Income of Canadians

2004

Median after-tax income rose for most Canadian families in 2004 as strong economic growth fostered gains in employment which in turn boosted market income, according to new data from the Survey of Labour and Income Dynamics (SLID).

Canadian families with two or more people had an estimated median income after taxes of $54,100, up about 2% from 2003 in real terms after adjusting for inflation. (Median is the point at which half of families had higher income and half less.)

The Canadian economy, as measured by real gross domestic product, grew 2.9% in 2004. According to the Labour Force Survey, this gain extended to the labour market as employment rose during the year, all in full-time jobs, and the unemployment rate declined.

The increase in after-tax income was not shared by all family types, however. Among senior or "elderly" families (those in which the main income earner was aged 65 and over) median after-tax income remained virtually unchanged at $38,500. However, it was up 12% in real terms compared with 1996.

It was also virtually unchanged among "unattached individuals," or single people, whose median after-tax income amounted to $21,300, and among female lone-parent families who had a median of $27,700.

Of the three main components of after-tax income (market income, transfers from governments and personal income taxes), only market income changed significantly from 2003. Market income is the sum of earnings from employment, investment income and private retirement income.

SLID data also showed that the proportion of families living below Statistics Canada's low-income cutoff (LICO), declined in 2004, reflecting the strong economic conditions.

An estimated 684,000 families were living in low income in 2004, 7.8% of all families. Some 865,000 children under 18 were living in low-income families, 12.8% of the total.

Market income: Lion's share of pre-tax income for families and singles

Families and singles earned the lion's share of their total (pre-tax) income from market income. For families of two or more people, median market income rose about 2% to $55,800.

In 2004, market income received from earnings, private pensions and investment income made up nearly $90 out of every $100 of income received before taxes. The remaining $10 came from government transfers.

Among non-senior families, earnings made up the largest share of income before taxes. For every $100 of total income, non-senior families received $93 from market income, and the remaining $7 from government transfers. (The $93 from market income comprised $85 from earnings, $3 from investment income, $3 from private pensions and $2 from other income.)

The median market income for non-senior families in 2004 was $62,800, up 2.8% from 2003. Increases in employment and the number of full-time jobs contributed to this gain.

Among female lone-parent families, median earnings have risen dramatically from $8,400 in 1996 to about $19,000 in 2004. For every $100 in total income, single mothers received $65 from earnings, $11 more than in 1996. This increase led to a reduction in their dependence on government transfers.

Tax-transfer system redistributes income across families

The personal income tax and government transfer system redistributes income across families at different periods in their lifetime and reduces income disparities.

In 2004, families paid a median income tax of $8,600 and received a median of $4,000 in government transfers.

For the purpose of this analysis, families were then equally divided into five groups according to their after-tax income, with each group representing 20% of all families. These groups are called "quintiles."

The highest quintile, or one-fifth of families with the highest after-tax income, earned 46% of all market income, paid 56% of all income taxes, and took home 40% of all after-tax income.

The lowest quintile, or one-fifth of families with the lowest after-tax income, earned only 3.6% of all market income, paid 1.8% of all income taxes, and took home 7.1% of after-tax income.

For every $1 of market income received by the one-fifth of families with the lowest after-tax income, the highest fifth received $12.90. After government transfers and taxes, the highest income group received $5.60 for every dollar received by the lowest group.

Among unattached individuals, the impact of the tax-transfer system was even more significant. The highest income individuals received $22.00 for every dollar received in market income by the lowest. This fell to $8.40 in after-tax dollars.

Between 1996 and 2004, the gap in average after-tax income widened between the lowest- and highest-income families from $82,500 to $102,700. By 2004, average after-tax income was $125,000 for the highest quintile, and $22,300 for the lowest.

Low-income rate among families declines

Statistics Canada's low-income rate measures the percentage of families below the low-income cutoff (LICO). The LICO is a statistical measure of the income thresholds below which Canadians likely devote a larger share of income than average to the necessities of food, shelter and clothing.

In 2004, about 3.5 million people were in low income. They accounted for 11.2% of all Canadians in 2004, well below the peak of 15.7% in 1996.

Among families, the proportion living in low income after taxes declined to 7.8% in 2004 from 8.5% the year before and a high of 12.1% in 1996. In 2004, 684,000 families were below the LICO. These families faced an average income gap of $7,200, which represents the amount of income they required to bring their income above the cut-off. The average income gap was $7,400 in 1996.

Low-income rates were highest among the 550,000 lone-parent families headed by women in 2004, 36% of whom lived in low income compared with 53% in 1996. This reduction was partly the result of an increase in the number of single mothers with earned income.

The low-income rate among seniors hit an all-time low of 5.6% in 2004, down from 6.8% in 2003.

About 865,000 children under 18 lived in low-income families in 2004, compared with 1.3 million in 1996. The proportion of children in low-income families fell from its peak of 18.6% in 1996 to its current level of about 12.8%.

The low-income rate for children in female lone-parent families was 40.0%, five times the proportion of only 8.1% among children in two-parent families.

Provinces: Alberta families had highest median income for the first time

Families in only two provinces (Alberta and Ontario) recorded median after-tax income that was higher than the national median. For the first time, Alberta families with two or more people had the highest median after-tax income in 2004. The year before, Alberta and Ontario were in a tie.

Half of all families in Alberta had after-tax income of $61,800 or more, up 4% from 2003. Median after-tax income in New Brunswick also increased 4%, but only to $46,400.

After-tax income was virtually unchanged for families in other provinces. It was lowest among families in Newfoundland and Labrador at $40,700.

Low-income rates among families of two or more people were higher than the national average of 7.8% in three provinces: British Columbia, where the rate was 10.3%; Newfoundland and Labrador where it was 9.2%; and Manitoba, where it was 8.0%.

Available on CANSIM: 202-0101 to 202-0107, 202-0201 to 202-0203, 202-0301, 202-0401 to 202-0411, 202-0501, 202-0601 to 202-0605, 202-0701 to 202-0706 and 202-0801 to 202-0807.

Definitions, data sources and methods: survey numbers, including related surveys, 3502 and 3889.

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

A more detailed report, Income in Canada, 2004 (75-202-XIE, free) is available today. This report contains analysis and 15 tables at the Canada and province level. Also available today, the 2004 Income Trends in Canada (13F0022XIE, $209) provides 40 tables at the Canada and province level also with some data at the census metropolitan area level.