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January 30, 2007
Measuring Low Income in Canada
For the purposes of the Urban Poverty Project, poverty is defined using Statistics Canada’s before-tax Low Income Cut-offs or LICOs.
Statistics Canada does not refer to the LICOs as poverty lines; instead, LICOs are "meant to convey the income level or threshold 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."
Data on family spending patterns for food, shelter and clothing are collected from the Survey of Household Spending (formerly the Family Expenditure Survey). To reflect differences in the costs of necessities, LICOs are defined for five categories of community size and seven family sizes.
And while Statistics Canada emphasizes that the LICOs are "quite different from measures of poverty," they concede that LICOs identify "those who are substantially worse off than the average." Further, "in the absence of an accepted definition of poverty, these statistics have been used by many analysts to study the characteristics of the relatively worse off families in Canada. These measures have enabled Statistics Canada to report important trends such as the changing composition of this group over time."
Researchers and analysts, however, agree that living in straitened circumstances in a wealthy country like Canada constitutes relative income poverty. Therefore in this report and elsewhere, LICOs are used to denote poverty-level incomes.
The LICO has many benefits. It is a fair and valid measure, consistently defined over time. It is adjusted for inflation, changes in Canadian spending patterns, household size, and community size. In that way, LICO measures the amount of income that it takes to live and participate as a citizen in Canada.
The LICO is also a good indicator of the public’s perception of poverty. Since 1976, Gallup Canada has surveyed Canadians on their views of income adequacy. Gallup asks a representative sample of adults, "What do you think is the least amount of money a family of four needs each week to get along in this community?" The resulting Gallup estimate (adjusted to reflect annual inflation) and the LICO have been reliably close for decades.
Urban Poverty Project 2007
Canadian Council on Social Development,
190 Cooper 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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