Report of the National Seniors Council on Low Income Among Seniors

Annex E: Overview of Measures of Low Income

The most commonly used measure of low income in Canada is the Low Income Cut-Off or LICO. However, it is important to note that the LICO is not a measure of poverty, but rather, as the name suggests, a measure of low income.

The LICO is based on how much a family spends on the basic categories of expenditure (food, clothing and shelter) relative to what the average family spends.Afamily is considered below the LICO if it spends a share of its post income tax income on food, shelter, and clothing that is 20 percentage points higher than the average family. The income levels where this occurs are then calculated for various family and community sizes to produce a range of LICOs (see table below). Generally speaking, the larger the community, the higher the LICO. There are both before-tax and after-tax LICOs, with the latter being the more common measure as it better represents the income one has available to spend.

Low Income Cut-Offs, After-Tax, According to Family and Community Size, 2006
Size of Family Unit Rural areas Urban areas
Less than 30,000 30,000 - 99,999 100,000 - 499,999 500,000 +
1 person 11,492 13,152 14,671 14,857 17,568
2 persons 13,987 16,008 17,857 18,082 21,381
3 persons 17,417 19,932 22,236 22,516 26,624
4 persons 21,728 24,867 27,741 28,091 33,216
5 persons 24,742 28,317 31,590 31,987 37,823
6 persons 27,440 31,404 35,034 35,474 41,946
7 persons or more  30,138 34,491 38,477 38,962 46,070

Source: Statistics Canada. 2008. Income in Canada (Catalogue no. 75-202-X). Ottawa: Minister of Industry.

Statistics Canada also produces an alternative relative measure of low income called the Low Income Measure (LIM). The LIM is defined as 50 percent of median family income adjusted for family size. The advantage of the LIM is that it allows for international comparisons. However, the major disadvantage of LIM is that it does not take any account of differences in living costs and in communities across the country.

An alternative to these two relative measures of low income is the Market Basket Measure (MBM). The MBM assesses whether households can afford to purchase essential goods and services including food, clothing, shelter, transportation and other essentials of life. Unlike the LICO, MBM is based on the goods and services in the basket rather than the share of income spent on food, clothing and shelter. MBMs vary by family and community size and are calculated for 48 geographic regions across the country.

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