Social transfers, earnings and low-income intensity among children,
1981-96: Highlighting recent developments in low-income measurement
by John Myles and Garnett Picot
Business
and Labour Market Analysis Division
Analytical Studies Branch research paper
series, No. 144
A major aim of the paper is methodological. We contrast
results using the SST (Sen-Shorrocks-Thon) index with results produced by the
more familiar low-income rate, the usual measure for indexing low-income trends.
The low-income rate is embedded in the SST index, but unlike the index, the rate
incorporates only partial information on the distribution of low-income. Consequently,
the low-income rate is generally unable to detect the changes we describe and
this is true irrespective of the choice of low-income cut-off. Compared to the
low-income intensity measure, the rate is also relatively insensitive to changes
in transfer payments and employment earnings.
To demonstrate the methodological
points, we revisit trends in low-income among Canadian children by taking advantage
of recent developments in the measurement of low-income intensity. We focus in
particular on the SST index and its elaboration by Osberg and Xu. Low-income intensity
among children declined in the 1980s but rose in the 1990s. Declining earnings
put upward pressure on low-income levels over much of the period. Higher transfers
more than offset this pressure in the 1980s and continued to absorb a substantial
share of the increase through 1993. In contrast, between 1993 and 1996 employment
earnings increased marginally, but government transfer declined more, no doubt
due to both the slow recovery, when transfers typically decline, and program changes.
The result was rising low-income intensity. The low-income rate alone is an important,
but only partial, guide to these developments. The low-income intensity measure,
by combining information on both changes in the rate and the gap (depth of low-income)
provides a much more comprehensive view of trends, highlighting features often
missed by trends in the rate alone.
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