Archived – The National Child Benefit Progress Report 2007

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Chapter 5
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 National Child Benefit (NCB) initiative in making progress on its first goal, to help prevent and reduce the depth of child poverty Footnote 20.

The chapter presents evidence based on a simulation using the 2005 Survey of Labour and Income Dynamics (SLID). The simulation compares the actual NCB income benefits structure to a hypothetical scenario based on the benefits structure that existed prior to the NCB.  This is the seventh in a series of simulations providing information to Canadians on the progress of the NCB. Five previous simulations were included in The National Child Benefit Progress Report: 2001, 2002, 2004, 2005 and 2006. A sixth 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. Footnote 21

The Simulation Approach

The simulation presented in this chapter focuses on the income benefits component of the NCB initiative: both 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 2005:

  • the change in number and incidence of children as well as families with children living in low income;
  • the average change in disposable income that families with children saw in 2005 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 each of these outcome indicators under two different federal/provincial/territorial child benefit structures in 2005: the actual structure with the NCB initiative, and a simulated structure without the NCB initiative. The impact of NCB income benefits is measured as the difference between these two child benefit structures. This methodology captures an estimated $2.15 billion of NCB income benefits. Key characteristics of these two child benefit structures are presented in Table 10.

Table 10 - Comparison of Two Federal/Provincial/Territorial Child Benefit Structures in 2005
Structure 1
Without NCB Initiative
Structure 2
With NCB Initiative
Maintain the Working Income Supplement (WIS) structureReference a is located after the table 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
  • Reference a from the above table 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 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 2005 Survey of Labour and Income Dynamics (SLID) made it possible to assess the impact of NCB income benefits on families with children who were in receipt of the NCB Supplement. As discussed in Chapter 4, the MBM was developed in 1998 at the request of Federal, Provincial and Territorial Ministers responsible for Social Services specifically for the purpose of assessing the progress of the NCB initiative. Beginning this year, this chapter will analyse direct impacts of the NCB using the MBM.  Analysis using post-tax Low-Income Cut-Offs (LICO) will be maintained for continuity with previous reports. Appendix 3 provides a detailed breakdown of these impacts as measured by Statistics Canada’s post-tax Low-Income Measure (LIM) along with the MBM and post-tax LICO.

The NCB Reduced the Number of Families with Children Living in Low Income in 2005

The NCB initiative was responsible for preventing an estimated 78,800 families with 171,100 children from living in low income in 2005 (see Table 11), using the MBM. This is a 13.7 percent reduction in the number of families with children living in low income in 2005. Analysis of the 2005 SLID data indicates there were an estimated 497,600 families with 970,600 children living in low income in 2005, representing 13.0 percent Footnote 22 of all Canadian families with children. If the NCB had not been introduced, an estimated 576,400 families with 1,141,700 children would have lived in low income in 2005, translating into 15.1 percent of all families with children. Therefore, in 2005, the NCB reduced the number of families with children living in low income by 78,800 families, from 576,400 to 497,600 (a 13.7 percent reduction).

The final row of Table 11 indicates the percentage point decline in the incidence of low income brought about by the NCB in 2005. As indicated above, with the NCB in place, the incidence of low income for families with children in 2005 was 13.0% percent. Without the NCB, this incidence would have been 15.1 percent. Therefore, the NCB was responsible for a 2.1 percentage point decrease in the incidence of low income among families with children.

As indicated in Table 11, the overall reduction of 13.7 percent can be further broken down into a 10.7 percent reduction in the number of lone-parent families living in low income, and a 16.0 percent reduction in the number of two-parent families living in low income. In 2005, the incidence of low income was higher among lone-parent families than two-parent families. There were an estimated 236,700 lone-parent families with 434,000 children living in low income, representing 30.4 percent of all lone-parent families. By comparison, only 8.6 percent (or an estimated 259,500) of two-parent families with 534,500 children were living in low income in 2005.

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 265,000 lone-parent families with 487,400 children would have lived in low income, translating into 34.0 percent of all lone-parent families with children. With the NCB, the incidence of low income for lone-parents was 30.4 percent, indicating that the NCB reduced the incidence of low-income by 3.6 percentage points.

Among two-parent families, the incidence of low income declined by 1.6 percentage points in 2005 due to the NCB. If the NCB had not been introduced, an estimated 308,800 two-parent families with 651,000 children would have lived in low income in 2005, translating into 10.2 percent of two-parent families with children. With the NCB, the incidence of low income for two-parent families was 8.6 percent.

Table 11 - Change in the Incidence of Low Income Among Families by Family Type Due to the NCB: January 2005 to December 2005The source for this table is located after the table
SLID 2005 One-Parent
Families
Two-Parent
Families
All Families Reference a is located after the table
MBM
Decline in Number of Children Living in Low Income 53,300 116,500 171,100
Decline in Number of Families Living in Low Income 28,300 49,400 78,800
Percentage Change in Number of Families Living in Low Income -10.7% -16.0% -13.7%
Decline in Incidence of Low Income Among Families with Children Reference b is located after the table -3.6% -1.6% -2.1%
Post-Tax LICOs
Decline in Number of Children Living in Low Income 70,400 74,100 144,500
Decline in Number of Families Living in Low Income 37,900 29,600 67,500
Percentage Change in Number of Families Living in Low Income -16.7% -12.9% -14.7%
Decline in Incidence of Low Income Among Families with Children Reference b is located after the table -4.9% -1.0% -1.8%
  • Reference a from the above table 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.
    Reference b from the above table Decline in incidence of low-income is expressed in percentage points.
    The source for the above table Source : Based on Statistics Canada Special Tabulations from the Survey of Labour and Income Dynamics (SLID) 2005.

Analysis based on LICO data shows similar impacts Footnote 23. Using the LICO, the NCB initiative was responsible for preventing an estimated 67,500 families with 144,500 children from living in low income in 2005 (see Table 11). This is a 14.7 percent reduction in the number of families with children living in low income in 2005. Analysis of the 2005 SLID data indicates there were an estimated 391,670 families with 770,128 children living in low income in 2005, representing 10.3 percent Footnote 24 of all Canadian families with children. If the NCB had not been introduced, an estimated 459,215 families with 914,646 children would have lived in low income in 2005, translating into 12.0 percent of all families with children. Therefore, according to LICO data from 2005, the NCB reduced the number of families with children living in low income by 67,500 families, from 459,215 to 391,670 (a 14.7 percent reduction).

As with the MBM, LICO data show that the incidence of low income for lone-parent families was greater than for two-parent families. Without the NCB, an estimated 227,501 lone-parent families with 421,083 children would have lived in low income, translating into 29.2 percent of all lone-parent families with children. With the NCB, the incidence of low income for lone parents was 24.3 percent, indicating that the NCB reduced the incidence of low-income by a 4.9 percent reduction. Among two-parent families, the incidence of low income declined by 1.0 percentage points in 2005 due to the NCB. If the NCB had not been introduced, an estimated 230,017 two-parent families with 491,132 children would have lived in low income in 2005, translating into a 7.6 percent reduction 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 2005 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 12, these increases in disposable income were estimated for three groups of families in 2005:

  • 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 2005 (i.e., families who were above the MBM low-income threshold with or without the NCB Supplement).

As indicated in Table 12, for those families with children who were prevented from living in low income in 2005 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 9.5 percent in their disposable incomes. Footnote 25

For those families with children who remained in low income, despite receiving the NCB Supplement in 2005, the NCB resulted in disposable incomes being, on average, $1,900 higher than what they would have been in the absence of the NCB initiative. This represents an increase of nearly 10.7 percent in their disposable incomes. Footnote 26

Finally, for those other families with children who received the NCB Supplement (i.e., families with children above the MBM low-income threshold with or without the NCB Supplement), disposable incomes rose, on average, $1,100 due to the NCB. This represents an increase of about 2.9 percent in their disposable incomes. Footnote 27

Table 12 - Change in Disposable Incomes Due to the NCB Among Families with Children by Family Type: January 2005 to December 2005 The source for this table is located after the table
SLID 2005 One-Parent
Families
Two-Parent
Families
All Families
MBM
Were Prevented from Living in Low Income in 2005
Increase in Disposable Income $2,100 $2,700 $2,400
Percentage Increase in Income 9.4% 9.6% 9.5%
Remained in Low Income in 2005
Increase in Disposable Income $1,700 $2,000 $1,900
Percentage Increase in Income 10.9% 10.6% 10.7%
Other Families Who Received NCB Supplement in 2005
Increase in Disposable Income $1,200 $1,100 $1,100
Percentage Increase in Income 3.1% 2.7% 2.9%
Post-Tax LICOs
Were Prevented from Living in Low Income in 2005
Increase in Disposable Income $2,300 $3,000 $2,600
Percentage Increase in Income 10.0% 10.0% 10.0%
Remained in Low Income in 2005
Increase in Disposable Income $1,700 $2,200 $1,900
Percentage Increase in Income 11.1% 11.3% 11.2%
Other Families Who Received NCB Supplement in 2005
Increase in Disposable Income $1,200 $1,200 $1,200
Percentage Increase in Income 3.0% 3.0% 3.0%
  • The source for the above table Source: Based on Statistics Canada Special Tabulations from the Survey of Labour and Income Dynamics (SLID) 2005.

Similar trends are observed using the LICO thresholds (as indicated in Table 12). For those families with children who were prevented from living in low income in 2005 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 10.0 percent in their disposable incomes. Footnote 28

For those families with children who remained below the LICOs, despite receiving the NCB Supplement during 2005, the NCB resulted in disposable incomes being, on average, $1,900 higher than what they would have been in the absence of the NCB initiative. This represents an increase of nearly 11.2 percent in their disposable incomes. Footnote 29

For those other families with children who received the NCB Supplement (i.e., families with children above the LICO threshold with or without the NCB Supplement), disposable incomes rose, on average, $1,200 due to the NCB. This represents an increase of about 3.0 percent in their disposable incomes. Footnote 30

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 2005. As indicated in Table 13, NCB income benefits closed the MBM low-income gap by a total of $1 billion, or 20.4 percent in 2005. The LICO low-income gap was closed by a total of $840 million, or 20.9 percent in 2005

  • The simulation found that NCB income benefits decreased the MBM low-income gap by $420 million for lone-parents living in low income, a reduction of 21.1 percent (a reduction of $370 million or 22.1 percent using the LICO).
  • For two-parent families, the MBM low-income gap was closed by $590 million, a reduction of 20.0 percent (a reduction of $470 million or 20.1 percent using the LICO).
Table 13 - Change in Depth of Low Income Due to the NCB Among Families Remaining in Low Income: January 2005 to December 2005 The source for this table is located after the table
SLID 2005 One-Parent Families Two-Parent Families All Families
MBM
Decline in Low Income Gap (in millions of dollars) $420 $590 $1,010
Percentage Change in Low Income Gap -21.1% -20.0% -20.4%
Post-Tax LICOs
Decline in Low Income Gap (in millions of dollars) $370 $470 $840
Percentage Change in Low Income Gap -22.1% -20.1% -20.9%
  • The source for the above table Source: Based on Statistics Canada Special Tabulations from the Survey of Labour and Income Dynamics (SLID) 2005.

The NCB Helps 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 2005.

Results of the direct impact analysis of the NCB indicate that of the 71,500 working families with children who were prevented from living below the MBM thresholds in 2005 due to the NCB, disposable incomes were, on average, $2,500 higher than they would have been in the absence of the NCB initiative. This represents an increase of 9.7 percent in their disposable incomes. Footnote 31

The NCB has also made a significant contribution to improving the level of disposable income for the estimated 328,100 working families who remained in low income during 2005. As a direct result of the NCB, disposable incomes of these families were on average $2,200 higher than they would have been in the absence of the NCB initiative. This represents an increase of more than 13.0 percent in disposable incomes in 2005. Footnote 32 As such, families who remained below the MBM low-income threshold in 2005 were, on average, $2,200 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 $814 million in 2005, representing a decline of 21.9 percent.

Finally, there were 473,900 additional working families who received the NCB Supplement but were not living in low income in 2005 (with or without the NCB). As a result of the NCB, these families saw their incomes increase on average by $1,170 or 3.0 percent. Footnote 33

Using post-tax LICO data, results of the direct impact analysis of the NCB indicate that of the 55,100 working families with children who were prevented from living below the LICO in 2005 due to the NCB, disposable incomes were, on average, $2,700 higher than they would have been in the absence of the NCB initiative (representing an increase of 10.0 percent in their disposable incomes).

In addition, findings using the LICO show the NCB initiative increased the disposable incomes of the estimated 247,124 working families who remained in low income during 2005 by $2,400 (an increase of more than 14.0 percent). This resulted in the “low-income gap” for these families being reduced by $663 million in 2005 (representing a decline of 22.8 percent).

Finally, according to the LICO, there were 571,334 additional working families who received the NCB Supplement but were not living in low income in 2005 (with or without the NCB). As a result of the NCB, these families saw their incomes increase on average by $1,260 or 3.1 percent.

Summary

This chapter assesses the direct impact of the NCB initiative’s income benefits component. A simulation approach is used to compare the actual NCB income benefits structure to a hypothetical scenario based on the benefits structure that existed prior to the NCB.

According to this simulation, the NCB initiative was responsible for preventing an estimated 78,800 families with 171,100 children from living below MBM low-income thresholds in 2005, a 13.7 percent reduction in the incidence of low income among families with children. The NCB increased the disposable incomes of these families by an average of 9.5 percent, or $2,400. Further, the NCB narrowed the low-income gap for all families with children. The combined amount of income that would be required for all low-income families to reach the MBM threshold was reduced by 20.4 percent or $1 billion in 2005 as a result of the NCB.


  • 20 Analysis in chapters 4 and 5 does not include the Territories as Statistics Canada's Survey of Labour and Income Dynamics (SLID) is a household survey that currently excludes residents of the Yukon, the Northwest Territories and Nunavut, residents of institutions and persons living on Indian reserves. Return to reference 20
  • 21 This simulation was based on the 2001 data. Return to reference 21
  • 22 The 13.0 percent refers to the percentage of families with children living in low income and receiving the NCB Supplement. By contrast, in Chapter 4, when considering all families with children, regardless of whether they receive the NCB Supplement, 13.5 percent were living in low income in 2005. Return to reference 22
  • 23 As discussed in Chapter 4, MBM shows a higher rate of low-income than that obtained using post-tax LICOs as the definition of disposable income used when comparing families’ income to the MBM low-income threshold is more comprehensive than the definition of disposable income used by the LICOs. As a result, the MBM subtracts more items from gross income than the LICOs. Return to reference 23
  • 24 The 10.3 percent refers to the percentage of families with children living in low income and receiving the NCB Supplement. By contrast, in Chapter 4, when considering all families with children, regardless of whether they receive the NCB Supplement, 10.5 percent were living in low income in 2005. Return to reference 24
  • 25 For those families with children who were prevented from living in low income due to the NCB in 2005, average, annual after-tax income was $28,300. Without the NCB in place, average, annual after-tax income would have been $25,900. Return to reference 25
  • 26 For those families with children who remained in low income during 2005, average, annual after-tax income was $19,100. Without the NCB in place, average, annual after-tax income would have been $17,300. Return to reference 26
  • 27 For families who were above the low-income threshold, with or without the NCB, average, annual after-tax income was $40,100. Without the NCB in place, average, annual after-tax income would have been $39,000. Return to reference 27
  • 28 For those families with children who were prevented from living in low income due to the NCB in 2005, average, annual after-tax income was $28,500. Without the NCB in place, average, annual after-tax income would have been $25,900. Return to reference 28
  • 29 For those families with children who remained in low income during 2005, average, annual after-tax income was $19,200. Without the NCB in place, average, annual after-tax income would have been $17,300. Return to reference 29
  • 30 For families who were above the low-income threshold, with or without the NCB, average, annual after-tax income was $41,700. Without the NCB in place, average, annual after-tax income would have been $40,500. Return to reference 30
  • 31 For those working families who were prevented from living in low income in 2005 due to the NCB, average, annual after-tax income was 28,600. Without the NCB in place, average, annual after-tax income would have been $26,100. Return to reference 31
  • 32 For those working families who remained in low income in 2005, average, annual after-tax income was $19,300. Without the NCB in place, average, annual after-tax income would have been $17,100. Return to reference 32
  • 33 For those working families who were above the low-income threshold with or without the NCB in 2005, average, annual after-tax income was $39,900. Without the NCB in place, average, annual after-tax income would have been $38,800. Return to reference 33

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