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Canada: ‘Poverty Rate’ Drops to Lowest Level Ever and Media Turns a Blind Eye
Source: ottawacitizen.com
Source Date: Monday, July 22, 2013
Focus: Electronic and Mobile Government
Country: Canada
Created: Jul 23, 2013

It’s been almost a month since Statistics Canada released its latest report on poverty in Canada (“Income of Canadians,” June 27). Since then I’ve been watching to see whether somebody, anybody would write about it.

You would think somebody would. It is a well-established principle of social justice that a society should make its first priority improving the lot of the worst off among it, and is to be judged by how well it does in this regard. What is more, the news on this front is remarkable, even extraordinary.

In 2011, the latest year for which StatsCan has figures, the proportion of the population living on low income — that is, with incomes below the agency’s Low Income Cut-off (LICO) — fell to its lowest level … well, ever. At just 8.8 per cent, it beat the previous record of 9.0 per cent, set in 2010. As recently as 1996, it was at 15.2 per cent. In 1965, the first year for which LICO rates were calculated, it was 25 per cent.

Certainly if the trend were in the other direction, we’d be reading about nothing but. That’s not speculation: when the poverty rate was rising, it was a staple of news and commentary. “Nearly four million Canadians,” the Toronto Star told its readers in December of 1992, “now live in abject poverty.” But now that fewer than three million Canadians are in poverty, it is no longer worthy of notice?

This is all the more remarkable since the line below which so many fewer people are falling is drawn at a higher level than ever. The LICO thresholds (plural: they are adjusted for family size and city population) aren’t defined as fixed sums of money, or even in relative terms, that is as a proportion of the average. Rather, they are set by a Byzantine process that defines even the relevant proportion in relativistic terms.

First StatsCan calculates the proportion of its gross income the average family spends on the necessities: food, shelter and clothing. Then it adds 20 percentage points to that figure. Then it extrapolates the level of income at which families would be spending that higher percentage on the same necessities. That’s the LICO. (Why 20 percentage points? Because.)

But as Canadians have grown richer over the years, they’ve tended to spend a smaller proportion of their incomes on the necessities. When those first LICOs were being calculated, it was estimated the average family spent half its income on the necessities, so the LICO standard was set at 70 per cent. By 1978 those proportions had fallen to 38.5 per cent and 58.5 per cent respectively; by 1992, to 34.7 per cent and 54.7 per cent. So not only were LICOs being calculated against much higher average incomes, but families could spend a much smaller proportion of it on necessities and still be counted as poor. What is defined as low income today — $30,945 in 2012, for a family of four in a mid-sized town — would have been the average not so long ago.

Indeed, this used to be a common complaint about LICO among conservatives: using an ever-shifting yardstick, they pointed out, understated actual improvements in living standards at the bottom. This cut no ice among those on the left, who carried on citing LICO as a “poverty” line regardless. They, too, had a point. The “absolute” measures beloved of the right themselves contain an element of relativism: what is a “decent” minimum today would be many times what it was a century ago.

So it’s worth noting that LICO is no longer quite such a moving target. The benchmark proportion used to be recalculated every decade or so, as new data on family spending patterns became available. But LICO today is still calculated using the 1992 base, adjusted for inflation. (StatsCan’s explanation: the Family Expenditure Survey from which it was drawn was discontinued in 1997, replaced by the Survey of Household Spending.) It’s still a relative measure, since it’s calculated in proportion to the average. It’s just not as relativistic, since the proportion remains constant.

Does that explain the progress in recent years? In part. A more purely relativistic yardstick, the Low Income Measure — defined as one-half the median income — yields less impressive results: at 12.6 per cent in 2011, it is lower than it was at its recent peak (13.4 per cent in 2004) but higher than at other times, notably in the boom years of the late 1980s.

But still: a much smaller proportion of the population now lives on low income, using a benchmark that was considered the acme of progressivism just a few years ago. The numbers that would be considered poor by the standards of 1965 must be a fraction of that.

Moreover, this is true whether you use before-tax income (the proportion here is 12.9 per cent), or income after taxes and transfers (the more usually cited measure, and the basis for the figures mentioned off the top). Fewer people are on very low incomes before tax than ever before, and fewer still are left in poverty after the tax-and-transfer system has done its work.

We can argue about the causes, but is this not at least worth noting?

(By Andrew Coyne)

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