Question Period Note: RELEASE OF PRELIMINARY 2023 POVERTY STATISTICS FROM THE CANADIAN INCOME SURVEY

On November 28, 2024, Statistics Canada released a publication titled “Preliminary Market Basket Measure (MBM) poverty estimates in Canada: A new modelling approach”. The publication offers early poverty estimates based on preliminary tax slips, seven months ahead the official data.

The Government acknowledges the release of preliminary 2023 poverty rates for Canada and values Statistics Canada’s efforts to provide Canadians with an earlier view of poverty trends in advance of official data releases.

The Government remains committed to ensuring that Canadian families, workers, and seniors are able to make ends meet and have a fair chance to succeed.

That is why Budget 2024 introduced several measures to make life more affordable and strengthen Canada’s social safety net. From building more affordable homes to making life cost less with new programs to help with the cost of going to the dentist and pharmacy, the Government is committed to supporting and investing in Canadians.

Canadian Income Survey (CIS)

• Canada’s annual poverty estimates are produced using the Canadian Income Survey (CIS). The CIS is administered by Statistics Canada and is currently the official data source for annual income and poverty statistics.

• The CIS is a cross-sectional sample survey, conducted nationwide in both the provinces and the territories. However, it excludes the population living on-reserve, the institutionalized population and households in extremely remote areas with very low population density. These exclusions amount to less than 2 percent of the overall population.
Why is Statistics Canada proposing a methodology for producing preliminary poverty rates with CIS data?
• CIS data are usually released with a 1.5-year lag. The latest CIS data available is for the 2022 reference year, which was released in April 2024.The main reason for the delay in producing official estimates is the CIS’s dependence on tax files, and especially the T1 file. Because most of the income data from the CIS are derived by tax linkages to respondents, the tax data must be complete and cleaned before they can be used by the CIS.

• To shorten the delay in poverty estimates, Statistics Canada proposed a new method of producing preliminary poverty estimates up to 7 months before the official release by using preliminary tax slips (approximately 9 months after the end of the reference year).

• Statistics Canada will continue to provide preliminary poverty estimates each fall following the reference year using the new approach. Official poverty estimates will continue to be released in the spring of the year after the reference year.

Details on Statistics Canada’s proposed methodology for producing 2023 preliminary poverty estimates
• To produce preliminary poverty estimates for 2023, Statistics Canada used the sample of CIS respondents from the previous year (2022 CIS) and either their tax slips for 2023 (where available) or historical imputation to derive an estimate of disposable income for 2023.

• The previous year’s sampling weights from the CIS were retained, with adjustments for non-response and calibration to 2023 population totals for certain subgroups. Finally, the CIS respondents’ age is adjusted to reflect the current year.

• It should be noted that the proposed methodology has certain limitations:

o The methodology assumes that all sociodemographic characteristics of respondents in the previous year’s CIS sample—such as region of residence, type of tenure and family composition—had not changed. This assumption, which may not hold true, could lead to an incorrect estimate of disposable income for the MBM.

o Additionally, some components of MBM disposable income are not adjusted, as they were unavailable on tax slips. These components include net income from self-employment; income tax; capital gains tax adjustments; and various expenses excluded from disposable income, such as employment insurance contributions, Canada Pension Plan or Quebec Pension Plan contributions, registered pension plan contributions, child care expenses, alimony paid, and direct medical expenses.

o Statistics Canada indicated that future studies are planned to evaluate the effects of these limitations.

• Statistics Canada also applied the proposed methodology to 5 previous cycles of the CIS. Preliminary poverty rates were found to be higher than official rates for 3 of those cycles (2019, 2020, 2022), lower in one (2018) and equal in another one (2021). Statistics Canada indicated that work to improve the proposed methodology will continue.

On Canada’s Official Poverty Line

• The Poverty Reduction Act (2019) established the Market Basket Measure (MBM) as Canada’s Official Poverty Line and requires it to be reviewed, on a regular basis as determined by Statistics Canada, to ensure it reflects the up-to-date cost of a basket of goods and services representing a modest, basic standard of living.

• The MBM establishes poverty thresholds based on the total cost of basket components, which include food, shelter, clothing, transportation and other necessities. These thresholds vary across different regions and can be adjusted to reflect families of different sizes. If a person’s or family’s disposable income is below their applicable threshold, they would be considered to live 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.

• The current MBM establishes thresholds for 53 different geographic regions in the provinces, including 19 major cities, and 13 geographic regions in Yukon, the Northwest Territories and Nunavut.

• The Third comprehensive review of the MBM was jointly launched by Statistics Canada and Employment and Social Development Canada (ESDC) in June of 2023. Similar to previous comprehensive reviews, the Third Comprehensive Review of the MBM is a joint effort by Statistics Canada and ESDC, with input from a variety of stakeholders across Canada. The release of proposed changes to the MBM methodology and a provisional 2023 MBM base are anticipated for early spring 2025. The review is expected to end in the fall of 2025 with the release of the official 2023 MBM base.

• The review and update of the MBM methodology ensures that Canadians can be confident that poverty is measured and reported using an approach that is up-to-date, transparent, and informed by a diversity of stakeholder perspectives.

• The Poverty Reduction Act (2019) also established poverty reduction targets: a 20% reduction in poverty by 2020, and a 50% reduction by 2030, compared to 2015 levels. The Act also states that progress towards these targets is to be measured using Canada’s Official Poverty Line.

If Pressed on the rising cost of living / food insecurity:

The Government recognizes that many Canadians are concerned about higher costs of living and their impact on personal and household finances.

That is why the government recently announced a tax break for all Canadians by proposing that the GST/HST be fully and temporarily relieved on holiday essentials, like groceries, restaurant meals, drinks, snacks, children’s clothing, and gifts, from December 14, 2024, to February 15, 2025.