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Wednesday, June 25, 2003 Family income2001After-tax family income rose for the fifth straight year in 2001, the result mainly of higher government transfers and lower personal income taxes. The number of families in low income declined slightly, as it has every year since 1996. After-tax income for families (of two people or more) reached an estimated $58,000, up 3.4% after adjusting for inflation, even though average market income changed little in 2001. Average government transfers paid to families rose 3.3% in 2001, halting four straight years of declines. At the same time, the average amount families paid in income taxes fell 8.2%. Income taxes accounted for 18.1% of total income, that is, market income plus government transfers. This was down from 19.9% in 2000. It marked the first time this proportion slipped below 19% since the late 1980s. Female lone-parent families recorded one of the largest increases in after-tax income. It went up 4.6% to an average of $31,200. Little change in market incomeFollowing four years of robust growth, including a 4.5% increase in 2000, average market income of families (of two people or more) rose a marginal 0.8% in 2001 to $63,700. This slower growth was related to weakening labour market conditions during the year. Nevertheless, in the period since 1996, during which economic growth in Canada was relatively strong, average market income grew 16% in cumulative terms after adjusting for inflation. This is equivalent to an average annual growth rate of 3.0%. The average market income of female lone-parent families, unlike that of most other families, continued its upward trend in 2001, rising 5.7%. From 1996 to 2001, it increased 46%, which is equivalent to an average annual growth rate of 7.9%. This trend was primarily the result of the higher labour force participation of female lone parents. About 82% of female lone-parent families had earnings in 2001, compared with only 65% in 1996. The market income of two-parent families remained virtually unchanged in 2001. However, at $75,400, it was still 17% higher than in 1996, just prior to the period of relatively strong growth. Government transfers up, income taxes downAfter declining for four years in a row, average government transfers paid to families increased 3.3% in 2001 to $7,100. Government transfers grew for all family types, except female lone-parent families. Transfers for female lone parents declined 3.2%, in part because of the increase in their market income. Government transfers to female lone-parent families have edged down over the last several years, as their average market income has risen. Employment Insurance benefits accounted for about half of the increase in government transfers in 2001. In late 2000, the federal government introduced several changes to the Employment Insurance system, which led to increased payments. Eligibility requirements were reduced for people seeking maternity or parental leave and the maximum number of months of benefits was increased. Eligibility requirements for seasonal and part-time workers were eased as well. As most government transfers are based on needs, the share of transfers paid to the 20% of families with the lowest after-tax income is typically the highest. In recent years, the share of all government transfers going to these families has generally been rising. It rose steadily from 28% in 1996 to 31% in 2000, and remained unchanged in 2001. On average, families paid an estimated $12,800 in income taxes in 2001, a decline of 8.2% or $1,100 from 2000. This more than offset a $900 increase in average taxes paid by these families in 2000 over 1999. Low-income rate among children down for fifth straight yearThe low-income rate among children under 18 years of age, based on after-tax income, declined for the fifth straight year in 2001. An estimated 786,000 children, or 11.4% of the total, were living in low-income families. These levels were down from 868,000 or 12.5% in 2000. The low-income rate among children in 2001 was the lowest since 1980, the earliest year for which comparable data are available. The proportion of children living in low-income families has been declining since 1996, when it peaked at 16.7%, based on after-tax income. This decline follows overall improvements in the Canadian economy during the late 1990s. For the population as a whole in the 10 provinces, about 3.2 million people, or 10.4%, were living in low income. The prevalence of low income among all Canadians has been declining since its peak in 1996 at 14.0%. Low income is traditionally more prevalent among women than men. In 2001, 11.1% of women were in low income, compared with 9.6% of men. The gap in the low-income rate between senior men aged 65 and over and their female counterparts narrowed in 2001. In fact, it was the first year in which the rate for senior women fell to less than twice that of senior men. About 9.1% of senior women were in low income, compared with 5.1% of senior men. Fifth consecutive decline in low-income rate of familiesAn estimated 646,000 families were in low income in 2001, down from 666,000 in 2000 and 870,000 in 1996. The low-income rate among these families declined from 10.7% in 1996 to 7.6% in 2001. This is the lowest rate for economic families since 1989, when it was 7.5%. The proportion of families in low income decreased for the fifth consecutive year. This reflected a healthy labour market in the latter part of the decade as well as recent increases in transfers and cuts in income taxes. Of the estimated 512,000 lone-parent families headed by women, 32% were in low income in 2001, down from 34% in 2000. For the 3,107,000 two-parent families with children, the low-income rate was 6.7%. A majority of these two-parent families, about 1,973,000, had two earners in 2001. The low-income rate for this latter group was 2.7%, down from 3.6%. From 1980 (the first year for which comparable data are available) to 2000, two-parent families with two earners had relatively stable low-income rates, varying between 3.5% and 5.3%. In contrast to the trend among two-parent families with two earners, the low-income rate for two-parent families with one earner has exhibited an overall upward trend since 1980, when it was 12%. Of the estimated 457,000 two-parent families with one earner in 2001, about 22% were in low income. While the low-income rate dropped, the financial situation of families below the low-income cutoffs deteriorated somewhat. Families in low income would have needed, on average, an additional $7,200 in after-tax dollars to climb out of low income. Between 1996 and 2000, this amount has ranged from $6,800 to $7,100. Gradual increase in income inequalityA measure of income inequality is the ratio of average market income received by the 20% of families with the highest income compared to the 20% of families with the lowest income. In 2001, this ratio was about 13 to 1. That is, the 20% of families with the highest income received $13 in market income for every $1 received by the 20% with the lowest. However, taxes and transfers moderate the differences between the outer ends of the income distribution. In 2001, after taxes and transfers, the one-fifth of families with the highest income received $5.50 for every $1 received by the one-fifth with the lowest. Income inequality increased gradually from 1995 to 2001. Up to 1995, the ratio had held fairly steady, with the 20% of families with the highest income getting about $4.80 for every $1 received by those with the lowest income. After-tax income of senior families stableIn 2001, the after-tax income of senior families - those in which the major income recipient was aged 65 or older - was estimated at $40,400, virtually unchanged from 2000. Despite some annual variations, after-tax income of senior families remained stable for the last decade, in part because of the high proportion of government transfers in their income. In 2001, senior families received on average an estimated $19,900 in government transfers, accounting for 43% of their total income before taxes. The market income of seniors has varied considerably over time. In 2001, senior families experienced a 5.6 % decrease in their market income, the result of a 16% fall in wages and salaries. However, annual changes of such a magnitude are not uncommon for seniors. In 2001, 3.3% of senior families were in low income. This rate has varied between a low of 2.1% in 1995 and a high of 4.1% in 1993, but has showed no apparent trend. After-tax income up in every province except twoFamilies in every province registered increases in average after-tax income in 2001, except for Nova Scotia and Prince Edward Island. No province showed a significant decline. The largest increases were in Alberta (+6.5%), Quebec (+4.8%) and British Columbia (+4.7%). Most provinces incurred little change in average family market income. However, those with significant percentage increases were Alberta (+4.6%) and Manitoba (+3.0%). For the first time since 1993, average market income in Ontario did not grow. However, it still had the highest average market income of all provinces, $72,100. All provinces posted declines of 3% or more in average income taxes paid by families in 2001. The largest declines occurred in British Columbia and Prince Edward Island, where average income taxes paid by families fell 13%. A trend to declining provincial low-income rates for families, which started in 1996, continued in 2001. All provinces had low-income rates below 10%. In addition, in the case of each province, low-income rates for families were one to four percentage points below their 1996 level. Available on CANSIM: tables 202-0101, 202-0102, 202-0201, 202-0202, 202-0301, 202-0401, 202-0403, 202-0404, 202-0501, 202-0601, 202-0603, 202-0701, 202-0702, 202-0704 to 202-0706, 202-0802, 202-0804, 202-0807 and 202-0901. Definitions, data sources and methods: survey numbers, including related surveys, 3502 and 3889. The CD-ROM Income trends in Canada, 1980-2001 (13F0022XCB, $195) is now available. The electronic publication Income in Canada, 2001 (75-202-XIE, $34) is also available. For more information, or to enquire about the concepts, methods or data quality for this release, contact Client Services (1-888-297-7355; 613- 951-7355; income@statcan.gc.ca), Income Statistics Division.
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