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July 19, 2000
The Canadian Fact Book on Poverty 2000
Chapter 1: Introduction
When most Canadians think of poverty, the image is of sickly children on the edge of starvation. In highly industrialized societies, however, this scene is not typical. What prevails instead is deprivation and need. In Canada, people suffer deeply not because the necessities of life barely exist for the population at large – the state of affairs in many Third World countries – but because an unequal distribution of income blocks access to Canada’s abundance. Poverty in this country is a matter not of starving but rather of begging for food at food banks and shelters, and of being shunted from one substandard shelter arrangement to another. For an increasing number of people, it even means living on the street and panhandling. This dreary picture is the result of an unequal distribution of riches rather than a lack of riches.
Poverty of the type typically found in industrial countries is a serious matter, and pockets of Third World poverty do exist in Canada, in some of our inner cities and on the reserves of Aboriginal peoples. There is no shortage of statistics documenting a link between poverty in Canada and various debilitating behaviours and conditions. For the sake of the many sceptics, let it be stressed that the authors do not claim that lack of income itself causes these human conditions – one cannot demonstrate causation with statistics – but only that these conditions are strongly associated with low income. The question of causation is left to the reader’s own judgement.
The statistics are especially striking for children – a segment of the population that is unequipped to overcome poverty by any efforts of its own. Income levels and the well-being of Canadian children are undeniably linked, as a pioneering study by the Canadian Council on Social Development (CCSD) has documented. Some of these links are:
Poor children (family income less than $20,000) are 1.3 times more likely to be growing up in substandard housing as are children from middle-income families (family income $45,000), and 2.4 times as likely as are children from high-income families (income above $80,000). Poor children are 1.9 times more likely to be living in neighbourhoods with lots of problems such as fighting, drug dealing and vandalism, than are children in middle-income families, and 2.4 times more likely than are children in high-income families. Poor children are 1.4 times more likely to engage in aggressive behaviour than are children in middle-income families or higher-income families. Poor children are 1.5 and 1.7 times as likely to be hyperactive than are children from middle- and high-income families, respectively. Poor children are more likely to exhibit delinquent behaviours compared to middle- and high-income families: 1.8 and 2.6 times respectively. Serious health problems that affect a child’s functioning such as vision, hearing, speech, mobility and cognition are 1.7 and 2.6 times more likely to be found in poor children than in children from middle- and high-income families, respectively. Four- and five-year-old children from poor families are 2.2 and 4.5 times more likely to exhibit delayed development on vocabulary tests than are the children from middle- and high-income families. In fact, over one-third (36 per cent) of poor children are judged to have delayed language development. Children from poor families are 1.8 times as likely to be registered in special education classes than are children from middle- and high-income families. Children enrolled in special education classes are at higher risk for falling behind in school and dropping out before high school completion. Poor children are 1.3 times less likely to participate in organized sports than are children from middle-income families and 2.8 times less likely than are children from high-income families. Almost three-quarters (72 per cent) of poor children do not participate compared to only one-quarter of children from high-income families. Older teens aged 16 to 19 years are normally expected to be either in school or in a job. However, poor children are 2.5 and 4.4 times more likely to be engaged in neither activity (in a sense, they are "idle") compared to teens from middle- and higher-income families.
This partial catalogue of misfortune makes clear that children who grow up in low-income families stand out in a variety of ways from their better-off peers. They are less healthy, have less access to skill-building activities, have more destructive habits and behaviours, live more stressful lives, and are subject to more humiliation. In short, they have less stable and less secure existences, and as a result are less likely to be secure as adults.
In a day and age when education, emotional maturity, leadership, and social and communication skills are prized as essential for prospering in an increasingly knowledge-based society, it is not promising that so many Canadian children are starting off with such disadvantage. The days of just making sure that children had enough to eat and a roof over their heads in order to produce strong arms and backs is long gone. The skills and attributes valued today require more than a start in life at a minimum subsistence level. In fact, the CCSD study (from which the above findings are taken) shows that after studying 27 living conditions and outcomes, the likelihood of a poor outcome dramatically diminishes up to a family income level of $30,000 in 80 per cent of the cases. Further, in 50 per cent of the cases, risk rapidly diminishes up to the $40,000 family income level. If a high level of child well-being is an important objective of a society, these are the income levels that need to be discussed in terms of setting a floor on income inequality in Canada.
The cataloguing of misfortune is not restricted to children. Adults with low incomes also suffer debilitating conditions according to a Statistics Canada study:
Adults in low-income households (less than $30,000 income) are 4.6 times more likely to report being in poor or only fair health compared to high-income adults (over $60,000), and 2.2 times more likely than middle-income adults ($30,000 to $60,000). In fact, one-fifth of poor adults report being in poor or only fair health. Serious health problems that affect an adult’s functioning such as vision, hearing, speech, mobility and cognition are 1.3 and 2.0 times more likely to be found in poor adults than in middle- and high-income adults respectively. Two-fifths of low-income adults have these health problems. Suffering from chronic health conditions such as asthma, high blood pressure, stomach ulcers and the effects of stroke is more prevalent in low-income adults. Whereas 55 per cent of low-income adults had two or more of these conditions, this was true for only 32 per cent of middle-income adults and 13 per cent of those with high incomes. The mental state of adults who responded to the Statistics Canada survey has been summed up in a mental health distress index. The results show that low-income adults are 2.4 times more likely to have a high distress score than are high-income adults, and 1.8 times more likely than are middle-income adults. Low-income adults are 1.3 times more likely to express low self-esteem compared to high-income adults. Esteem relates to whether a person feels they have a number of good qualities, are worth as much as others, have a positive attitude towards self, and whether they believe they are failures or not.
These results for adults cannot confirm that the debilitating conditions in each case are caused by low income. In some cases, it may be that the conditions are the cause of low incomes. However, this brief portrait does confirm that low income is associated with a disproportionate number of special problems. Thus, to integrate these people into society requires a special effort. To facilitate a permanent escape from poverty, such an effort must include special services to assist people in overcoming or adapting to some of the problems as well as income transfers to address their current poverty.
While noting the links between income and many child and adult outcomes, it would be gratifying to report that the inequality between rich and poor is narrowing and as a consequence, some of the riskier outcomes are being ameliorated. Unfortunately, the opposite is true – inequality is widening. For example, between 1973 and 1997, the share of total earnings in Canada going to the bottom 20 per cent of families with children fell steeply from a paltry 5.3 per cent to 2.6 per cent, which represents several billion dollars in total. In contrast, the share of earnings going to the top 20 per cent increased from an already generous 38.4 per cent to 42.8 per cent. This is income redistribution in reverse. Fortunately, after government transfers and income taxes, the picture improves: the bottom 20 per cent received 7.7 per cent of all income in 1973, but even this small amount had deteriorated to 7.0 per cent in 1997, while the top 20 per cent increased their share from 35.5 per cent to 37.2 per cent. So, over time, both labour market earnings and government assistance have let down the poor.
A Day in a Life of Poverty
Aside from the negative links between low income and child well-being, what does it mean in real-life terms to be raised in poverty in a well-off industrialized country such as Canada? Although some individuals raised in poor families turn out to be happy and successful adults, such exceptions do not disprove the rule. Most poor Canadian individuals or families suffer the effects of continual deprivation: a relentless feeling of being boxed in; a feeling that life is dictated by the requirements simply of surviving each day. In this way of life there is no choice, there is no flexibility, and if something unexpected happens – such as sickness, accident, family death, fire or theft, rent increase – there is no buffer to deal with the emergency. Life is just today, because tomorrow offers no hope.
Perhaps the easiest way to comprehend what a day in a life of poverty is like is to describe a family’s left-over income after it pays for basic shelter, food and clothing. How much money does a typical poor family consisting of two adults and two children, and living in a large urban area, have at its disposal? In 1997, while the traditional Statistics Canada low income cut-off line (see Chapter 2) for such a family was set at $28,100, the average two-parent family with two children was in fact below this line by an amount equal to $10,050, leaving it with $18,050 annually on which to live.
Compare this to the family’s basic expenditures on shelter, food and clothing. Using the Canadian Mortgage and Housing Corporation (CMHC) survey of shelter costs across the country, the median rent for a three-bedroom apartment amounted to $8,495 per year (weekly equivalent of $40.84 per person). To adhere to Agriculture Canada’s Nutritious Food Basket as a guide to basic food costs, the family required $6,885 (weekly equivalent of $33.10 per person). Using the Montreal Diet Dispensary guidelines for basic living, estimated clothing costs totalled $2,208 (weekly equivalent of $10.61 per person). This amounts to $17,588 per year for the typical poor four-member family. Deducting this from its gross income of $18,050 leaves a surplus of only $462 for the year, or $2.22 per person per week.
This $2.22 per week must be used to meet all other needs such as personal care, household needs, furniture, telephone, transportation, school supplies, health care and so on. There is no money for entertainment, recreation, reading material, insurance, and charitable or religious donations.
It is easy to understand why poor families:
cut into their budget for essentials; rent substandard housing; move often in attempts to save rent; purchase poor-quality food that lacks freshness or variety; supplement their food budget with trips to food banks; own a minimum selection of mainly used clothing.
Defining and Measuring Poverty
There are two basic approaches to defining and measuring poverty in Canada. When taken to their respective extremes, they establish the possible income bounds of poverty. Numerous intermediate measures fall between these extremes.
Absolute measure: The first approach is based on the belief that one can determine an absolute measure of poverty by examining an essential basket of goods and services deemed necessary for physical survival. The cost of this basket represents an objective dollar measure of poverty. The strictest application of this approach results in a standard of living sufficient only to keep the human body together. This purely physical approach stipulates a budget whose components are food provided by a charitable group or food bank, shelter provided by a community hostel, second-hand clothing, and access to basic remedial health care. The poverty line implied by such a budget would be very low; an annual income in the order of $2,000 per person would probably cover it.
The consequence of the absolute approach, if rigorously applied, is an utter absence of choice and flexibility in how one lives. The shape of one’s life is determined rigidly by the requirements of a fixed and rock-bottom physical existence. Relative approach: At the other definitional extreme is the relative approach, which is based on the belief that any definition of poverty must take into account social and psychological as well as physical well-being. The relative approach is based on social inclusion and equity, that is, on some notion of the extent to which society should tolerate inequality in the distribution of income. It argues that someone who has so little that he or she stands out in relation to the surrounding community will feel marginalized. Marginalized people, whether children or adults, affect the social cohesion of a community because they no longer feel part of what they see as an indifferent or hostile society.
In the rich countries of the industrialized world, the income level associated with a relative definition of poverty will be many times the level required to assure physical survival. In fact, an argument frequently voiced against relative definitions of poverty is that a typical poor family in Canada would be wealthy if the family lived in the Third World. But poor Canadians do not live in the Third World; they live in communities that have First World living costs and in which wealth surrounds them daily. Hence the justification for a relative measure.
Not surprisingly, there is no consensus on the question of which basic approach should be adopted. Most approaches compromise between the two, that is, they attempt to define a basket of goods and services that assures a minimum standard of living which is acceptable in social as well as purely physical terms. The difference in these approaches is their judgement of what constitutes a minimum that respects the need to function with dignity in society. The difference between the lower guidelines based on absolute or physical definitions of poverty, and the higher ones based on relative or social definitions, is considerable.
To a great extent, the enduring debate about the proper definition of poverty is academic. Although poverty standards have been loosely used as a guide to the level of payments under the federal government’s elderly benefit programs, and to determine eligibility for school lunch programs and the like, they have not been used to set the level of the income safety net. As outlined in later chapters, the income of poor households falls well below the recommended incomes of the most widely accepted definitions of poverty. For example, the income of the average Canadian poor family in 1997 was $8,559 below the widely recognized low-income line established by Statistics Canada (and $8,942 below in the case of a lone-parent mother). It is accurate to conclude, therefore, that basic assistance to Canada’s poor population is guided mainly by the absolute approach to the definition of poverty. The growth and persistence of food banks and the homeless underscore this conclusion.
Common Misconceptions About Poverty
There are at least two common misconceptions about poverty. The first is that if a relative poverty line is used to measure the number of poor, for example, one-half of average income, then poverty can never be eliminated because the line keeps moving up with economic progress. Poverty, therefore, will always be with us. The second misconception is that the number of poor is overstated because many are young students who are only temporarily poor; or they are people who may have low incomes but own their own homes (this is often thought of the elderly); or they are people who may have low incomes but receive subsidized shelter or child care, and hence are not as poor as their incomes indicate. These common beliefs need to be examined more closely.
Will the Poor Always Be With Us?
Many people believe that, unlike a fixed dollar target provided by an absolute poverty measure, a moving relative target makes it impossible to reduce and eliminate poverty. These people say that as the incomes of the poor are improved, the income average also moves up, and with it the poverty line. It is an unending upward income spiral in which poverty becomes statistically impossible to reduce or eliminate.
This misconception can be unravelled by considering the means selected to reduce poverty. If poverty is to be reduced only through increasing general economic prosperity and income growth, whereby nobody changes their relative income position, then the poor will indeed always be with us. To explain: imagine a society of 100 people ranged on an income ladder according to their levels of income. The person with the highest income is on the first rung at the top and the person with the lowest income is on the 100th at the bottom. If everyone’s income increases equally because of general economic growth, then the ladder shifts up, but people will stay on the same rungs. Thus, those on the bottom rungs will always be poor; they will never rise above the 75th rung (assuming this rung represents a poverty line defined as one-half of average income).
However, if redistribution of income (through direct income transfers or jobs) is the major means for resolving poverty, then it is quite possible to move all people above the level of income formerly marked by the 75th rung. In this case, shifting income from the top to lower rungs of the ladder does not increase the target average income, it just rearranges the same total amount. This, of course, is what the relative approach is all about: reducing income inequality. For anyone still doubting this explanation, it may be helpful to take a pen and paper and try a few simple arithmetic examples.
In summary, the poor will always be with us using a relative measure only if we rely on income growth and not on income redistribution as a solution. When people state that poverty cannot be eliminated using a relative measure, they are simply rejecting income redistribution as a means.
Are the Poor Not Really Poor?
An oft-heard complaint is that even if relative poverty lines are accepted, most of the poor are not really poor. The argument takes different courses but usually consists of the same main elements:
Many of the poor are young students who are just temporarily poor and are probably receiving undeclared parental support. The common argument is that young students who face higher-income futures are not "deserving" poor. Many of the poor (especially the elderly) own their own homes and, therefore, possess a hidden form of wealth. Many of the poor receive public subsidies, the main one of which is a shelter subsidy, and the value of this is not included in poverty line calculations.
As demonstrated below, reliable data indicate that these arguments are misconceptions.
Students
The argument deals with students living away from home, because students living at home are not counted as poor individuals in their own right unless the whole family is poor. In 1997, of all poor unattached individuals (the Statistics Canada term for people who are neither married nor living with blood relatives), only 14.4 per cent (or 235,000) were students. In other words, of all poor people in Canada (those living in families as well as those living unattached), only 4.5 per cent were students. Even if all these students were removed from the poverty statistics, Canada’s overall poverty rate would drop by only 0.8 of a percentage point. Admittedly, this is not a totally insignificant reduction, but it hardly justifies the argument that temporarily low-income students inflate the true numbers of poor people all out of proportion.
Moreover, it is questionable if all these students could justifiably be removed from the poor rolls. Not all of them are young and, thus, not all can be considered to be receiving parental support. In fact, 43 per cent of all full-time students living unattached in 1997 were over the age of 25. Undoubtedly, a number of these would have been true hardship cases; whether or not they might eventually earn higher incomes, it is difficult to understand why they should not be considered legitimately poor and deserving of assistance.
Home Owners
In 1996, only 18 per cent of poor households owned and lived in a dwelling free of mortgage, and most of these represented elderly households. Among poor households with heads under the age of 65, only 13 per cent owned homes outright.
How much is home ownership (illiquid wealth) worth if converted into a stream of income (liquid purchasing power)? According to the Canadian Real Estate Association, the average price for all houses sold in October 1999 was $172,500; because this figure only covers house sales in the 25 major Canadian markets, it probably overestimates the average value of a Canadian home. Nonetheless, if low-income Canadians sold their homes for the average figure of $172,500 and invested the proceeds in a safe fixed income investment, it would get a return of about 5 per cent annually. This amounts to $8,625 a year, or $718 a month, which is either not enough or barely enough to pay for rented quarters for an average-size family of three persons.
This wealth conversion and the extra income stream it generates may technically raise some families above the poverty line. However, it has not increased the family’s standard of living. They are no further ahead. By converting their housing wealth into income and renting, low-income families have increased their incomes and expenses by about the same amount. If they had a poor standard of living before, they are still poor.
Individuals who believe that most of the poor are sitting on unconverted wealth must be assuming that these people are living in modern homes in well-off neighbourhoods in large cities. In truth, it is unlikely that many people with low incomes are living in such houses; there may be an anecdotal few, but not a significant number.
Shelter Subsidies
The available Statistics Canada data from the Survey of Consumer Finances show that, in 1996, only 19 per cent of all poor households combined (17 per cent of poor families and 20 per cent of poor unattached individuals) received some form of rental subsidy. Moreover, the amount of subsidization, even for the few who receive it, would have to be fairly large to raise the family above the poverty line, keeping in mind that the average poor family had an income in 1997 that was $8,559 below Statistics Canada’s low income cut-off line (LICO).
Conclusion about Misconceptions
Do income surveys overestimate the numbers of poor? The evidence suggests that even if all students were excluded, the numbers of families and individuals in poverty would decline by only a small amount. True, a small proportion of poor people do receive rental subsidies, own their own home, and receive non-cash income that is not counted in income surveys, which in some cases would raise people over the income poverty line. However, the available evidence suggests that the extent of certain forms of non-cash income does not appear to be significant enough to change the estimates of the number of poor in Canada.
Instead of overestimating poverty, a case can be made that the annual surveys in fact underestimate poverty in Canada. There are several reasons for this:
Aboriginal peoples living on reserves are not counted, but census and other data show that the rate of poverty among this population group is about double the average. The homeless are not counted. People with no permanent address or telephone are not counted, because the survey is a household survey conducted by telephone. Residents of the Yukon, Northwest Territories and Nunavut, a large proportion of which are poor Aboriginal peoples, are excluded.
Consequently, if all of these poor people were taken into account, Canada’s recorded poverty rate would be higher.
A Cautionary Note
Before proceeding with the statistical analysis of poverty, a few definitional matters must be clarified.
First, poverty is discussed here in material terms. There are several dimensions and consequences of living in poverty, but in a materialistic society, the lack of an adequate income imposes extreme hardships.
Second, the term poor is used throughout this book to signify material deprivation, not to imply that someone is inadequate or performing their tasks poorly. For example, a poor mother is not someone who is doing a poor job of raising her children, but rather someone who has insufficient income (according to some standard).
Third, discussion of Canada’s poor in a collective sense does not imply that all poor people are members of a permanent, easily identifiable underclass with similar backgrounds, expectations and behaviours. Some of the people defined as poor by the income measures used in this book would probably resent the label, because some people are in a better position than others to cope with income shortfalls. Moreover, this shortfall may only be temporary. Annual estimates of Canadian poverty count those who are poor at the time the survey is conducted. The term "poor households" means only those households that are poor in the given year. The annual surveys do not show whether they were poor in the previous year or will be poor in subsequent years, although this information is now becoming available.
Canadian Fact Book on Poverty 2000 - Related Material
Canadian Council on Social Development,
190 O'Connor Street, Suite 100,
Ottawa, Ontario, K2P 2R3
Tel: (613) 236-8977, Fax: (613) 236-2750, Web: www.ccsd.ca, Email: council@ccsd.ca
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