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Study: Low income dynamics of Canadian taxfilers, 1992 to 2013

Released: 2016-06-21

Fewer taxfilers falling into low income, fewer transitioning out

From 1992 to 2001, 4.8% of taxfilers aged 18 and over on average fell into a low-income situation in each year. By 2013, the rate of entry into low income had declined to 4.1%.

The entry rate into low income is the number of taxfilers who entered low income in the second year as a percentage of taxfilers who were not in low income during the first year.

In 2013, rates of entry into low income were relatively high among taxfilers in lone-parent families (11%), taxfilers who had immigrated to Canada less than five years before (9%) and taxfilers aged 18 to 24 (7.3%).

In contrast, 34.1% of low-income taxfilers on average left their low-income situation each year from 1992 to 2001. This exit rate had fallen to 26.3% by 2013.

The exit rate from low income corresponds to the percentage of taxfilers who have low income in a given year and leave low income the following year. Since it is expressed as a share of low-income taxfilers, the exit rate is higher than the entry rate, which is expressed as a share of all taxfilers not in low income.

The low-income exit rate of taxfilers aged 65 and older has declined considerably over the 20-year period, falling from 55.5% in 1993 to 20.3% in 2013.

  Note to readers

New data for low income dynamics of Canadian taxfilers are now available in three new CANSIM tables: 204-0101, 204-0102 and 204-0103.

Data on low income dynamics based on the Survey of Labour and Income Dynamics from 1993 to 2010 are available in CANSIM tables 202-0806 and 202-0807. However, because of differences in data source and methodology, these data are not directly comparable with those presented in the article.

More information on the differences in data from the two surveys is available in the document, "What can we learn about low-income dynamics in Canada from the Longitudinal Administrative Databank?"

Analysis in this release is based on data from the Longitudinal Administrative Databank (LAD) from 1992 to 2013. The LAD is a 20% sample of the T1 Family File that is based on income tax returns from the Canada Revenue Agency.

The after-tax Low Income Measure is used to determine low-income in this release. The concept underlying this low income measure is that all persons in a census family are considered to have low income if their family income is less than half the median income of all census families. This low income threshold is recalculated each year based on the annual distribution of income on the LAD. Other low income thresholds and indicators of low income dynamics are also available in CANSIM tables 204-0101, 204-0102 and 204-0103.

Estimates presented in this release are for Canadian taxfilers aged 18 and older.

Definitions

The entry rate into low income is the proportion of taxfilers who entered low income in the second year among filers who were not in low income the first year. The entry rate is calculated by counting the number of taxfilers who have both an income above the low-income line in a given year and an income below the low income line the following year. This count is then divided by the number of taxfilers who were not in low income in the given year.

The exit rate from low income is the proportion of taxfilers who exited low income in the second year among filers who were in low income the first year. The exit rate is calculated by first counting the number of taxfilers who have both an income below the low-income line in a given year and an income above the low-income line the following year. This count is then divided by the number of taxfilers who were in low income in the given year.

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca) or Media Relations (613-951-4636; STATCAN.mediahotline-ligneinfomedias.STATCAN@canada.ca).

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