Question Period Note: THIRD COMPREHENSIVE REVIEW OF THE MARKET BASKET MEASURE

Release of the proposed 2023-base of the Market Basket Measure (MBM)

• The Government welcomes the publication of the proposed new methodology of the Market Basket Measure, Canada’s Official Poverty Line.

• This marks another milestone in refining Canada’s official poverty measure so that it continues to reflect the goods and services required for a modest, basic standard of living while relying on the latest available data and the most up-to-date standards.

• The Government remains committed to achieving the 2030 poverty reduction target of reducing poverty by 50%, relative to 2015.

• The government will continue to support Canadians by taking social and economic measures to make life more affordable and build a strong economy that benefits everyone.

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.

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

On comprehensive reviews of the MBM

• 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.

• While the legislation does not specify the frequency of the reviews, Statistics Canada and ESDC have agreed to undertake a comprehensive review of the MBM methodology every five years.

• Comprehensive reviews and re-basings of the MBM are critical to the maintenance of the MBM as an absolute measure of poverty. The reviews are undertaken to ensure that:
d) the MBM basket continues to use the most recent standards established for Canadian families to represent a modest, basic standard of living;
e) MBM basket components and costs are benchmarked using the latest available data and up-to-date methodologies, and are appropriately estimated for MBM geographical regions; and,
f) the income available to families to determine their poverty status continues to be appropriately defined.

• Previous comprehensive reviews of the MBM produced two previous MBM methodologies: a ‘2008 base’ and the current ‘2018 base’. The current Third Comprehensive Review of the MBM was launched in June 2023 and will end in fall 2025 with the creation of the 2023 base of the MBM.

Summary of proposed changes between the 2018-base and the 2023-base for provinces and territories, by MBM component

Concept Comparison between the 2018-base and the proposed 2023-base MBM provincial methodologies
2018-base 2023-base
Food component (Provinces) Provinces – Prices collected in 38 cities, using an instore collection method Provinces - Prices collected in more than 900 population centres, using scanner data

Food component (Yukon and NWT) Prices collected in the territorial capitals using instore collection, adjusted using spatial indexes for outside the capitals Prices collected in the territorial capitals using scanner data, adjusted using spatial indexes for outside the capitals
Clothing and footwear component (Provinces) Prices collected in 11 cities Combination of instore collected prices (22 cities) and web-scrapped prices (national pricing strategy)
Shelter component (All jurisdictions) Uses 2016 Census data Uses 2021 Census data
Shelter component (Provinces) Median rent for 3-bedroom non-subsidized rental unit, using either a direct estimate or quintile regression model with explanatory variables Median rent for 3-bedroom non-subsidized rental unit, using either a direct estimate or quintile regression model with additional explanatory variables
No adjustment for households reporting zero fuel and electricity costs Imputation of utilities for households reporting zero fuel and electricity costs
Shelter component (Yukon and NWT) Average of modeled median rent for 3-bedroom non-subsidized rental unit, using a regression model quintile regression Average rent for 3-bedroom non-subsidized rental unit, using the direct estimate
Transportation component (Provinces) Uses a weighted (2016 Census) average of the cost of public transit and private transportation (Population centres with fewer than 30,000 people only have private transportation costs) Uses a weighted (2021 Census) average of the cost of public transit and private transportation (Population centres with fewer than 30,000 people only have private transportation costs)
1,200 litres of gas per year (same estimate for all MBM regions) Litres of gas per year are determined by NRCan data and vary at the provincial level and by rural and non-rural communities
Cost of monthly public transit passes for two adults and one child and an additional amount sufficient for 12 round trip taxi or rideshare rides Cost of monthly public transit passes for two adults and one child and an additional amount sufficient for 12 round trip taxi rides or rideshare rides
Transportation component (Yukon and NWT) Weighted basket of one used compact car and one used sport utility vehicle, and their associated costs Weighted basket of one used compact car and basket of five used small sport utility vehicles used sport utility vehicle, and their associated costs
Communication services component (All jurisdictions) Not applicable Costs associated with landline services, cell phone services (one for each adult) and internet access services
Not applicable Based on universal service objective set by the Canadian Radio-television and Telecommunications Commission (CRTC)
Not applicable Separate calculation for urban and rural communities for landlines services only
Not applicable Annual adjustments use the provincial communications index
Other expenses component Fixed multiplier (75.4%) using Survey of Household Spending (SHS) data of the total cost of the food and clothing components for each MBM region. Fixed multiplier (53.4%) using Survey of Household Spending (SHS) data of the total cost of the food and clothing components for each MBM region (lower multiplier due to carve-out of telecommunication expenditures, now in its own MBM basket component)
49 expenditure categories in the numerator and 24 in the denominator 46 expenditure categories in the numerator and 24 in the denominator
2009, 2009 and 2008 reference year SHS data 2021, 2019 and 2017 reference year SHS data
Universe: 2 adults & 2 children, 2nd before-tax income decile Universe: 2 adults (aged 25 to 64 years old) & 2 children (aged 6 to 16 years old), between 2nd and 5th before-tax income decile
Additional amount for cell phone services Not applicable
Disposable income (All jurisdictions) Tenure Type Adjustments for subsidized renters, homeowners with or without a mortgage, by each MBM region
Note: Tenure Type estimations follow the shelter methodology Tenure Type Adjustments for subsidized renters, homeowners with or without a mortgage, by each MBM region
Note: Tenure Type estimations follow the shelter methodology
Medical expenses imputation uses a combination of 2015-2018 Canadian Income Survey data (CIS) and 2014-2017 Survey of Household Spending (SHS) data, by province Medical expenses imputation uses a combination of 2019-2023 Canadian Income Survey data (CIS) and 2021, 2019 and 2017 Survey of Household Spending (SHS) data, by province and age
Disposable income (Provinces) Mortgage interest costs were derived using a five-year fix rate and the Survey of Financial Security (SFS) Mortgage interest costs were derived using the average rate of all existing lends in Canada, the Canada Housing Survey (CHS) and Census
Geography (Provinces) 53 MBM regions across the provinces: 19 specific communities and 34 population centre size and province combinations. 52 MBM regions across the provinces: 19 specific communities and 33 population centre size and province combinations.

On the Market Basket Measure Poverty Index (MBM-PI)

• The adoption of any new MBM base or methodology results in a break or shift in the MBM poverty rate series. In anticipation of these expected breaks, the decision was made during the Second Comprehensive Review of the MBM to implement an index to track progress towards poverty reduction targets based on the 2015 reference year

• ESDC and Statistics Canada officials developed the MBM-PI which follows a similar approach used for the Consumer Price Index (CPI).

• The MBM-PI will allow to track Canada’s overall poverty rate across MBM bases relative to a baseline year. A paper outlining a methodology for the MBM-PI was released by Statistics Canada in 2022 after consulting with expert methodologists at Statistics Canada.

• The Poverty Index will be published on the Dimensions of Poverty Hub on the Statistics Canada website. The MBM-PI series will continue to add annual poverty observations produced with the new 2023-base and future MBM bases while following a smooth and uninterrupted trend.

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