Question Period Note: PREDICTED MARKET BASKET MEASURE (MBM) POVERTY RATES FOR 2023

Statistics Canada analysis on predictions of Canada’s overall poverty rate for 2023.

• The Government acknowledges the publication on predicted changes in the overall poverty rate, which provides valuable insight as we work toward achieving the 2030 poverty reduction target of reducing poverty by 50%, relative to 2015.

• This remains a challenging time for many Canadians who face higher housing costs and still-elevated consumer prices.

• The Government’s affordability plan includes a range of measures aimed at helping Canadians navigate these economic headwinds. The Government will continue to support Canadians with social and economic measures to make life more affordable and build a strong economy that benefits everyone.

On the methodology to model the overall poverty rate
• To predict Canada’s overall poverty rate Statistics Canada used estimated parameters of a regression model which describe the MBM poverty rate as a function of the bottom quintile’s disposable income, the Consumer Price Index (CPI) and a time trend.

• Disposable income from the bottom quintile of the Canadian population was provided by the Distributed Household Economic Accounts, or DHEA, a model that is able to output up-to-date estimates for the distribution of income using internationally accepted National Accounts concepts. The predicted values of Canada’s overall poverty rate used DHEA income estimates available through the second quarter of 2023.

On the Canadian Income Survey

• The official data source for annual poverty statistics is the Canadian Income Survey (CIS), administered by Statistics Canada. The primary objective of the CIS is to provide information on the income and income sources of Canadians, along with their individual and household characteristics. The data collected in the CIS is combined with data from the Labour Force Survey (LFS) and tax data.

• The CIS is conducted nationwide, in both the provinces and the territories. It covers all individuals in Canada, excluding persons living on reserve and other Indigenous settlements in the provinces, the institutionalized population, and households in extremely remote areas with very low population density. Overall, these exclusions amount to less than 2 percent of the population.

• CIS data and new poverty rate estimates are usually published in the second year following the reference year, meaning that there is generally a 1.5-year data lag. The latest CIS data available is for the 2022 reference year and was released in April 2024. Official poverty rates for 2023 will become available with the release of CIS data in the Spring of 2025.

On the Market Basket Measure – Canada’s Official Poverty Line

• The Poverty Reduction Act (2019) established the Market Basket Measure (MBM) as Canada’s Official Poverty Line. The MBM is an absolute measure of low income developed in Canada.

• The MBM establishes poverty thresholds based upon the cost of a basket of food, clothing, shelter, transportation, and other items representing a modest, basic standard of living. The current MBM determines thresholds for different regions in Canada, which can be adjusted to families of different sizes. If a family’s disposable income is below the threshold for the region in which they live in a given year, they are considered to be living in poverty.

• Disposable income for the purposes of the MBM is based on total income (including government transfers) after deducting not only income taxes but also several non-discretionary expenditures such as EI and CPP/QPP contributions, child care expenses and direct medical expenses. It also takes into account the financial impacts of different housing tenure types such as mortgage-free home ownership and subsidized rental housing.

• To ensure that MBM basket costs are up-to-date and that basket contents continue to reflect the items required to meet basic needs and achieve a modest, basic standard of living, the Poverty Reduction Act (2019) also requires that Canada’s Official Poverty Line be reviewed regularly.

• MBM thresholds are currently available for all Canadian provinces and the three territories.

On the Consumer Price Index

• The Consumer Price Index (CPI) tracks changes in prices as experienced by Canadian consumers. It measures price change by comparing, through time, the cost of a fixed basket of goods and services.

• The goods and services in the CPI basket are divided into 8 major components: Food; Shelter; Household operations, furnishings and equipment; Clothing and footwear; Transportation; Health and personal care; Recreation, education and reading, and Alcoholic beverages, tobacco products and recreational cannabis. CPI data are published at various levels of geography including Canada, the ten provinces, Whitehorse, Yellowknife and Iqaluit, and selected cities.

N/A