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July 19, 2000
The Canadian Fact Book on Poverty 2000
Poverty is an important social issue because it affects the development prospects of children and adults. How a society distributes its income is a fundamental determinant of social cohesion. People left on the fringes economically also tend to be on the fringes socially. The many debilitating effects of poverty on child development and adult well-being are well documented.
Measuring Poverty
The choice of poverty lines ranges from those providing for bare physical subsistence (the "absolute" approach) to those providing full inclusion in society (the "relative" approach). There are many working definitions of poverty, but no official version. All poverty lines are based on subjective factors and their usage depends on their credibility and public acceptability.
For over 30 years, the leading poverty line in Canada has been Statistics Canada's Low Income Cut-offs (LICOs). These cut-offs are by far the most popular with the public, analysts and organizations dealing with poverty and income distribution issues. The LICOs are not without legitimate criticisms, but the competitor lines have more flaws and less acceptability. The LICOs have also been repeatedly supported over time by public opinion surveys and empirical research showing that the most serious negative impacts of low income start to abate when family income approaches the income levels that correspond with the low income cut-offs (Chapter 2).
Poverty has Risen
Household poverty has increased in Canada over the past quarter-century. The rate of household poverty, as measured by Statistics Canada's LICO, was higher in 1997 (22.4 per cent) than it was in 1989, 1981 and 1973. This translates into an increase of 1.3 million poor households since 1973 (Table 3.1). Average household incomes, before and after income transfers and taxes, have not recovered from the recession of the early 1990s. Average household incomes in 1997 were lower than in 1981 (Table 3.3). Moreover, the distribution of income has become more polarized between low- and high-income households. As well, middle-income groups have experienced a declining share of market and disposable income (Table 3.10).
Seniors' Poverty Rates have Declined
While too many of Canada's senior citizens are still poor, their poverty rate continued to decline between 1981 and 1997 (Table 3.1). The poverty rate among elderly households dropped by 7.2 percentage points between 1981 and 1989 and another 1.8 percentage points between 1989 and 1997. In contrast, the poverty rate among working-age households increased by 6.3 percentage points over this time period.
Although the authors applaud the reduction in the rate of poverty among elderly households, two cautions must be raised:
Despite gains, the rate of poverty among unattached elderly individuals remains high, at 45.0 per cent in 1997 (Table 3.2). As well, the poverty rate among elderly households has a pronounced gender bias. In 1997, 49.1 per cent of unattached elderly females were living in poverty compared to 33.3 per cent of elderly males. Many elderly households have only been barely lifted above the poverty lines through a combination of federal elderly benefits. Thus, it should not be inferred from the improved poverty figures that the elderly are comfortably off. In fact, a large segment of the non-poor are nearly poor.
Young Families are More Likely to be Poor
Poverty has been increasing dramatically among young families. In 1981, a young family (in which the oldest adult is under age 25) faced a 21.7 per cent chance of being poor; by 1997, this chance had more than doubled to 46.1 per cent. Poverty rates among young families in the next oldest age group are higher as well: among those aged 25 to 34 years, the rate of poverty increased from 12.0 per cent in 1981 to 18.9 per cent in 1997 (Table 4.3).
The Regional and Provincial Distribution of Poverty has Shifted
In 1981, 12.3 per cent of all poor Canadian families lived in the Atlantic provinces, but this share dropped to 8.8 per cent in 1997 (Table 4.1). In Alberta and British Columbia, during the same period, the share of all poor families increased from 14.8 per cent to 20.9 per cent. Much of this change occurred in the 1980s. In the 1990s, the share of poor families rose the most in Ontario: increasing by 7.2 percentage points. With the exception of Alberta and British Columbia, the poverty rate among provinces was stable or declined between 1981 and 1989. In the 1990s, however, this trend was reversed and many provinces experienced an increase in their rates of poverty. In 1989, for example, Ontario had the lowest rate of family poverty by a substantial margin at 8.2 per cent. By 1997, the rate had climbed to 12.6 per cent, an increase of over 50 per cent (Table 4.3).
The Vulnerability of Children and Lone-parent Mothers has Increased
Poverty strikes hardest at children, the most vulnerable members of society and the least able to defend themselves. The child poverty rate increased from 14.9 per cent in 1981 to 19.9 per cent in 1997 (Table 4.6). In 1997, there were 1.4 million poor children in Canada. Although over half (54.6 per cent) of all poor children live in two-parent families, the trend is toward more poor children living in lone-parent households. In 1981, 32.8 per cent of all poor children lived in lone-parent families; by 1997, this figure had risen to 43.2 per cent. The exceptional circumstances of lone-parent mothers must be underlined. Among these families, the rate of poverty was 53.5 per cent in 1981. Over the next decade and a half, the poverty rate hovered between 55 and 60 per cent, reflecting the ups and downs of the business cycle. In 1997, it was 56.0 per cent, while the share of all poor households composed of lone-parent mothers had increased to 28.4 per cent, up from 22.5 per cent in 1981 (Table 4.1).
Minority Groups Face Higher Poverty Rates
Some of the highest rates of poverty are found among Aboriginal peoples, members of visible minority groups and persons with disabilities. According to the 1996 Census, 43.4 per cent of Aboriginal people, 35.9 per cent of visible minorities and 30.8 per cent of persons with disabilities were poor in 1995. These rates were significantly higher than the national average (Tables 4.8, 4.9 and 4.10).
The Market has Failed to Generate Adequate Incomes
Increased poverty rates for working-age households reflect in large part the failure of market income to provide living wages to all Canadian households. The number of working-poor households, those where one or more income earners were employed for at least 49 weeks, increased substantially between 1981 and 1997 (Table 5.1). If market earnings only are considered, almost 1.6 million Canadian working-age families would have been poor in 1997, compared to 1.1 million poor families after government transfers have been taken into account. The rate of market poverty increased from 14.7 per cent in 1981 to 21.9 per cent in 1997 (Table 5.4). Higher rates of market poverty highlight the inferior performance of earnings. Families have responded by sending more earners into the labour market. Among working-age households, the number of earners increasingly distinguishes poor from non-poor households. In 1997, only 18.6 per cent of poor two-adult households contained two earners compared to 67.0 per cent of non-poor two-adult households (Table 5.8).
The incomes of female spouses continue to play a key role in sustaining families. In 1997, women in non-poor families were almost five times more likely to have worked full-time/full-year than their poor counterparts (47.2 per cent compared to 9.9 per cent). But it is not only women's employment that sets non-poor apart from poor (Table 5.9).
Increasingly, the employment activity of men distinguishes poor couples from non-poor couples. Among poor couples, only 29.1 per cent of men were employed full-time/full-year compared to 77.5 per cent of non-poor male partners (Table 5.9).
Education is Still Key to Escaping Poverty
Along with number of earners, level of education is an important factor distinguishing poor from non-poor households. The higher the level of education, the lower the likelihood of having a low income. This was as true in 1981 as it is today. In 1997, only 7.7 per cent of families with an adult university graduate were poor, compared to 20.5 per cent of those families in which the highest level of an adult member's education was less than nine years of schooling (Table 4.3). It should be noted, however, that over time the proportion of poor having higher educational credentials has increased: the share of poor families having a post-secondary certificate, diploma or degree has more than doubled from 13.5 per cent in 1981 to 32.6 per cent in 1997 (Table 4.1).
Poor Falling Further Below the LICO
The depth of poverty - how far below the poverty line a poor person's total income falls - has increased dramatically. Between 1981 and 1997, the poverty gap for all poor households almost doubled (86.4 per cent). If only market income is considered, the market poverty gap grew by 96.0 per cent over the same period, an increase of $27.3 billion (Table 6.1 and Table 6.5). Working-age households, in particular, have experienced the greatest economic difficulties. Their market poverty gap grew by 113.0 per cent and the total poverty gap (market and transfer income combined) grew by 106.1 per cent. The largest increases occurred in the period between 1989 and 1997. If government transfers had not increased between 1981 and 1997, the poverty gap would have been much larger.
Duration of Poverty Varies for Different Groups
The percentage of poor people who enter poverty one year, but escape the next, varies. For roughly 60 per cent, poverty proves to be a temporary situation, while it is a recurrent problem for the remaining 40 per cent. On average, a poor individual will spend approximately five years in poverty after counting both single and multiple spells, while five per cent will stay in poverty for 10 or more years (Chapter 7). Certain groups are more vulnerable to lengthy spells of poverty. These groups include lone parents, persons with disabilities, members of visible minority groups, recent immigrants, individuals with low levels of education, and unattached individuals. The longer one remains in poverty, the more difficult it is to escape (Chapter 7).
Government Transfers Grow in Importance
Government transfers have come to play an increasingly important role in sustaining low-income households. The failure of labour markets to provide employment opportunities and living wages to a large number of people has highlighted the importance of Canada's income security system. Households in the bottom two quintiles - with market incomes under $23,473 - received only 7.9 per cent of market income but 64.9 per cent of all transfer income in 1997 (Table 8.1). Reliance on government transfers has increased over time. In 1981, transfers made up 38.2 per cent of total income for households in the lowest income quintiles; by 1997, transfers made up 90.0 per cent of total income for these households (Table 8.2). The benefits of various income security programs are distributed differently among different population groups. The highly targeted Child Tax Benefit program delivered 64.9 per cent of benefits to the bottom 40 per cent of families with dependent children in 1997 (Table 8.4). The benefit package for seniors had a more modest redistributive effect: 46.6 per cent of benefits of OAS/GIS/SpA went to the bottom 40 per cent of senior households in 1997 (Table 8.5). Contributory social insurance programs tend to benefit middle-income households. The Canada and Quebec Pension Plans deliver 31.2 per cent of benefits to the poorest 40 per cent of seniors, reflecting the unequal earnings' history of retirees. The Employment Insurance program is the most neutral in its effect on the income distribution of working-age households; each quintile received a roughly equivalent share of program benefits (Table 8.6).
Canada's Anti-poverty Performance Remains Weak
Rates of poverty in Canada are high in comparison to many other advanced industrial countries despite a reduction in the overall rate of poverty over time. Canada's overall rate of poverty - the proportion of the population living on disposable incomes amounting to 50 per cent or less of median income - has declined from 12.5 in the late 1970s to 10.6 per cent in the mid-1990s (Table 9.1). In large part, the decline in the overall poverty rate is related to the improved economic situation of seniors. High levels of poverty among children and the working-age population kept poverty rates from declining further. In the mid-1990s, using a standard international measure, 13.9 per cent of children were impoverished in Canada. Children in the United States were much more likely to live in poverty compared to children in other countries (22.7 per cent), while Swedish children were much less likely to do so (2.7 per cent) (Table 9.2). Among working-age households with children in 12 industrialized countries, Canada's rate of poverty ranks very high in several categories. For example: Canada's poverty rate for these households ranks second highest among two-parent households with no wage earner present; third highest among lone-parent families; and fourth highest among two-parent households where there are one or two wage earners (Table 9.3). Income transfers and tax policy have an important impact on a country's poverty rate. In all countries, taxes and transfers reduce the rate of poverty based on market incomes alone. Among industrialized countries, Canadian income supports for seniors - as well as those in Sweden, the Netherlands, Norway and Italy - produce a notable reduction in poverty (Table 9.5).
In contrast, English-speaking countries including Canada provide comparatively little support to children and working-age adults as measured by reduction in poverty rates. Countries with high rates of market-based poverty like Canada tend to have lower rates of poverty reduction.
Canadian Fact Book on Poverty 2000 - Related Material
Canadian Council on Social Development,
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Ottawa, Ontario, K2P 2R3
Tel: (613) 236-8977, Fax: (613) 236-2750, Web: www.ccsd.ca, Email: council@ccsd.ca
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