Question Period Note: CANADA’S OFFICIAL POVERTY LINE

2018 Canadian Income Survey and Market Basket Measure Comprehensive Review

• Based on the 2018 Canadian Income Survey data, Canada’s poverty rate continues to trend downward over time reaching 8.7% in 2018 compared to 9.5% in 2017. This represents over 1,000,000 fewer individuals living in poverty than in 2015.

• For the first time in Canada’s history, the Government has set an official measure of poverty – Canada’s Official Poverty Line (COPL) – which will be used to measure progress towards the poverty reduction targets.

• COPL is based on the Market Basket Measure (MBM). The MBM is a made-in-Canada measure that reflects the combined costs of a basket of goods and services that individuals and families require to meet their basic needs and achieve a modest standard of living.

• The Poverty Reduction Act requires COPL to be reviewed, on a regular basis as determined by Statistics Canada, to ensure that it reflects the up-to-date cost of a basket of goods and services representing a modest, basic standard of living in Canada.

• Statistics Canada and Employment and Social Development Canada launched the review of Canada’s Official Poverty Line in the fall of 2018.

• On February 24, 2020, Statistics Canada released the final discussion paper of the MBM series entitled the Second Comprehensive Review report alongside the release of the 2018 Canadian Income Survey.

• The release of the report will now be followed by a validation period during which Statistics Canada and ESDC will work with experts, stakeholders, and federal, provincial and territorial officials to validate the results of the review. Until this process is finalized at the end of June 2020, the existing 2008 base will continue to be used as the COPL.

If pressed on the impact of the 2018 MBM base on poverty rates:

• The Market Basket Measure has not been updated since the comprehensive review in 2008 to 2010.

• The MBM comprehensive review has been informed by broad consultations with Canadians, experts, and provincial and territorial officials, and is based on a transparent process where progress is publicly communicated.

• Recognizing the need for a non-partisan and statistically-robust official measure of poverty, decisions related to the MBM review have been delegated to the Deputy Minister of ESDC and the Chief Statistician.

• The increase reflects what was heard during consultations, where Canadians noted that the current basket used for calculating the MBM underestimates the cost of living.

• The increased poverty rate shows a continued downward trend in poverty since 2015, representing over 1 million Canadians lifted out of poverty.

• The Government continues to have met the interim 20 percent poverty reduction target.

• The Government of Canada assesses poverty by measuring the number of Canadians with low incomes, and Statistics Canada publishes data on three measures of low income:

o Low-Income Measure (LIM) – a relative measure defining low income as being below 50% of median household incomes.

o Low-Income Cut-Offs (LICO) – originally designed as a relative measure but now based on a fixed income threshold, the LICO is considered to be an absolute measure under which a household is in low income if it spends 20% more on food, shelter and clothing than the average family in 1992.

o Market Basket Measure (MBM) – an absolute measure tracking the inability to purchase a specific basket of goods and services that is updated over time to reflect current standards.

• Unlike relative low income measures, the MBM reflects families’ capacity to afford to meet their basic needs and achieve a modest standard of living. By contrast relative low income measures reflect how well off families are relative to other families across the country (i.e., the overall income distribution).

• The MBM basket is calculated based on the costs of a basket of goods and services that individuals and families require to meet their basic needs and achieve a modest standard of living.

• The MBM basket includes items such as healthy food, appropriate shelter and home maintenance, clothing and transportation, as well as other goods and services that allow Canadians to participate in their community.

• The value of the MBM basket is compared against a measure of family disposable income where a family with an income below the appropriate threshold for their family’s size and region is considered to be living in poverty.

• The MBM disposable income is based on total income (including government transfers) after deducting not only income taxes but also several non-discretionary expenditures such as Employment Insurance, CPP contribution, child care expenses and direct medical expenses.

• The MBM currently reflects poverty thresholds for 50 regions across Canada, including 19 communities.

• The Poverty Reduction Act requires COPL to be reviewed, on a regular basis as determined by Statistics Canada, to ensure that it reflects the up-to-date cost of a basket of goods and services representing a modest, basic standard of living in Canada.

• A joint Statistics Canada – ESDC review of the MBM was launched in the fall of 2018 and is still underway. Statistics Canada is responsible for launching the review, updating the statistical methodology, and leading public consultations. ESDC is responsible for determining the scope of the review and setting the policy direction.

• Recognizing the need for a non-partisan and statistically-robust official measure of poverty, decisions related to the MBM review have been delegated to the Deputy Minister of ESDC and the Chief Statistician.

• The MBM comprehensive review has been informed by broad consultations with Canadians, experts, and provincial and territorial officials, and is based on a transparent process where progress is publicly communicated.

• From September 2018 to January 2019, Statistics Canada undertook consultations with experts, as well as other groups of interested Canadians, as part of the review. These consultations included an anonymous online survey with Canadians regarding the existing MBM thresholds; a series of face-to-face and focus group sessions with Canadians with lived experiences of poverty; an online “Chat with an Expert” question and answer session; a two-day meeting with provinces and territories; and a two-day meeting with academics and non-governmental organizations interested in poverty.

• In July 2019, Statistics Canada released the first of four discussion papers as part of the comprehensive review entitled “An Update on the Market Basket Measure Comprehensive Review” that describes the consultations, provides highlights of what Statistics Canada heard, outlines the roles and responsibilities of Statistics Canada and ESDC, and describes next steps for the MBM review.

• The second discussion paper in this series, “Towards an update of the Market Basket,” was released on December 6, 2019. This discussion paper describes considerations for updating the disposable income concept including changes to the methodology for calculating disposable income.

• On December 20, 2019, Statistics Canada released the third discussion paper entitled, “Towards an update of the disposable income concept for the Market Basket Measure.” This discussion paper describes considerations for updating the disposable income concept including changes to the methodology for calculating disposable income.

• On February 24, 2020, Statistics Canada released the final discussion paper of the MBM series entitled The Second Comprehensive Review report alongside the release of the 2018 Canadian Income Survey. The report describes the proposed changes to be made to how the MBM is calculated and includes provisional poverty estimates using the new 2018 base.

• There was a decrease in the overall poverty rate in 2018. According to Canada’s Official Poverty Line, there were approximately 3.2 million people in poverty in Canada in 2018 (8.7 percent), meaning that approximately 1,065,000 fewer Canadians were living in poverty relative to 2015.
• There was a decrease in the poverty rate for children under 18 in 2018. According to Canada’s Official Poverty Line, there were approximately 566,000 children in poverty in Canada in 2018 (8.2 percent), meaning that approximately 334,000 fewer children were living in families in poverty in 2018 relative to 2015.

• There was a decrease in the poverty rate for seniors in 2018. A total of 216,000 seniors lived below Canada’s Official Poverty Line in 2018 (3.5 percent, meaning that approximately 73,000 fewer seniors were in poverty in 2018 relative to 2015. This decline reverses the trend of increased seniors’ poverty that had been observed between 2014 and 2015.