I have a slide presentation.
It would be useful to consult it. I will let you know which slides I am referring to.
I am going to start with slide number two.
Poverty is a multi-faceted subject. There's no agreement among experts on a single measure. Having a low income is a dimension of poverty. The media and academic publications often use income as a proxy for poverty. This presentation will discuss low-income trends and examine differences among groups.
Low income happens when a family's after-tax income falls below a specific threshold. All Statistics Canada measures refer to relative low income. They refer to the share of the population that has low income compared to what would be considered an acceptable living standard relative to the societal norm. Relative low income is commonly used for measuring poverty in developed nations. Absolute low income would refer to the share of the population with incomes below what is needed to meet the minimum standards of food, clothing, health care, and shelter. Statistics Canada does not measure absolute low income.
The headline low-income indicator used by Statistics Canada is the low-income measure or LIM. The concept underlying the LIM is that if your family income is below half the median family income in a year, then your family is in low income for that year. Each year the LIM is rebased, so there is a new set of thresholds every year. Thus, the LIM measures whether low incomes are keeping up with contemporary living standards.
An advantage of LIM is that it's easy to understand and always reflects current standards of living. A common criticism of LIM is that because the low-income thresholds change every year, the yardsticks are always moving, making it difficult to use for short-term policy analysis.
A second low-income measure produced by Statistics Canada is the low-income cut-off or LICO. The concept underlying the LICO is that if your family income is below the LICO threshold, it means that you are likely to be spending a significantly larger share of your income on food, shelter, and clothing than the Canadian average. LICO thresholds were last rebased in 1992. Since 1992 the thresholds have been updated for changes in prices using the consumer price index, CPI. Changes in the low-income rate under LICO tell us whether incomes at the lower end of the income distribution are keeping up with or falling behind inflation. An advantage of the LICO is that the thresholds have a stable, real value in constant dollars. They can provide policy-makers with a fixed benchmark to evaluate short-term progress. A common criticism of LICO is that the LICO thresholds no longer reflect an acceptable relative standard of living.
For the purposes of this presentation, I present statistics from both LIM and LICO. I'd like to add that Statistics Canada produces a number of other statistics that reflect upon Canadians in less advantaged situations. Some of these were developed with the involvement of other federal departments.
LICO and LIM can be used together to study trends in low income. This graph shows the low-income rate for all Canadians using both measures. Recent trends for the two measures are quite different. The LIM has been steady or rising slightly since 2000. This means that the income of low-income families has just managed to keep up with overall living standards, which have been rising over this period. For this purpose, I am referring to living standards as median incomes of families. The LICO has fallen steadily. This means that the incomes of low-income families have been rising relative to inflation.
The story is similar for children but not seniors. These graphs show low-income rates for these groups. Incomes for low-income seniors have been keeping up with prices, which can be seen in the steady LICO low-income rate, but falling behind median living standards, which can be seen by a rising LIM low-income rate. To say it differently, while low-income seniors are not worse off in real terms, the income gap has been rising between low-income seniors and other Canadians.
For the remainder of the presentation, I'll refer to low-income rates calculated using both the LIM and LICO methodologies, but I won't compare the results. While trends in the two indicators are different, as I just showed, they otherwise tell very consistent stories about low income in Canada.
Before returning to trends in low income, I'll talk a little about trends in income overall. Underlying trends in low income are changes in income for low-, medium-, and high-income families. In fact, the 2000s have seen family income growth across the income spectrum, especially at the top. This graph shows after-tax income for families, including unattached persons. Median after-tax income rose by 19% between 2000 and 2014. After-tax income at the 10th percentile rose by 14%, indicating that incomes for low-income families were also rising. The fastest growth was at the top of the income distribution, where after-tax income at the 90th percentile rose by 23%.
Research showed that income growth differed widely by region. The left graph shows the average annual growth in median family income by province from 2000 to 2014. Income growth was especially high in resource-rich provinces: Alberta, Saskatchewan, and Newfoundland and Labrador. The right graph shows the change in the low-income rate over the same period. Low income also fell most in Newfoundland and Labrador, Saskatchewan, and Alberta, and rose most in Ontario.
This graph shows the low-income rate by province in 2014, the last year for which we have data. Low income differs comparatively little across provinces, with only Alberta posting a rate substantially below the Canadian average. The low-income rate in Alberta was 6.9%, while for all other provinces the low-income rate was between 12% and 16%.
The data indicates that low income is concentrated among particular groups. This graph shows low-income rates for specific demographic segments of the population. Recent immigrants and persons in lone-parent families have low-income rates about 2.5 times the average. Aboriginal people off reserve have rates more than twice the average. Women who are unattached seniors are more likely to be low income than women seniors overall. Persons with disabilities have low-income rates that are twice that of others.
It's also important to consider how persistent low-income spells are. This graph shows the number of years a spell of low income is expected to last for spells beginning in each year from 1993 to 2013. The average duration of low-income spells has risen since the 1990s. On average, a spell of low income was expected to last 3.3 years in 2013 compared to 2.9 years in 2003 and 2.2 years in 1993. A graph in the supplementary slide attached to this presentation shows that the low-income spells rose most for seniors and unattached persons.
To gauge the effect of transfers on low income, we can compute the low-income rate before and after transfers are added in. The differences between the two rates is the amount by which the transfer reduces low income. The results do not take into account any behavioural responses to changes in transfers. Rather, they are meant to illustrate the importance of transfers as a component of income for low-income persons. The red bars show the amount that transfers reduce low income.
All government transfers, including federal and provincial transfers overall, reduce low income by 50%. The blue bars show the amount that transfers reduce deep, low income, where deep, low income is defined using a threshold set 40% below the usual one. Transfers reduce deep, low income by more than 70%. Likewise, child benefits reduced low income for families with children and benefits to seniors reduced low income for these Canadians.
A supplementary slide at the end of the presentation describes the importance of progressivity in transfers in reducing low income. In short, progressive transfers that target low-income persons reduce low income by more than transfers that are less progressive.
Finally, on slide 15 we look to see if federal savings programs are used by low-income families. The registered education savings program, registered retirement savings program, and tax-free savings program are three federally run programs that assist savers by making it possible to defer tax or by making interest on savings tax free. The RESP program also makes available the Canada education savings grant. This slide shows the take-up rates for these programs by low-income and non-low-income households. Families with children and senior families are shown. RESPs, RRSPs, and TFSAs are used by low-income families, but to a much lesser degree than they are by higher-income families.
That's the end of my presentation this morning. Thank you.