Low income and inequality

Low income cut-offs (LICOs) are intended to convey the income level at which a family may be in straitened circumstances because it has to spend a greater portion of its income on the basics (food, clothing and shelter) than does the average family of similar size. The LICOs vary by family size and by size of community.

This publication provides a brief explanation of how the LICOs are derived and updated annually. In addition, it provides on a historical basis, LICOs for different family sizes by size of area of residence. LICOs are calculated based on the spending patterns of families on basic 'necessities' - food, shelter and clothing - as collected from the Survey of Household Spending (formerly referred to as the Family Expenditure Survey (FAMEX)).

The electronic publication "Low income measures (LIMs)" presents low income statistics, based on annual Survey of Consumer Finances (SCF) data, utilizing the LIMs for estimation of the low income population. LIMs are one alternative to the traditional low income cut-offs (LICOs) for prevalence, depth and composition of the low income population.

This report presents low income data on an after-tax income concept, including data on how far family incomes are from the LICO or LIM on an after-tax basis (or income deficiency/surplus, popularly referred to as the "poverty gap"). The after-tax low income data are also compared with results from the main or perferred LICO concept.

This report contains three alternate sets (1980 to present) of historical low income lines to the traditional "Low income cut-offs" (LICOs). The first set, "Low income measures" (LIMs), are set at one-half median adjusted family before-tax income, where "adjusted" indicates a consideration of different needs for families of varying size. The second and third sets are lines on an after-tax basis, using the LICO and LIM methodologies.

While there are many studies on differences in earnings between immigrants and the native-born or among immigrant groups, they ignore the distribution and concentration of income. These aspects are important for understanding the distribution of economic welfare and consumer behaviour among members and hence are policy relevant.

Using the 1991 Census data, the distribution and concentration of income have been examined among 15 broad birthplace groups for population aged 55 years and over. About 19% of males and 15% of females receive less than half the median income and obtain 5% and 3% of the aggregate income respectively. About 30% of males and 29% of females receive more than one and half times the median income and obtain 61% and59% of aggregate income respectively. About 51% of males and 56% of females who receive incomes between half and one and half times the median income are termed middle-class and their shares of aggregate income amount to 34 and 38% respectively.

Although, older immigrants aged 55 years and over, as a group, have roughly the same quartile distribution and concentration of income as their Canadian-born counterparts, the birthplace groups differ from each other. The groups coming from the developing regions, that is, the very groups that have lower average annual incomes, also have more inequitable distribution of income than the Canadian-born or their counterparts from the developed regions. Thus, the income distribution is more polarized in the populations from developing regions than in the populations from developed regions or in the Canadian-born population. On average, females receive 45% less income than males, and there is less polarization of income among them than among males regardless of the place of birth. A part of the explanation lies in the receipt of government transfers which tend to equalize rather than polarize incomes, and older women derive higher proportion of their income from government transfers than older men.

This publication Low income persons (Low income cut-offs, 1992 base) presents low income statistics, based on annual Survey of Consumer Finances (SCF) data, utilizing the low income cut-offs (1992 base), or LICOs.

Recently there has been extensive and recurring media coverage of Statistics Canada's low income cut-offs and their relationship to the measurement of poverty. At the heart of the debate is the use of the low income cut-offs as poverty lines even though Statistics Canada has clearly stated, since their publication began over 25 years ago, that they are not. The high profile recently given this issue has presented Statistics Canada with a welcome opportunity to restate its position on these issues, views which seem to have become lost in the debate.

This paper investigates the extent to which Canadians were exposed to low income during the 1993 to 1996 period.

Several recent studies have found that earnings inequality in Canada has grown considerably since the late 1970's. Using an extraordinary data base drawn from longitudinal income tax records, we decompose this growth in earnings inequality into its persistent and transitory components. We find that the growth in earnings inequality reflects both an increase in long-run inequality and an increase in earnings instability. Our large sample size enables us to estimate and test richer models than could be supported by the relatively small panel surveys used in most previous research on earnings dynamics. For example, we are able to incorporate both heterogeneous earnings growth and a random-walk process in the same model, and we find that both are empirically significant.

The electronic publication "Low income measures (LIMs)" presents low income statistics, based on annual Survey of Consumer Finances (SCF) data, utilizing the LIMs for estimation of the low income population. LIMs are one alternative to the traditional low income cut-offs (LICOs) for prevalence, depth and composition of the low income population.

This report presents low income data on an after-tax income concept, including data on how far family incomes are from the LICO or LIM on an after-tax basis (or income deficiency/surplus, popularly referred to as the "poverty gap"). The after-tax low income data are also compared with results from the main or perferred LICO concept.

This report contains three alternate sets (1980 to present) of historical low income lines to the traditional "Low income cut-offs" (LICOs). The first set, "Low income measures" (LIMs), are set at one-half median adjusted family before-tax income, where "adjusted" indicates a consideration of different needs for families of varying size. The second and third sets are lines on an after-tax basis, using the LICO and LIM methodologies.

This publication Low income persons (Low income cut-offs, 1992 base) presents low income statistics, based on annual Survey of Consumer Finances (SCF) data, utilizing the low income cut-offs (1992 base), or LICOs.

Low income cut-offs (LICOs) are intended to convey the income level at which a family may be in straitened circumstances because it has to spend a greater portion of its income on the basics (food, clothing and shelter) than does the average family of similar size. The LICOs vary by family size and by size of community.

This publication provides a brief explanation of how the LICOs are derived and updated annually. In addition, it provides on a historical basis, LICOs for different family sizes by size of area of residence. LICOs are calculated based on the spending patterns of families on basic 'necessities' - food, shelter and clothing - as collected from the Survey of Household Spending (formerly referred to as the Family Expenditure Survey (FAMEX)).

While there are many studies on differences in earnings between immigrants and the native-born or among immigrant groups, they ignore the distribution and concentration of income. These aspects are important for understanding the distribution of economic welfare and consumer behaviour among members and hence are policy relevant.

Using the 1991 Census data, the distribution and concentration of income have been examined among 15 broad birthplace groups for population aged 55 years and over. About 19% of males and 15% of females receive less than half the median income and obtain 5% and 3% of the aggregate income respectively. About 30% of males and 29% of females receive more than one and half times the median income and obtain 61% and59% of aggregate income respectively. About 51% of males and 56% of females who receive incomes between half and one and half times the median income are termed middle-class and their shares of aggregate income amount to 34 and 38% respectively.

Although, older immigrants aged 55 years and over, as a group, have roughly the same quartile distribution and concentration of income as their Canadian-born counterparts, the birthplace groups differ from each other. The groups coming from the developing regions, that is, the very groups that have lower average annual incomes, also have more inequitable distribution of income than the Canadian-born or their counterparts from the developed regions. Thus, the income distribution is more polarized in the populations from developing regions than in the populations from developed regions or in the Canadian-born population. On average, females receive 45% less income than males, and there is less polarization of income among them than among males regardless of the place of birth. A part of the explanation lies in the receipt of government transfers which tend to equalize rather than polarize incomes, and older women derive higher proportion of their income from government transfers than older men.

This paper investigates the extent to which Canadians were exposed to low income during the 1993 to 1996 period.

Several recent studies have found that earnings inequality in Canada has grown considerably since the late 1970's. Using an extraordinary data base drawn from longitudinal income tax records, we decompose this growth in earnings inequality into its persistent and transitory components. We find that the growth in earnings inequality reflects both an increase in long-run inequality and an increase in earnings instability. Our large sample size enables us to estimate and test richer models than could be supported by the relatively small panel surveys used in most previous research on earnings dynamics. For example, we are able to incorporate both heterogeneous earnings growth and a random-walk process in the same model, and we find that both are empirically significant.

Recently there has been extensive and recurring media coverage of Statistics Canada's low income cut-offs and their relationship to the measurement of poverty. At the heart of the debate is the use of the low income cut-offs as poverty lines even though Statistics Canada has clearly stated, since their publication began over 25 years ago, that they are not. The high profile recently given this issue has presented Statistics Canada with a welcome opportunity to restate its position on these issues, views which seem to have become lost in the debate.