Low income rate and low income gap ratio

To determine whether a person is in low income, the appropriate low income line (LIL) is compared to the income of the person’s family1 (or household)2.  If their income is below the cut-off, the individual is considered to be in low income.  In other words, “persons in low income” should be interpreted as persons who are part of low income families (or households), including persons living alone whose income is below the cut-off. Similarly, “children in low income” means “children who are living in low income families (or households)”.  Overall, the low income rate for persons can then be calculated as the number of persons in low income divided by the total population.  The same can be done for various sub-groups of the population; for example, low income rates by age, sex, or province.

After having determined that an individual is in low income, the low income gap ratio can be analysed by using the amount that the person’s family (or household) income falls short of the relevant low income cut-off, expressed as a percentage of the relevant low income cut-off3. For example, an individual living in a family (or household) with an income of $15,000 and a low income cut-off of $20,000 would have a low income gap of $5,000. In percentage terms, the “gap ratio” would be 25%.4 The average (or median) gap ratio for a given population is the average (or median) of these values as calculated for each person.

Notes

  1. The family concept used is the economic family, that is, all persons living in the same dwelling and related by blood, marriage, common-law relationship or adoption.
  2. When using the LICO or the MBM, the economic family is the appropriate unit.  When using the LIM, the household is the appropriate unit.
  3. See “What you should know” section of the 2009 Income in Canada release for a more detailed explanation (Statistics Canada, 2011a).
  4. For the calculation of this low income gap, negative incomes are treated as zero.
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