It’s time Canada had an official poverty line

Poverty is hard to measure. There are many aspects besides living on a low income, including having disabilities or costly health problems, not being able to find decent housing, not being able to understand and communicate in an environment with increasing technological and legal complexity, and being unable to afford nutritious food.

Still, Ottawa has embarked on formulating a poverty-reduction strategy and it would presumably like to have meaningful ways of measuring and monitoring progress toward that goal — what Social Development Minister Jean-Yves Duclos has called the 3Ms.

It’s time the federal government established an official poverty line, a dollar amount of income below which a person or family would be deemed to be poor.

Statistics Canada, while producing various low-income lines since the 1960s, has refused to call these poverty lines because poverty involves more than living with low income. This is reasonable because there is no purely statistical method for deriving a poverty line. However, it’s reasonable for a government to specify a poverty line, even if it embodies arbitrary judgments.

Having a poverty line enables a government to set targets, such as reducing the prevalence of measured poverty by 50 per cent over the next decade. This kind of target enables a government to focus its policies on the interventions and program changes most likely to be effective in meeting the target. It further allows Canadians to monitor the government’s progress toward meeting its target. One challenge is whether it’s possible to construct a meaningful measure of poverty. A poverty line defined by an income level should only be a starting point because it needs to be complemented by other issues, including access to assets and social support, disability, literacy, housing and food insecurity.

What kind of income line would best fit the requirements for a meaningful official poverty line? At present, StatsCan produces three sets of lines, all flawed.

The oldest is the “low-income cutoff” based on an arcane statistical estimation that hasn’t been revised since 1992 since it can bounce around in ways that defy logic. LICOs should be abandoned.

Starting in 1992, StatsCan began publishing a “low-income measure,” which is anchored at half the median family income, after taking account of family size. LIMs vary for families of different sizes according to an “equivalence scale.” Starting in 2000, at the request of provincial social-affairs ministers, StatsCan began publishing a “market-based measure.” While the LIM fails to make a distinction along an urban-rural spectrum, the MBM has different lines for each of 50 municipalities and geographic regions. This regional variation is important to reflect differences in costs across Canada.

The MBM uses the same equivalence scale as the LIM, but also uses a complex mixture of items to make up its market basket. The mixture isn’t transparent and when one examines the nearly 100-page document describing the most recent 2010 detailed revisions, many will find the specific items arbitrary.

The LIM and the MBM have strong and weak points. Fortunately, it’s easy to imagine a new “Canadian poverty line” that would combine the advantages of both, while avoiding their limitations.

Like the LIM, this line would be anchored at half the median (family size-adjusted) income. But this median income would be averaged over the past few years to provide more stability. And like the MBM, it would be differentiated by the same 50 geographic regions — though instead of the complex and highly arbitrary basket of expenditures underlying the MBM, only shelter costs (rents on two- and three-bedroom apartments) would be used to reflect geographic variations.

While not perfect, a CPL would be a sufficient start for the government’s poverty-reduction strategy: It’s meaningful, it’s practical for Statistics Canada to measure, and it would provide a solid basis for monitoring progress toward the fundamental objective of reducing poverty.