The Daily. Tuesday, November 6, 2001

Family income

For the second consecutive year, average family income reached a new high in 1999, as Canadians continued to rebound from the recession of the early 1990s.

Average after-tax family income reached an estimated $51,473 in 1999, up 1.9% from 1998. The source of this growth was an increase in market income resulting from improved labour market conditions. (All figures have been adjusted for inflation.)

Market income-earnings from employment, private retirement pensions and investments-increased 1.4%, while government transfers to families declined 3.3%.

Unattached individuals-people who do not live in families-also made gains. Their average after-tax income was $22,064 in 1999, up 2.7% from 1998. Couples with children under 18 earned an average after-tax income of $57,665, also up 2.7%.

Families on average paid 2.8% less income tax, resulting in an average increase of about $1,000 more income in 1999 in real terms than in 1998. Unattached individuals ended up with almost $600 more in their pockets.

Note to readers This release is based on a new report, Income in Canada, which examines family income and low income in 1999. Data come from two household surveys: the Survey of Consumer Finances (SCF) and the Survey of Labour and Income Dynamics (SLID). This is the second issue of this annual report, which replaces a series of publications traditionally produced by the SCF team. It contains the key tables from the previous series, with many additions. Historical data prior to 1996 are drawn from the SCF, and data since 1996 are taken from SLID. To factor in inflation when comparing income levels across time, all income estimates are expressed in 1999 constant dollars. Low income Statistics Canada's low-income cutoffs (LICOs) convey the income level at which a family may be in "straitened circumstances" because it has to spend significantly more of its income on the basics (food, shelter and clothing), than does the average family. The LICOs depend on family and community size. For many years, low-income cutoffs have been calculated using both total income (that is, income after transfers but before taxes) and after-tax income. Although Statistics Canada publishes low-income rates based on both total and after-tax income, the after-tax rates have not been featured because they were only available several months later than the total-income rates. With the introduction of this publication last year, the two sets are available simultaneously. Although Statistics Canada will continue to publish both sets of low-income rates, the analysis in this release features the after-tax low-income information. Although LICOs are often referred to as poverty lines, they have no official status as such. For further information, consult Statistics Canada's website (). From the Statistical methods page, choose Discussion papers, then the Feature article on poverty and low income.

After remaining stable throughout the early 1990s, inequality of after-tax income was higher at the end of the decade. Ranking families by their income, the top 20% received $5.20 for every $1 that went to the bottom 20% in 1999, up from $4.80 for every $1 in 1994 (the year with the lowest ratio during the 1990s).

In 1999 an estimated 723,000 families, or 8.6% of all families, were in low income, down from 737,000 in 1998. This was the lowest after-tax low-income rate since 1990 (8.5%). About 1,280,000 unattached individuals, or 29.9%, were in low income in 1999. This was the first time since 1990 that the proportion was below 30%.

Sixth year of sustained growth in market income

Average market income for families of two or more people was estimated at $56,998 in 1999, up 1.4% from 1998. This marked the sixth year of sustained growth, albeit at a slower rate than in the two previous years. Average market income has increased 13.6% for families of two or more people from the low of $50,192 in 1993.

Average market income for unattached individuals rose 4.3% to $22,038-the second consecutive year in which this growth rate exceeded 4%. The average market income of unattached individuals fell rapidly at the beginning of the decade, and stayed at about the same level (around $20,200) from 1993 to 1997. Mainly because of the increases in 1998 and 1999, the average market income of unattached individuals finished the decade at basically the same level as 10 years earlier.

Growth in market income was driven mainly by labour market conditions. In 1999, Canada saw strong economic growth for the third consecutive year as well as accelerated employment growth. Employment rose 2.8% in 1999, its best performance of the decade, while the number of Canadians working full-time rose 3.3%.

Downward trend in government transfers

The overall transfer rate (the proportion of total income received as transfers from governments) for families has continued on a downward trend since 1993, when transfers reached a peak of 12.9% of average family income.

In 1999, families of two or more people received an average $6,821 in government transfers, down 3.3% from 1998. Transfers accounted for 10.7% of their income in 1999, down slightly from 11.2% the year before.

Unattached individuals received an average $5,020 in transfers, a 2.9% decline. Their transfer rate went from 19.7% to 18.6%.

Lone-parent mothers without earnings received $13,351 from government sources, which represented 89.0% of their total income. This was 5.1% higher than what they received in 1998, and resulted largely from a 16.5% gain in the average amount of child tax benefits these families were given.

Government transfers typically make up a large proportion of seniors' income. In 1999, 42.5% of the income received by families headed by a senior (someone 65 or over) came from government transfers, down from 44.6% in 1998. This group had a sizeable increase in market income in 1999. Seniors who lived alone received 54.2% of their total income from government transfers, virtually unchanged.

Senior women who lived alone received $11,909 in government transfers in 1999, accounting for 57.3% of their average income. However, unattached senior men received $12,672 in transfers, representing 47.6% of their total income. Older women have had a lower level of participation in the labour market, and were less likely to receive income from private pensions, investments or employment earnings. As a result, they generally had lower market income than did men.

Decline in income taxes for families

On average, families paid $12,346 in income taxes, down $362 or 2.8% from 1998. Income taxes of unattached individuals averaged $4,994 in 1999, up 4.0% from 1998. The contrasting direction of average income tax for families and unattached individuals can be partly explained by differential changes in their market incomes.

Families paid 19.3% of their total income in taxes in 1999, down from 20.1% in 1998. Unattached individuals paid, on average, 18.5% of their total income in taxes, up slightly from 18.3% in 1998.

In 1999, the 20% of families with the highest incomes paid an average $31,966 in income taxes, which made up 51.8% of all income taxes paid by families. In contrast, the 20% of families with the lowest incomes paid an average $1,148, or 1.9% of the total income tax bill of families.

After-tax income rises for the fourth year in a row

After-tax income is total income (market income plus government transfers) minus income taxes. It reflects the impact of both taxes and transfers.

In 1999, the average after-tax income of families was $51,473, up 1.9% or $934 from 1998. Average after-tax income of unattached individuals was $22,064 in 1999, up 2.7% from 1998.

Families in which the main income earner was under 65 received $781 more in after-tax income in 1999 than in 1998, a 1.5% increase. Since average after-tax income hit its decade low in 1993, average after-tax income of these non-elderly families recorded an increase of 11.5% to reach $53,507 in 1999.

In 1999, after-tax income of elderly families was $38,846, a 5.8% increase from 1998. For elderly families, the low point for after-tax income during the 1990s occurred in 1996. Since then, average after-tax income of families headed by a senior has increased 7.3%.

The after-tax income of two-parent families with one earner, as well as female lone-parent families, changed little in 1999 after rising sharply in 1998.

The combination of personal income taxes and government transfers is designed to reduce the differences in income among the various types of families. Average market income for two-parent families was more than three times that of female lone-parent families. On an after-tax basis, two-parent families received a little over twice the amount held by female lone-parent families. The gap in after-tax income between these two family types was stable throughout the 1990s.

Gap between two ends of the income scale widens slightly

Market income for families has become more polarized in the 1990s. In 1990, the top 20% of families received 42.2% of total market income. By 1999, their share was 44.4%. Market income shares of the other four quintiles dropped slightly over this period. The biggest losses were in the second and third quintiles, which each saw drops of almost one percentage point in their respective shares of market income.

Families in the top 20% received $11.80 in market income for every dollar earned by families in the lowest 20% in 1990. During the recession years at the beginning of the decade, inequality in market income rose considerably so that, in 1994, families in the top quintile received $13.90 for every dollar received by families in the bottom quintile. By 1999, this had dropped back down to $12.70.

The net effect of taxes and transfers during the 1990s counterbalanced these shifts, so that the equivalent ratio of after-tax income between the top and bottom quintiles remained stable around 5 to 1 throughout the decade.

Financial situation of low-income families shows improvement

The financial situation of low-income families showed some improvement. In 1999, families in low income would have needed, on average, an additional $6,262 in after-tax dollars to exit low income. This compares with $6,690 in 1998.

In 1999, an estimated 723,000 families, or 8.6% of the total, were in low income, down from 737,000, or 8.9%, in 1998. This was the lowest rate since 1990 (8.5%).

Of the 570,000 lone-parent families headed by a woman, 41.3% were in low income in 1999, up from 40.4% in 1998. Three out of four lone-parent families headed by women had earnings in 1999. Of those without earnings, 90.9% were in low income.

Among unattached individuals, about 1,280,000, or 29.9%, were in low income in 1999, virtually the same as in 1998. On average, unattached individuals in low income would have needed an additional $5,047 to rise above the cutoff in 1999.

In 1999, a family of four in a city of 500,000 or more would be counted as living in low income if its after-tax income was below $28,392. For the same family living in a rural area, the cutoff was $18,615. Low-income cutoffs are lower for smaller families and higher for larger ones, reflecting greater expenditures on necessities. They also vary by community size.

Low income rate for individuals also falls

The total number of people in low income also declined. In 1999, 11.8% of all Canadians, about 3.6 million people, were in low income based on after-tax income. After climbing throughout the early 1990s, the rate peaked in 1996, at 14.0%, and has been declining since.

In 1999, an estimated 962,000 children under age 18 were living in low income, down from 978,000 in 1998. The low-income rate for children dropped from a peak of 16.8% in 1996 to 13.7% in 1999.

Many families "cross the line"

Major changes in family circumstances, such as a job loss or a job gain, a marital separation or the birth of a child, can cause a family to "cross the line"-to move into or out of low income. Of all people in low income in 1998, about one-third were no longer below the line in 1999, while the remaining two-thirds stayed in low income both years.

Despite the overall reduction in low income in 1999, there was significant flux. Of all people in low income in 1999, 30% had not been in low income the year before.

There is significant flux in the low-income population from one year to the next. At least for some, low income is not a persistent state. However, this level of change also means that, over a longer period, the number of people experiencing low income is much higher than one might conclude based on annual low-income rates.

Almost one-quarter (24.1%) of Canadians experienced low income for at least one year between 1993 and 1998. Of the total population, 8.0% were in low income for one of the six years and 4.8% experienced exactly two years. An estimated 3.3% of the population were in low income throughout the full six years.

Average income

The electronic version of the report Income in Canada, 1999 (75-202-XIE, $45) is now available. The paper version (75-202-XPE, $45) will be available in December.

Data on market income, total income, government transfers, income tax, income after tax and persons in low income are also available, free at Statistics Canada's Web site (). From the Canadian statistics page, see the subheading The people, then choose Families, households and housing, then Income. As well, data on earnings are available; from the Canadian statistics page, see The People, then choose Labour, employment and unemployment, then Earnings.

For more information or to enquire about the concepts, methods or data quality of this release, contact Client Services (1-888-297-7355; 613 951-7355; income@statcan.gc.ca), Income Statistics Division.

Low-income rates

Government transfers