Section 1
Introduction

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Several low income lines are regularly published in Canada.¹ They include the Low Income Cut-Offs (LICO) below which families are likely to live under straitened circumstance, the Low Income Measures (LIM) that represent half of the contemporary median adjusted family income, and more recently, the Market Basket Measure (MBM) which reflects the cost of a basket of goods and services that are deemed essential to maintain physical health and to moderately participate in community activities.²

The co-existence of several low income lines allows one to study the well-being of Canadians from different angles, but researchers and analysts often choose to focus on one line. This practice in low income benchmarking leads to some critical questions. Do we observe the same trend if a different line is employed, in the short-run as well as in the long-run? Who fall in low income under one line but not the others? Do we get the same information for disadvantaged groups of individuals under different lines?

On the other hand, although leading poverty researchers proposed numerous aggregate indexes by which one may answer questions such as how many individuals are in low income, what their income shortfalls are, and how the income shortfalls are distributed, in practice, poverty debates often focus on a single index, namely the "headcount", and tend to compare aggregate indexes over time or across individuals without noticing whether a change of, say, half a percentage point in low income rate is statistically significant. Can these practices be misleading?

This study attempts to tackle these questions. In particular, the study will assess the impact of choosing different lines with several distribution sensitive, aggregate low income indexes for the country as a whole and across disadvantaged groups of individuals. In addition to the existing LIM line, which we shall refer to as the variable or floating LIM hereafter, we introduce the fixed or anchored LIM line to broaden the comparisons. This will also make our low income measurement practice to be in line with several European countries where both variable and fixed LIM-type measures are employed.

The paper is organized as follows. In Section 2, we introduce the fixed LIM line and summarize the main characteristics of the various lines. Section 3 presents the movements of several aggregate indexes, including the low income incidence, gap, and severity for the period of 1976 to 2007. We examine how different lines interact with each other in Section 4. This is followed by a decomposition analysis to see how different groups of individuals contribute to low income in Canada. A summary and the conclusions are contained in Section 6.

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Notes

1. Others include the low income guidelines of Canadian Council on Social Development (CCSD), the basic needs index of Professor Chris Sarlo at the Fraser Institute and poverty line of the Senate Committee. At regional level, there are the budget guidelines of Montreal Diet Dispensary, the budget guides of Social Planning Council of Metropolitan Toronto, the cost of living guidelines of the Social Planning and Research Council of British Columbia, and the acceptable living level of Social Planning Council of Winnipeg.
2. See Appendix 1 for a brief methodological review for the LICO, LIM and MBM lines.