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Chapter 6
Assessing the Direct Impact of the National Child Benefit Initiative

The previous chapter examined societal level indicators such as the incidence and depth of low income. This chapter reports on the direct impact of the income component of the NCB initiative in making progress on its first goal, to help prevent and reduce the depth of child poverty. The chapter presents evidence based on a simulation using the 2002 Survey of Income and Labour Dynamics (SLID). This is the fourth in a series of simulations providing information to Canadians on the progress of the NCB. Two previous simulations were included in The National Child Benefit Progress Report: 2001 and The National Child Benefit Progress Report: 2002. A third simulation, Impact of the National Child Benefit on the Incomes of Families with Children: A Simulation Analysis, was released by Federal, Provincial, and Territorial Ministers Responsible for Social Services in August 2005.

The Simulation Approach

The simulation presented in this chapter focuses on the income benefits of the NCB initiative: the federal NCB Supplement and provincial/territorial reinvestments and investments in income benefits. Although provincial, territorial and First Nations reinvestments and investments in non-income programs and services also contribute to the NCB goal of preventing and reducing the depth of child poverty, isolating the impact of these non-income programs and services is beyond the scope of this analysis.

The report presents a simulation of the direct impact of the NCB income benefits on the following three outcome indicators for the period from January to December 2002:

  • the change in number and incidence of children and families with children living in low income;
  • the average change in disposable income that families with children saw in 2002 as a direct result of the NCB; and
  • the change in the depth of low income, or the low-income gap (the aggregate amount of income that low-income families would need to reach a predetermined low-income line).

The impact of the income benefits of the NCB is determined by comparing the difference in one of these outcome indicators under two different federal/provincial/territorial child benefit structures in 2002: the actual structure with the NCB initiative, and a simulated structure without the NCB initiative. The impact of the NCB income benefits is determined by the difference between these two child benefit structures. This methodology captures an estimated $1.85 billion of NCB income benefits. Key characteristics of these two child benefit structures are presented in Table 14.

Table 14
Comparison of Two Federal/Provincial/Territorial Child Benefit Structures in 2002

Structure 1: Without NCB Initiative Structure 2: With NCB Initiative
Maintain the Working Income Supplement (WIS) structure* Introduce the NCB Supplement
No adjustments to provincial/territorial income support programs for increases in the NCB Supplement Introduce adjustments to provincial/territorial income support programs for increases in the NCB Supplement
No provincial/territorial reinvestment programs and additional investments in income benefits directly related to the NCB initiative Introduce provincial/territorial reinvestment programs and additional investments in child
benefits and earned income supplements

*The Working Income Supplement (WIS) was a federal program that preceded the NCB, providing income support to supplement the earning of low-income working families. The WIS was replaced in July 1998 by the NCB Supplement.

This methodology has the advantage of isolating the impact of the income benefits of the NCB initiative on the three outcome indicators described above, while keeping other socio-economic variables such as the level of employment or earnings unchanged. However, the methodology used in this report cannot capture changes in the economic behaviour of low-income families with children, which may have been caused by the NCB. For example, on the one hand, the NCB may have encouraged low-income families to enter the workforce from social assistance. On the other hand, the NCB Supplement reduction rates may have had a negative impact on the number of hours worked, especially by some workers. These dynamic effects are not captured by this methodology.

The application of the above methodology to the data from Statistics Canada's 2002 Survey of Labour and Income Dynamics (SLID) made it possible to assess the impact of the NCB income benefits on families with children who were in receipt of the NCB Supplement. All impacts are reported using Statistics Canada's post-tax Low-Income Cut-Offs (post-tax LICOs). Appendix 3 provides impacts using the post-tax Low-Income Measure and the Market Basket Measure, respectively. The advantages and limitations of the SLID database were described in Chapter 5.

Fewer Low-Income Families with Children in 2002 as a Result of the NCB

The NCB initiative was responsible for preventing an estimated 45,900 families with 106,000 children from living in low income in 2002 (see Table 15). This is a 9.7 percent reduction in the number of families with children living in low income in 2002. Analysis of the 2002 SLID data indicates there were an estimated 424,700 families with 809,700 children living in low income in 2002, representing 11.120 percent of all Canadian families with children. If the NCB had not been introduced, an estimated 470,600 families with 915,700 children would have lived in low income in 2002, translating into 12.3 percent of all families with children. Therefore, in 2002, the NCB reduced the number of families with children living in low income by 45,900 families, from 470,600 to 424,700 (a 9.7 percent reduction).

Table 15
Change in the Incidence of Low Income Among Families by Family Type due to the NCB: January 2002 to December 2002

SLID 2002 Post-Tax LICOs One-Parent Families Two-Parent Families All Families*
Decline in Number of Children Living in Low Income 49,200 56,500 106,000
Decline in Number of Families Living in Low Income 22,900 22,900 45,900
Percentage Change in Number of Families Living in Low Income -9.00% -10.70% -9.70%
Decline in Incidence of Low Income Among Families with Children** -3.10% -0.70% -1.20%

*The "All Families" group includes one-parent, two-parent and other family types (e.g. children in foster homes). Children in other family types do not fall in the category of one- or two-parent families.

** Decline in incidence of low-income is expressed in percentage points.

Source: Based on Statistics Canada Special Tabulations from the SLID 2002.

As indicated in Table 15, the overall reduction of 9.7 percent can be further broken down into a 9 percent reduction in the number of lone-parent families living in low income, and a 10.7 percent reduction in the number of two-parent families living in low income.

In 2002, the incidence of low income was higher among lone-parents than two-parents. In 2002, there were an estimated 231,900 lone-parent families with 425,300 children living in low income, representing 31.4 percent of all lone-parent families. By comparison, only 6.2 percent (or an estimated 190,400) of two-parent families with 381,300 children were living in low income in 2002.

The final row of Table 15 indicates the percentage point decline in the incidence of low income brought about by the NCB in 2002. As indicated above, with the NCB in place, the incidence of low income for families with children in 2002 was 11.120 percent. Without the NCB, this incidence would have been 12.3 percent. Therefore, the NCB was responsible for a 1.2 percentage point decrease in the incidence of low income among families with children.

The NCB has made a more significant contribution to the decline in the incidence of low income for lone-parent families than for two-parent families. Without the NCB, an estimated 254,800 lone-parent families with 474,400 children would have lived in low income, translating into 34.5 percent of all lone-parent families with children. With the NCB, the incidence of low income for lone-parents was 31.4 percent, indicating that the NCB reduced the incidence of low-income by 3.1 percentage points.

Among two-parent families, the incidence of low income declined by 0.7 percentage points in 2002 due to the NCB. If the NCB had not been introduced, an estimated 213,300 two-parent families with 437,800 children would have lived in low income in 2002, translating into 6.9 percent of two-parent families with children.

The NCB Improves Disposable Incomes of Low-Income Families with Children

NCB income benefits have reduced the number of families with children living in low income by improving their disposable income. Statistics Canada's 2002 Survey of Labour and Income Dynamics (SLID) was used to simulate the average increase in the level of disposable income that families with children saw as a direct result of NCB income benefits. As shown in Table 16, these increases in disposable income were estimated for three groups of families in 2002:

  • families with children who were prevented from living in low income as a direct result of the NCB Supplement;
  • families with children who remained in low income despite receiving the NCB Supplement; and
  • all other families with children who received the NCB Supplement in 2002 (i.e., families who were above the low-income threshold with or without the NCB Supplement).

Table 16
Change in Disposable Incomes due to the NCB Among Families with Children by Family Type: January 2002 to December 2002

SLID 2002 Post-Tax LICOs One-Parent Families Two-Parent Families All Families
Remained in Low Income in 2002
Increase in Disposable Income $1,000 $1,400 $1,200
Percentage Increase in Income 6.5% 7.4% 6.9%
Were Prevented from Living in Low Income in 2002
Increase in Disposable Income $2,500 $2,400 $2,400
Percentage Increase in Income 11.5% 8.5% 9.8%
Other Families Who Received NCB Supplement in 2002
Increase in Disposable Income $800 $900 $900
Percentage Increase in Income 2.2% 2.4% 2.2%

Source: Based on Statistics Canada Special Tabulations from the SLID 2002.

As indicated in Table 16, for those families with children who were prevented from living in low income in 2002 due to the NCB, disposable incomes were, on average, $2,400 higher than they would have been in the absence of the NCB initiative. This represents an increase of 9.8 percent in their disposable incomes.21

For those families with children who remained in low income, despite receiving the NCB Supplement during 2002, the NCB resulted in disposable incomes being, on average, $1,200 higher than what they would have been in the absence of the NCB initiative. This represents an increase of nearly 7 percent in their disposable incomes.22

Finally, those other families with children who received the NCB Supplement (i.e., families with children above the low-income threshold with or without the NCB Supplement), disposable incomes rose, on average, $900 due to the NCB. This represents an increase of about 2.2 percent in their disposable incomes.23

Table 17
Change in Depth of Low Income due to the NCB Among Families Remaining in Low Income: January 2002 to December 2002

SLID 2002 Post-Tax LICOs One-Parent Families Two-Parent Families All Families
Decline in Low Income Gap (In Millions of Dollars) $250 $290 $540
Percentage Change in Low Income Gap -15.0% -14.8% -14.9%

Source: Based on Statistics Canada Special Tabulations from the SLID 2002.

The NCB Reduced the Low-Income Gap for all Families

The NCB reduced the depth of low income, or low-income gap, for families with children who received the NCB Supplement in 2002. As indicated in Table 17, NCB income benefits closed the low-income gap by a total of $540 million, or 14.9 percent in 2002.

  • The simulation found that NCB income benefits decreased the low-income gap by $250 million for lone-parents living in low income, a reduction of 15 percent.
  • For two-parent families, the low-income gap was closed by $290 million, a reduction of 14.8 percent.

Helping Low-income Working Families

In addition to preventing and reducing the depth of child poverty, the NCB was designed to encourage families to leave social assistance for work by improving their incomes and maintaining child benefits when they join the labour force. The previous analysis identified the impact of the NCB on all families that received NCB income benefits. This section examines the impact of the NCB on families who were working during 2002. Results of the direct impact analysis of the NCB indicate that of the 37,600 working families with children who were prevented from living in a low-income situation in 2002 due to the NCB, disposable incomes were, on average, $2,600 higher than they would have been in the absence of the NCB initiative. This represents an increase of 10.3 percent in their disposable incomes.24

As well, the NCB has also made a significant contribution to improving the level of disposable income for the estimated 217,500 working families who remained living in low income during 2002. As a direct result of the NCB, disposable incomes of these families were on average $1,600 higher than they would have been in the absence of the NCB initiative. This represents an increase of more than 10.1 percent in disposable incomes in 2002.25 As such, families who remained below the low-income threshold in 2002 were, on average, $1,600 closer to the income level above which they would no longer be considered low-income families. The "low-income gap" was reduced for these families by $403 million in 2002, representing a decline of 17.8 percent.

The majority of the 45,900 families with children who were not living in low income in 2002 (with or without the NCB), were working families (37,600 or 81.8%) who received no social assistance. The remaining 8,300 were families who received some social assistance benefits in 2002. As a result of the NCB, these families saw their incomes increase on average by $1,000 or 2.6 percent.26


20The 11.1 percent refers to the percentage of families with children living in low income and receiving the NCB Supplement. By contrast, in Chapter 5, when considering all families with children, regardless of whether they receive the NCB Supplement, 11.4 percent were living in low income in 2002.

21For those families with children who were prevented from living in low income due to the NCB in 2002, average annual after-tax income was $26,900. Without the NCB in place, average, annual after-tax income would have been $24,500.

22For those families with children who remained in low income during 2002, average, annual after-tax income was $17,900. Without the NCB in place, average, annual after-tax income would have been $16,700.

23For families who were above the low-income threshold, with or without the NCB, average, annual after-tax income was $38,800. Without the NCB in place, average, annual after-tax income would have been $37,900.

24For those working families who were prevented from living in low income in 2002 due to the NCB, average, annual after-tax income was $27,800. Without the NCB in place, average, annual after-tax income would have been $25,200.

25For those working families who remained in low income in 2002, average, annual after-tax income was $17,800. Without the NCB in place, average, annual after-tax income would have been $16,200.

26For those working families who were above the low income threshold with or without the NCB in 2002, average annual after-tax income was $38,900. Without the NCB in place, average, annual after-tax income would have been $37,900.

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