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Chapter 5
Monitoring Progress - Societal Level Indicators

Federal, provincial and territorial governments are committed to monitoring and reporting on the National Child Benefit (NCB) initiative in accordance with the NCB Governance and Accountability Framework.14This commitment is essential so that Canadians can be informed on the NCB’s progress toward meeting its goals.

This chapter focuses on societal level, or general outcome, indicators. These indicators are affected by the NCB and are also affected by many factors that are unrelated to the NCB, such as the general level of economic activity, government investments in income transfers, changes in tax policy, or changes in demographics. While the NCB initiative has some influence on the trend of these societal level indicators, no attempt is made to isolate the impact of the NCB alone on these trends. Instead, the indicators reported in this chapter paint a broad picture of the condition of low-income families with children in Canada, and provide a basis for comparison on the progress made over time. Chapter 6 will describe and report on outcome indicators, which identify the direct impact of the NCB on families with children.

Table 12 describes the set of societal and direct outcome indicators that have been developed to track the degree to which each of the NCB’s three goals is being achieved. This report provides information on many of these outcome indicators. Information on other outcome indicators is included in the Evaluation of the National Child Benefit Initiative: Synthesis Report.15As part of their ongoing commitment to assessing and reporting to Canadians on the progress of the NCB, NCB partners will continue their work on developing reliable outcome indicators.

It should be noted that the measures used in this chapter only indicate trends among Canadian families with children in terms of income. Many other investments in benefits and services introduced under the NCB initiative contribute to improving the well-being of children and their families. Many provincial and territorial NCB programs, benefits and services, such as supplementary health benefits, child/day care, early childhood and children-at-risk services, do not directly affect income trends but are still an important part of governments’ strategies to support Canadian families.

Measuring Low Income

Canada does not have an official poverty line. Several different measures of low income are used in Canada, and in recent years there has been considerable debate about the best way to measure it. Some believe low income means lacking enough income to buy the basic necessities of life, such as food, shelter and clothing. Others believe that it means not having enough income to participate fully in one’s community. Still others believe that low income lies somewhere in between.

The two most widely used indicators of low income in Canada are Statistics Canada’s Low-Income Cut-Offs (LICOs) and the Low-Income Measure (LIM). Both establish a dollar figure below which a family is considered to be living in low income. LICOs and LIM can be reported based on total income (i.e., income including government transfers such as the Canada Child Tax Benefit, before the deduction of income taxes) known as pre-tax, or after-tax income (i.e., total income after the deduction of income taxes) known as post-tax. There is, as well, the Market Basket Measure (MBM), which is described on page 30.

Both pre- and post-tax LICOs are set according to the proportion of annual income spent on basic needs, including food, shelter and clothing. The LICO line is the income level at which the average family with that income spends 20 percentage points more of its income on these items relative to the average family. In this case, the family falls beneath the LICO line. The size of the family and community is taken into account, but geographic differences in the cost of living are not.

The LIM was developed as an alternative to the LICOs. It considers a family to be living in low income if its income, adjusted for family size, is less than half the median income (the income level at which the incomes of half of all families are higher and half are lower). The post-tax-and-transfer LIM is similar to measures used in international comparisons, but it does not reflect geographic differences in living costs across Canada.

As with The National Child Benefit Progress Report: 2002, the focus of this report is post-tax LICOs. Post-tax income is generally considered to be a better measure of low-income in Canada16 for two reasons. First, post-tax income more fully accounts for the re-distributive impact of Canada’s tax system. Pre-tax income includes the effect of government transfers but not taxes. But post-tax income refers to the income available to a family after both government transfers and taxes. Secondly, since the purchase of necessities is made with after-tax dollars, this approach more fairly and consistently measures the economic well-being of individuals and families. Consequently, indicators based on post-tax LICOs are better indicators of the impact of government initiatives like the NCB on the overall economic well-being of Canadian families with children.

While the focus has shifted to post-tax LICOs, this chapter continues to include information on the pre-tax LICOs and the post-tax LIM. These various measures are used to follow trends relating to the low-income population, such as the depth and incidence of low income, by family type and source of income. The numbers of families living in low income differ from measure to measure, but the trends illustrated are very similar17

Table 12
Outcome Indicators for the NCB

Goals Societal Level Indicators Direct Outcome Indicators
Help prevent and reduce the depth of child poverty. Depth of low income (dollar and percentage)
Additional amount of income a low-income family would need to reach a pre-determined line (as measured by the LICOs, LIM and Market Basket Measure).
Depth of low income
The change in the aggregate amount of income that low-income families would need to reach a pre-determined line, due to NCB benefits, within a year.
  Incidence of low income
Number and percentage of families and children living in low income (as defined by the LICOs, LIM and Market Basket Measure).
Number of families/children on social assistance.
Incidence of low income
The change in the number of families and children that fall below the low-income line, because of the NCB, within a year.
  Duration of low income
Number and percentage of families and children who have been on low income during all four previous years.
Not applicable
Promote attachment to the labour market by ensuring that families will always be better off as a result of working. Labour market participation
Number and percentage of earners in families below the low-income line.Average earned income of low-income families as a percentage of the low-income line.
Average earned income of low-income families, over time, expressed in constant dollars.
The change in the difference in disposable income between social assistance and employment due to the NCB, within a year.
The change in social assistance caseloads, exit rates and duration of spells on assistance due to the NCB.
Reduce overlap and duplication by harmonizing program objectives and benefits, and simplifying administration. Level 1 - use of federal income tax system to deliver benefits.

Level 2 - participation rates in NCB programs, examples of expanded information-sharing agreements.
Level 3
- surveys of managers and other key informants (monitored as part of the NCB evaluation)

Not applicable

The Market Basket Measure

The Market Basket Measure (MBM) is an additional tool that provides a different way of understanding low income.

The MBM was developed by Human Resources Development Canada in consultation with the Federal/Provincial/Territorial Working Group on Social Development Research and Information. This work was initiated in 1997 when Federal, Provincial and Territorial Ministers Responsible for Social Services asked officials to explore whether a new tool could be developed to complement existing measures of low income trends for families with children.

The MBM is used to complement the LICOs and the LIM to assess low-income trends among families with children. The LICOs and the LIM are relative measures: the former is based on average consumption patterns and the latter is set at half of median income, adjusted for household size and composition. The MBM identifies disposable income levels that are required to purchase a detailed, selected basket of goods and services in various communities across Canada.

The MBM is based on the actual cost of food, clothing, shelter, transportation and other necessary goods and services, such as household supplies and telephone services included in the basket. It is considered to be socially unacceptable for any household to be without these goods and services. Households are considered to be living in low income if they are unable to purchase this basket of goods and services after accounting for income and payroll taxes and other non-discretionary out-of-pocket spending. This out-of-pocket spending includes such items as child care necessary to earn income, medically prescribed health expenses and aids for persons with disabilities.

Compared with the LICOs and the LIM, the MBM more precisely reflects differing living costs by geographic location because the thresholds are estimated by region, as well as urban size.

For 2002, using the MBM, the incidence of low income among Canadian families with children was 15.4 percent. This translates into 564,916 families with 1,143,917 children. The depth of low income measures how far family income falls below a given low-income threshold. With the MBM, the depth of low income for families with children was 26.6 percent.

The key trends from the societal level indicators (using post-tax LICOs) for low-income families with children include:

  • The incidence of low income among families with children dropped from a peak of 17.6 percent in 1996 to 11.0 percent in 2001. In 2002, the incidence of low income increased to 11.4 percent. This represents a reduction in the number of families with children living below the post-tax LICO from 687,100 in 1996 to 437,000 in 2002, or a decline of 250,100 families.
  • The number of children living in low-income families has declined from a peak of 1,304,000 in 1996 to 839,500 in 2002, or a decrease of 464,500 children.
  • The depth of low income (which is the additional amount of income needed by low-income families to reach the low-income line) declined slightly between 1996 and 2002. Expressed in 2002 dollars, the average depth of low income was $7,110 in 2002 compared to $7,310 in 1996.
  • The number of children living in low income four years in a row declined from 6.3 percent between 1996 and 1999 to 3.8 percent between 1999 and 2002.
  • There was a reduction in dependence on social assistance among families with children, and corresponding evidence of increasing attachment to the labour force. Between 1996 and 2002, the total social assistance caseload for families with children declined by 49.4 percent, from 631,900 to 319,700 families. By 2003, the decline reached 53.5 percent (down to 293,900 families). The proportion of low-income families in which at least one parent was employed for pay during the year increased from 55.7 percent in 1996 to 65.8 percent in 2002.

The SLID Database

The analysis in this chapter and Chapter 6 is based on data from Statistics Canada’s Survey of Labour and Income Dynamics (SLID). The SLID is a longitudinal labour market and income survey begun in 1993 as a replacement to the Survey of Consumer Finances. The SLID has a number of advantages and limitations which affect the analysis presented in this report.

A major and unique advantage of using the SLID in this report is that it allows for an ongoing analysis of the NCB initiative. As a longitudinal income survey, the SLID permits an assessment and comparison of the impacts of the NCB initiative on particular individuals over time. The SLID is designed to track the economic well-being of Canadians within a shifting economic environment. The depth of information available in the SLID permits the impact of the NCB initiative to be assessed in isolation from other changes affecting individuals and families, such as changes in paid work, family makeup, receipt of other government transfer payments and other factors.

At the same time, the SLID database also has a number of limitations. The SLID tends to under-report social assistance benefits because of non-reporting of these benefits by some low-income families. This results in an overestimation of the number of low-income families that are working and therefore could bias upward the total impact of the NCB initiative. The SLID can also overestimate the length of time that families spend on social assistance, because it assumes that a family receives social assistance for an entire year, even if that family received social assistance for only part of the year. Studies have shown that movement in and out of social assistance within a year are significant. As a result, the SLID database overestimates the total amount of the NCB initiative adjustments to social assistance benefits made by provincial and territorial governments, and results in an underestimation of the total impact of the NCB initiative benefits. A simulation performed by Statistics Canada using the Social Policy Simulation Database and Model (SPSD/M) to evaluate the impact of these limitations showed they had a relatively small impact on the type of aggregated indicators used in the NCB progress report. These simulation results were summarized in an appendix to The National Child Benefit Progress Report: 2001.

Finally, in-depth analysis of the SLID has recently revealed that the number of NCB Supplement recipients is underrepresented in the SLID by approximately 30 percent, compared to CCTB administrative data provided to Social Development Canada (SDC) by Canada Revenue Agency (CRA). The magnitude and direction of the effect of this under-representation on the impact of the NCB are difficult to predict. The income distribution of missing cases among the low-income population is unknown. Depending on the income distribution of the missing cases, as well as the amount of underreported social assistance, the levels of the low-income measures being used to assess precisely the NCB Supplement may change.

Historical Revisions

Every few years, Statistics Canada revises income data from the SLID and the Survey of Consumer Finances. The release of the 2003 income data by Statistics Canada was accompanied by a historical revision for 1990 to 2002 due to an update in the survey weights in both the SLID and the Survey of Consumer Finances. The 2003 historical revision also incorporates revised 1992-based low income cut-offs (LICOs) resulting from the historical re-weighting of the 1992 Family Expenditure Survey. As a result of these revisions, the low income rates for persons and families generally underwent a modest upward revision for all years between 1990 and 2002.

Incidence of Low Income among Families with Children

The incidence of low income refers to the number of families with children who fall below a pre-determined low-income line expressed as a percentage of all families with children. The trend in the incidence of low income among Canadian families with children over the last 17 years is shown in Figure 9, using post and pre-tax LICOs, and post-tax LIMs.

Figure 9 - Percentage of Families with Children below LICOs and LIM Thresholds, 1984-2002

Figure 9 - Percentage of Families with Children below LICOs and LIM Thresholds, 1984-2002

Description

1984 Pre-Tax LICO 19.3% Post-Tax LIM 14.5% Post-Tax LICO 14.7%
1985 Pre-Tax LICO 17.7% Post-Tax LIM 13.7% Post-Tax LICO 14.1%
1986 Pre-Tax LICO 16.2% Post-Tax LIM 12.8% Post-Tax LICO 12.7%
1987 Pre-Tax LICO 16.0% Post-Tax LIM 12.8% Post-Tax LICO 12.6%
1988 Pre-Tax LICO 14.7% Post-Tax LIM 11.9% Post-Tax LICO 11.2%
1989 Pre-Tax LICO 14.2% Post-Tax LIM 11.7% Post-Tax LICO 10.8%
1990 Pre-Tax LICO 17.4% Post-Tax LIM 13.3% Post-Tax LICO 12.9%
1991 Pre-Tax LICO 18.4% Post-Tax LIM 13.2% Post-Tax LICO 14.0%
1992 Pre-Tax LICO 18.9% Post-Tax LIM 13.0% Post-Tax LICO 14.0%
1993 Pre-Tax LICO 21.1% Post-Tax LIM 13.1% Post-Tax LICO 15.6%
1994 Pre-Tax LICO 19.8% Post-Tax LIM 12.9% Post-Tax LICO 15.1%
1995 Pre-Tax LICO 20.9% Post-Tax LIM 13.3% Post-Tax LICO 16.3%
1996 Pre-Tax LICO 22.5% Post-Tax LIM 15.1% Post-Tax LICO 17.6%
1997 Pre-Tax LICO 21.3% Post-Tax LIM 14.9% Post-Tax LICO 16.8%
1998 Pre-Tax LICO 19.4% Post-Tax LIM 13.7% Post-Tax LICO 14.6%
1999 Pre-Tax LICO 18.1% Post-Tax LIM 13.0% Post-Tax LICO 13.5%
2000 Pre-Tax LICO 16.8% Post-Tax LIM 12.5% Post-Tax LICO 12.7%
2001 Pre-Tax LICO 15.9% Post-Tax LIM 12.2% Post-Tax LICO 11.0%
2002 Pre-Tax LICO 16.7% Post-Tax LIM 12.7% Post-Tax LICO 11.4%

Source: Statistics Canada, Survey of Consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002.

Source: Statistics Canada, Survey of Consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002.

The proportion of families with children living in low income has closely followed the business and employment cycles over these years. The latter half of the 1980s was a period of economic growth and low unemployment in Canada (see Figure 10). As Figure 9 shows, this translated into a decline in the percentage of families with children living in low income. On the other hand, the early 1990s were a period of economic slowdown and high unemployment in Canada. This translated into an increase in the percentage of families with children living in low income.

Figure 10 - Unemployment Rate and Percentage of Families below Post-tax LICOs, Canada, 1984-2002

Figure 10 - Unemployment Rate and Percentage of Families Below Post-tax LICOs, Canada, 1984-2002

Description

1984 Post-Tax LICO 14.70% Unemployment 11.30%
1985 Post-Tax LICO 14.10% Unemployment 10.70%
1986 Post-Tax LICO 12.70% Unemployment 9.60%
1987 Post-Tax LICO 12.60% Unemployment 8.80%
1988 Post-Tax LICO 11.20% Unemployment 7.80%
1989 Post-Tax LICO 10.80% Unemployment 7.50%
1990 Post-Tax LICO 12.90% Unemployment 8.10%
1991 Post-Tax LICO 14.00% Unemployment 10.30%
1992 Post-Tax LICO 14.00% Unemployment 11.20%
1993 Post-Tax LICO 15.60% Unemployment 11.40%
1994 Post-Tax LICO 15.10% Unemployment 10.40%
1995 Post-Tax LICO 16.30% Unemployment 9.40%
1996 Post-Tax LICO 17.60% Unemployment 9.60%
1997 Post-Tax LICO 16.80% Unemployment 9.10%
1998 Post-Tax LICO 14.60% Unemployment 8.30%
1999 Post-Tax LICO 13.50% Unemployment 7.60%
2000 Post-Tax LICO 12.70% Unemployment 6.80%
2001 Post-Tax LICO 11.00% Unemployment 7.20%
2002 Post-Tax LICO 11.40% Unemployment 7.70%

Source: Statistics Canada, Survey of Consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002; Labour Force Survey from 1984 to 2002.

Source: Statistics Canada, Survey of Consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002; Labour Force Survey from 1984 to 2002.

Using the post-tax LICOs measure, Figure 9 shows the incidence of low income among families with children dropped from 17.6 percent in 1996 to 11.0 percent in 2001. In 2002, the incidence of low income increased slightly to 11.4 percent. The overall decline from 1996 to 2002 has been about 35 percent.

This reduction translates into a net movement of more than 250,100 families with about 464,500 children above the post-tax LICOs between 1996 and 2002. In 2002, there were 437,000 families with 839,500 children living below the post-tax LICOs, compared to 687,100 families with 1,304,000 children in 1996.

The reduction in the proportion of single-parent families living in low income over the last five years has been particularly significant. As Figure 11 shows, the proportion of one-parent families living below the post-tax LICOs declined from 46.0 percent in 1996 to 31.6 percent in 2002. The proportion of two-parent families living below the post-tax LICO also showed a decline, from 10.9 percent to 6.5 percent over the same period.

Figure 11 - Percentage of Families with Children with Low Incomes, Single-Parent and Two-Parent Families, LICOs and LIM, 1984-2002

Figure 11 - Percentage of Families with Children with Low Incomes, Single-Parent and Two-Parent Families, LICOs and LIM, 1984-2002

Description

1984 Single Parent Family Pre-Tax LICO 54.40% Post-Tax LIM 44.30% Post-Tax LICO 45.50%
Two-Parent Family Pre-Tax LICO 13.00% Post-Tax LIM 9.20% Post-Tax LICO 9.10%

1985 Single Parent Family Pre-Tax LICO 52.80% Post-Tax LIM 44.50% Post-Tax LICO 45.60%
Two-Parent Family Pre-Tax LICO 11.70% Post-Tax LIM 8.40% Post-Tax LICO 8.70%

1986 Single Parent Family Pre-Tax LICO 47.90% Post-Tax LIM 40.40% Post-Tax LICO 40.00%
Two-Parent Family Pre-Tax LICO 10.90% Post-Tax LIM 8.10% Post-Tax LICO 8.10%

1987 Single Parent Family Pre-Tax LICO 50.00% Post-Tax LIM 41.70% Post-Tax LICO 41.70%
Two-Parent Family Pre-Tax LICO 10.20% Post-Tax LIM 7.80% Post-Tax LICO 7.70%

1988 Single Parent Family Pre-Tax LICO 47.10% Post-Tax LIM 41.40% Post-Tax LICO 39.20%
Two-Parent Family Pre-Tax LICO 9.00% Post-Tax LIM 6.70% Post-Tax LICO 6.30%

1989 Single Parent Family Pre-Tax LICO 44.60% Post-Tax LIM 37.00% Post-Tax LICO 35.70%
Two-Parent Family Pre-Tax LICO 8.60% Post-Tax LIM 7.10% Post-Tax LICO 6.30%

1990 Single Parent Family Pre-Tax LICO 52.60% Post-Tax LIM 41.90% Post-Tax LICO 41.50%
Two-Parent Family Pre-Tax LICO 10.20% Post-Tax LIM 7.50% Post-Tax LICO 7.10%

1991 Single Parent Family Pre-Tax LICO 51.20% Post-Tax LIM 39.30% Post-Tax LICO 41.60%
Two-Parent Family Pre-Tax LICO 11.40% Post-Tax LIM 7.70% Post-Tax LICO 8.20%

1992 Single Parent Family Pre-Tax LICO 51.00% Post-Tax LIM 37.00% Post-Tax LICO 39.90%
Two-Parent Family Pre-Tax LICO 11.20% Post-Tax LIM 7.30% Post-Tax LICO 7.80%

1993 Single Parent Family Pre-Tax LICO 52.50% Post-Tax LIM 35.20% Post-Tax LICO 39.90%
Two-Parent Family Pre-Tax LICO 13.20% Post-Tax LIM 7.60% Post-Tax LICO 9.50%

1994 Single Parent Family Pre-Tax LICO 50.40% Post-Tax LIM 34.40% Post-Tax LICO 40.40%
Two-Parent Family Pre-Tax LICO 12.70% Post-Tax LIM 7.90% Post-Tax LICO 9.30%

1995 Single Parent Family Pre-Tax LICO 52.40% Post-Tax LIM 35.60% Post-Tax LICO 41.90%
Two-Parent Family Pre-Tax LICO 13.80% Post-Tax LIM 8.20% Post-Tax LICO 10.60%

1996 Single Parent Family Pre-Tax LICO 55.40% Post-Tax LIM 42.60% Post-Tax LICO 46.00%
Two-Parent Family Pre-Tax LICO 14.70% Post-Tax LIM 8.60% Post-Tax LICO 10.90%

1997 Single Parent Family Pre-Tax LICO 52.30% Post-Tax LIM 41.60% Post-Tax LICO 43.20%
Two-Parent Family Pre-Tax LICO 13.70% Post-Tax LIM 8.40% Post-Tax LICO 10.40%

1998 Single Parent Family Pre-Tax LICO 47.60% Post-Tax LIM 37.50% Post-Tax LICO 37.00%
Two-Parent Family Pre-Tax LICO 12.30% Post-Tax LIM 7.60% Post-Tax LICO 8.80%

1999 Single Parent Family Pre-Tax LICO 44.70% Post-Tax LIM 35.10% Post-Tax LICO 34.20%
Two-Parent Family Pre-Tax LICO 11.60% Post-Tax LIM 7.60% Post-Tax LICO 8.40%

2000 Single Parent Family Pre-Tax LICO 40.40% Post-Tax LIM 30.90% Post-Tax LICO 30.80%
Two-Parent Family Pre-Tax LICO 11.10% Post-Tax LIM 8.10% Post-Tax LICO 8.30%

2001 Single Parent Family Pre-Tax LICO 38.20% Post-Tax LIM 30.40% Post-Tax LICO 27.90%
Two-Parent Family Pre-Tax LICO 10.50% Post-Tax LIM 7.80% Post-Tax LICO 6.90%

2002 Single Parent Family Pre-Tax LICO 43.10% Post-Tax LIM 35.40% Post-Tax LICO 31.60%
Two-Parent Family Pre-Tax LICO 10.30% Post-Tax LIM 7.20% Post-Tax LICO 6.50%

Source: Statistics Canada, Survey of Consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002.

Source: Statistics Canada, Survey of Consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002.

These declines are encouraging. Although the incidence of low income increased slightly between 2001 and 2002, there has been considerable improvement since 1996.

Low Income is Temporary for Most

Low income is usually not a permanent situation for most families with children. Among those families who do experience it, most move in and out of low income over time. From 1984 to 2002, on average, about 13.8 percent of families with children lived in low income (post-tax LICO) in any given year. However, as shown in Figure 12, between 1996 and 1999, about a quarter of all children aged 13 and under lived in a family which experienced low income for at least one of those four years (1,403,600 children in total). However, of those 1,403,600 children, less than one-half lived in low income for more than two of these four years (638,700 children in total, or 12.1 percent of all children age 13 and under). Only about a quarter of these children lived in a low-income situation for all four years (332,700 children in total, or 6.3 percent of all children age 13 and under).

Figure 12 - Children 13 and Under Living in Low Income, 1996-1999, 1997-2000, 1998-2001, 1999-2002

Figure 12 - Children 13 and Under Living in Low Income, 1996-1999, 1997-2000, 1998-2001, 1999-2002

Description

One Year or More
1. 96-99 0.265%
97-00 0.243%
98-01 0.226%
99-02 0.196%

2. 96-99 8.80%
97-00 8.00%
98-01 7.90%
99-02 7.40%

3. 96-99 5.60%
97-00 6.10%
98-01 5.40%
99-02 4.40%

4. 96-99 5.80%
97-00 4.50%
98-01 4.10%
99-02 4.00%

5. 96-99 6.30%
97-00 5.70%
98-01 5.20%
99-02 3.80%

Source: Statistics Canada, Survey of Labour and Income Dynamics

Source: Statistics Canada, Survey of Labour and Income Dynamics.

There is evidence this situation is improving. Comparing the 1996-1999 period to the next four-year period, 1997-2000, the proportion of children experiencing low income in at least one of the four years declined from 26.5 percent to 24.3 percent. This proportion declined even further in the 1998-2001 period to 22.6 percent, and then to 19.6 percent in the 1999-2002 period. Even more pronounced is the decline among those children experiencing low income in all four of the years, which fell from 6.3 percent in the 1996-1999 period to 3.8 percent in 1999-2002.

Depth of Low Income

The depth of low income measures how far family income falls below a given low-income line. It measures the additional amount of income a low-income family would need to reach a pre-determined low-income line, such as Statistics Canada’s LICOs or the LIM.

An example is given below in Table 13. It shows that the 2002 low-income line (post-tax LICO) of a two-parent, two-child family living in a city of more than 500,000 people is $34,654. If such a family had post-tax income of $25,990 in that year, its depth of low income would be $8,664 (i.e., $34,654 — $25,990). Expressed as a percentage, the depth of low income of this family is equal to 25 percent of the low-income line (i.e., [$8,664 /$34,654] x 100).

Table 13
Depth of Low Income for a Two-Parent, Two-Child Family Living in a City of More Than 500,000 People in 2002

  2002 Low-Income
Cut Off (Post-tax)
Example Family’s
Income (Post-tax)
Difference Between Low-
Income Cut Off And
Example Family’s Income
(Depth of Low Income of that Family)
Percentage
Points Below
Low-Income Cut Off
Post-tax LICOs $34,654 $25,990 $8,664 25%

Source: Income in Canada 2002, Statistics Canada

As illustrated in Figure 13, the depth of low income for families with children has generally improved since 1984. Between 1996 and 2002, the depth of low income for families with children improved from 32.2 percent to 28.6 percent.

Figure 13 - Post-tax LICOs: Depth of Low Income - Shortfall of Low-Income Families with Children as a Proportion of the LICO, 1984-2002

Figure 13 - Post-tax LICOs: Depth of Low Income - Shortfall of Low-Income Families with Children as a Proportion of the LICO, 1984 - 2002

Description

1984 All Families 33.70% 2-Parent Families 32.80% Single-Parent Families 34.30%
1985 All Families 31.80% 2-Parent Families 28.90% Single-Parent Families 35.00%
1986 All Families 31.10% 2-Parent Families 29.20% Single-Parent Families 33.10%
1987 All Families 30.10% 2-Parent Families 28.30% Single-Parent Families 32.00%
1988 All Families 29.30% 2-Parent Families 26.50% Single-Parent Families 31.80%
1989 All Families 30.10% 2-Parent Families 30.40% Single-Parent Families 30.10%
1990 All Families 31.90% 2-Parent Families 31.90% Single-Parent Families 31.70%
1991 All Families 31.50% 2-Parent Families 30.40% Single-Parent Families 32.70%
1992 All Families 33.60% 2-Parent Families 36.00% Single-Parent Families 31.50%
1993 All Families 29.20% 2-Parent Families 28.10% Single-Parent Families 30.20%
1994 All Families 30.80% 2-Parent Families 31.30% Single-Parent Families 30.10%
1995 All Families 29.50% 2-Parent Families 29.70% Single-Parent Families 29.10%
1996 All Families 29.80% 2-Parent Families 30.60% Single-Parent Families 28.70%
1997 All Families 32.20% 2-Parent Families 33.30% Single-Parent Families 30.60%
1998 All Families 30.20% 2-Parent Families 29.40% Single-Parent Families 30.70%
1999 All Families 30.10% 2-Parent Families 30.70% Single-Parent Families 29.20%
2000 All Families 28.00% 2-Parent Families 28.50% Single-Parent Families 27.30%
2001 All Families 29.20% 2-Parent Families 30.70% Single-Parent Families 27.70%
2002 All Families 28.60% 2-Parent Families 29.70% Single-Parent Families 27.60%

Source: Statistics Canada, Survey of consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002.

Source: Statistics Canada, Survey of Consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002.

In 1996, low-income families with children had an average after-tax income of $17,219. These low-income families would have needed, on average, $7,310 to reach the low-income line (post-tax LICOs). Comparatively, low-income families had an average after-tax income of $17,750 in 2002 and needed, on average, $7,110 to reach the low-income line (post-tax LICOs).18

Complex factors make it difficult to interpret changes in the depth of low income. As described above, movements in and out of low income are significant and have an impact on the depth of low-income indicator. For example, if families that are closer to the low-income line increase their incomes enough to no longer be considered living in low-income, the average depth of low income for those who remain below the low-income line may actually increase. This result would give the impression that the situation has worsened for all, when it has really improved for many. Despite these limitations, the depth of low income is an important indicator of how low-income families are faring.

Earned Income of Low-Income Families

Promoting attachment to the labour force among low-income families with children is the second goal of the NCB initiative. Figure 14 indicates that from 1984 to the economic downturn in the early 1990s, the percentage of low-income families in which the parents had paid employment was quite stable. The percentage declined during the early 1990s, but continued to increase during the economic recovery of the late 1990s.

As illustrated in Figure 14, the proportion of low-income families with children in which at least one parent was employed for pay during the year increased from 55.7 percent in 1996 to 65.8 percent in 2002. The proportion of one-parent families employed for pay rose from 37.5 percent in 1996 to 53.9 percent in 2002.

Figure 14 - Post-tax LICOs: Percentage of Low-Income Families Employed for Pay During the Year, By Family Type, 1984-2002

Figure 14 - Post-tax LICOs: Percentage of Low-Income Families Employed for Pay During the Year, By Family Type, 1984-2002

Description

1984 Total 64.25% 2 Parent 81.39% 1 Parent 45.09%
1985 Total 67.55% 2 Parent 85.62% 1 Parent 47.57%
1986 Total 64.59% 2 Parent 78.28% 1 Parent 47.45%
1987 Total 66.08% 2 Parent 83.98% 1 Parent 4.67%
1988 Total 64.38% 2 Parent 79.46% 1 Parent 49.26%
1989 Total 66.24% 2 Parent 84.54% 1 Parent 49.10%
1990 Total 66.59% 2 Parent 85.89% 1 Parent 50.33%
1991 Total 61.70% 2 Parent 79.73% 1 Parent 4.46%
1992 Total 57.23% 2 Parent 80.17% 1 Parent 39.08%
1993 Total 56.57% 2 Parent 71.07% 1 Parent 43.44%
1994 Total 54.94% 2 Parent 70.63% 1 Parent 38.96%
1995 Total 60.92% 2 Parent 76.90% 1 Parent 43.15%
1996 Total 55.67% 2 Parent 73.38% 1 Parent 37.51%
1997 Total 61.20% 2 Parent 80.12% 1 Parent 41.94%
1998 Total 61.11% 2 Parent 73.83% 1 Parent 48.71%
1999 Total 61.09% 2 Parent 80.24% 1 Parent 43.32%
2000 Total 65.67% 2 Parent 78.97% 1 Parent 50.93%
2001 Total 63.03% 2 Parent 76.56% 1 Parent 49.54%
2002 Total 65.80% 2 Parent 80.02% 1 Parent 53.95%

Source: Statistics Canada, Survey of Consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002.

Source: Statistics Canada, Survey of Consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002.

Additional information on labour force attachment can be gained by examining the sources of income of low-income families with children. For example, Figure 15 shows the average level of government transfers received and average earnings of low-income families with children between 1984 and 2002 (expressed in 2002 dollars).

Figure 15 - Source of Family Income, Low-Income Families with Children, Post-tax LICOs (expressed in 2002 dollars)

Figure 15 - Source of Family Income, Low-Income Families with Children, Post-tax LICOs (expressed in 2002 dollars)

Description

1984 Transfers 8371 Earnings 6506
1985 Transfers 7783 Earnings 7383
1986 Transfers 8537 Earnings 6792
1987 Transfers 8556 Earnings 7619
1988 Transfers 9506 Earnings 6306
1989 Transfers 8874 Earnings 6546
1990 Transfers 9166 Earnings 6326
1991 Transfers 9489 Earnings 6041
1992 Transfers 9555 Earnings 4576
1993 Transfers 11275 Earnings 5296
1994 Transfers 10896 Earnings 5012
1995 Transfers 10458 Earnings 6391
1996 Transfers 10674 Earnings 5153
1997 Transfers 8966 Earnings 5618
1998 Transfers 10847 Earnings 5179
1999 Transfers 9791 Earnings 5521
2000 Transfers 10537 Earnings 6297
2001 Transfers 11048 Earnings 5313
2002 Transfers 10445 Earnings 5670

Source: Statistics Canada, Survey of Consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002.

Source: Statistics Canada, Survey of Consumer Finance from 1984 to 1995 and Survey of Labour and Income Dynamics from 1996 to 2002.

While there has been variation from year to year, since the early 1990s, there has been a moderate upward trend in the level of earnings of low-income families with children and in the proportion of after-tax income that comes from employment earnings. In 1992, low-income families earned, on average, $4,576. This amount represented approximately 31 percent of the after-tax income of low-income families. In 2002, low-income families earned, on average, $5,670, which was about 32 percent of their total after-tax income. During this same period, the trend in government transfers was slightly upward, and transfers continued to play an important role as a source of family income for low-income families.

Fewer Canadian Children Are on Welfare

While it is not a direct indication of increased labour force attachment, there was a significant decline in the number of families receiving welfare during the late 1990s. Figure 16 shows that between 1996 and 2002, the number of one-parent families relying on social assistance decreased by 47.7 percent (from 454,500 to 237,700 households). By 2003, the decline reached 51.8 percent (down to 219,000 households). Between 1996 and 2002, the number of two-parent families with children relying on social assistance decreased by 53.7 percent (from 177,400 to 82,100 households). By 2003, the decline reached 57.8 percent (down to 74,900 households). As a result, between 1996 and 2002, the overall number of children living in families relying on social assistance decreased by 46.1 percent (from 1,096,900 to 591,200 children). By 2003, the decline reached 50.4 percent (down to 544,200 children).

Figure 16 - Social Assistance Families and Children in March of Each Year, 1987-2003 (in thousands)

Figure 16 - Social Assistance Data in March of Each Year, 1987-2003 (in thousands)

Description

One-Parent Families
1987 - 277,300
1988 - 284,800
1989 - 289,300
1990 - 309,400
1991 - 349,400
1992 - 408,200
1993 - 1994 - 441,500
1995 - 465,600
1996 - 472,500
1997 - 454,500
1998 - 429,600
1999 - 402,100
2000 - 347,300
2001 - 306,300
2002 - 255,500
2003 - 237,700

Two-Parent Families
1987 - 102,000
1988 - 93,300
1989 - 89,800
1990 - 93,000
1997 - 117,200
1992 - 149,000
1993 - 169,700
1994 - 179,900
1995 - 178,600
1996 - 177,400
1997 - 165,000
1998 - 147,300
1999 - 121,500
2000 - 105,700
2001 - 86,600
2002 - 82,100
2003 - 74,900

Total Children
1987 691,500
1988 683,900
1989 687,500
1990 725,300
1991 863,600
1992 - 1,030,100
1993 - 1,108,600
1994 - 1,162,700
1995 - 1,153,100
1996 - 1,096,900
1997 - 1,037,600
1998 - 955,400
1999 - 809,000
2000 - 712,600
2001 - 634,500
2002 - 591,200
2003 - 544,200

Source: Social Policy, Social Development Canada

Source: Social Policy, Social Development Canada.

It is interesting to compare the reduction in social assistance caseloads for families with children with the situation of childless families. Figure 17 shows that between 1996 and 2002, the two-parent family welfare caseload numbers decreased by 53.7 percent while those of couples without children decreased by only 17.6 percent. By 2003, the decline had reached 57.8 percent and 21.7 percent respectively. Furthermore, between 1996 and 2002, the caseload for one-parent families declined by 47.7 percent compared to a decline of 17.7 percent for singles without children. By 2003, the decline had reached 51.8 percent and 18.8 percent respectively.

Economic growth in the late 1990s was one of the main reasons for the overall reduction in welfare caseloads. In addition, welfare reform measures, including the restructuring of social assistance systems in several provinces as part of the NCB initiative, were a contributing factor in the decline in the caseload of families with children. Finally, evidence from the federal/provincial/territorial evaluation of the NCB initiative suggests that the NCB was associated with social assistance caseload reductions.19

Figure 17 - Social Assistance Data as of March of Each Period, 1996, 2002, and 2003

Figure 17 - Social Assistance Data as of March of Each Period, 1996, 2002 and 2003

Description

Singles without children
1996 - 869,300
2002 - 715,800
2003 - 706,200

One-parent families
1996 - 454,500
2002 - 237,600
2003 - 219,000

Couples without children
1996 - 80,800
2002 - 66,600
2003 - 63,200

Two-parent families with children
1996 - 177,400
2002 - 82,100
2003 - 74,900

Source: Social Policy, Social Development Canada

Source: Social Policy, Social Development Canada.

Summary

This chapter has shown that the incidence of low income among families with children has declined significantly since the mid-1990s. From a peak of 17.6 percent in 1996, the incidence of low income among families with children has fallen to 11.4 percent in 2002, a reduction of 35 percent. In addition, the depth of low income and the duration of low income among families with children continue to decline.

In terms of attachment to the labour market, the proportion of earnings from employment and the percentage of low-income families employed for pay showed slight increases between 2001 and 2002 and both were higher than in 1996. Finally, the social assistance caseload for families with children continues to decline.

These indicators are important in monitoring the overall economic well-being of low-income families with children. However, the extent to which the NCB has contributed to these changes cannot be directly determined from the societal level indicators reported on in this chapter. They do not tell us the extent to which the NCB is responsible for changes in these trends. Chapter 6 will describe the direct contribution of the NCB to preventing and reducing the incidence and depth of low income of families with children.


14The NCB Governance and Accountability Framework is available on the NCB Web site.

15The Evaluation of the National Child Benefit Initiative: Synthesis Report is available on the NCB Web site.

16Statistics Canada, Income in Canada 2000 (Ottawa: 2002) Catalogue 75-202-XIE, p. 89.

17Statistical trends, based on pre- and post-tax LICOs and post-tax LIMs, can also be found in Appendix 4, which is available on the NCB Web site.

18For comparison purposes, the figures in this paragraph are expressed in 2002 dollars.

19See Evaluation of the National Child Benefit Initiative Synthesis Report (2005), page 20, available on the NCB Web site.

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