Thank you, Mr. Chair. I'm very honoured to be here.
In today's presentation I want to talk about how we measure poverty. I want to make a link to the mandate of this study, and that is about how well the delivery of federal programs works for poverty reduction.
In today's presentation I will make the argument that the way we measure poverty in Canada is not living up to international standards. Our near exclusive focus on low income as an indicator of poverty leads us to exclude a significant number of Canadians who may be experiencing poverty. If their situations improve, it is not counted as poverty reduction. Moreover, because we also don't count these people in our policy evaluations, we tend to underestimate how well our programs perform when it comes to poverty reduction. We're not only misdiagnosing the problem, but at the same time we're underestimating the effect of the solution.
The recommendation I want to make today is that we complement the low-income indicators with an indicator that measures how many people experience poverty level conditions of living. An indicator such as that one exists, and we call it material deprivation. Allow me to elaborate a bit further on this. I've also detailed the argument, together with Michael Mendelson from the Caledon Institute of Social Policy, in a brief that I've already submitted to the clerk.
Policy in Canada means that you cannot afford a very modest but still acceptable standard of living. That means, for instance, that you can't afford a warm winter coat. It may mean that you cannot afford to buy even a small gift for your child's birthday. It may mean that even though your tooth has been hurting for weeks, you cannot afford to go to the dentist, but low-income indicators don't measure that. They measure a family's income, and they compare that to the costs of living that you need to spend in order to finance that acceptable standard of living.
I don't want to say that low-income indicators are bad indicators of poverty, because they're fine, but they do focus on a single financial resource. It's an important one, and it's an important one for Canadians, but it's not the only thing. The indicator has its slots. Low-income indicators focus on income, which means we don't look at other financial resources, such as access to savings and access to credit. Another point which is very important is that families may have higher than average needs. They may have a family member that has a handicap or a severe food allergy, and that means they have to spend more than an otherwise similar family in order to get that minimum acceptable living standard. Families may live in an area where living costs are high, and we try to adjust for that with our low-income indicators, but that doesn't always work.
As another example, a family may have an okay income above the threshold, but they may be spending a large part of it on paying back loans. I could go on further, but I won't.
The consequence, which I mentioned earlier, is that by focusing nearly exclusively on low-income indicators, we miss out on people who have a combination. These types of issues are different ones, and those families are experiencing poverty level conditions. In addition to low income, when we tried to measure outcomes, it suggests that not being able to afford a warm winter coat and not being able to go to the dentist when you really need to means that we tackle that issue right away, and we have a much wider chance of identifying those families. That's what material deprivation indicators do.
I mentioned that the level of misdiagnosis is substantial. My research shows that we might be missing up to two million Canadians by just focusing on low income. That's about 5% of the Canadian population. If you compare that to the number of people who are considered to be in low income according to our normal indicators, which we find to be about 10% to 15%, that's a large number of people.
We misdiagnose the extent of the problem, and on top of that, we underestimate how our programs perform when it comes to poverty reduction. Take, for instance, a program such as the Canada child benefit. A family may have above the low-income level of income but may be having some of the challenges I just mentioned. When we're assessing the effectiveness of the Canada child benefit, which we know has broader goals than just poverty reduction, in light of a federal poverty reduction strategy it might make sense to look at how programs such as the Canada child benefit fare when it comes to reducing poverty.
Imagine that family with a child receiving the Canada child benefit. That family is going to be helped financially. It is going to get more financial support, but that effect is not taken into account when we look at low income, so the program seems to be reducing poverty less, because we're not counting that family as poor, and we're not counting the money that is going to that family as poor. That has an impact on the effectiveness of the program, but at the same time, it has an impact on how we assess the efficiency of that program with respect to poverty reduction, because the fiscal cost for that family is seen as a waste, at least from that perspective.
Material deprivation indicators are not perfect either. They have their challenges in tracking the needs of minority groups. People might under-report because they are ashamed that they cannot afford a small gift for their child.
The key message I want to end with is that by using both low-income and material deprivation indicators, we get a better assessment of economic poverty in Canada. Other countries do this. Ireland, the U.K., and the European Union do this. Statistics Canada has the capacity to do this. They did it for Ontario, but they're not doing it anymore. The costs are relatively modest.
What is needed now is that the government give Statistics Canada the mandate to do this and that the government, in assessing the effects of its policies on poverty reduction, use both types of indicators: low income and material deprivation.
Thank you very much.