advantages and disadvantages, but whatever system is ultimately chosen to be used by the government of Canada when it decides to make policy on poverty should be one which reflects the needs of Canadian society as a whole.

References

Statistics Canada (StatCan). (2013). Low income lines, 2011-2012. Retrieved from http://www.statcan.gc.ca/pub/75f0002m/75f0002m2013002-eng.pdf

Post-Reading