Non-money indicators of poverty and their link to low-income and policy Geranda Notten Graduate School of Public & International Affairs University of Ottawa Canadian Economics Association - Annual Conference 2018

Canadian Economics Association - Annual Conference 2018 My argument Low income statistics are a useful and necessary tool for measuring poverty But: Low income statistics have serious flaws that lead to unacceptably large errors Therefore: To understand and reduce poverty in Canada, the Federal Government needs to routinely produce non-money indicators of poverty And: Canadian social scientists, civil society groups and governments need to routinely use them Canadian Economics Association - Annual Conference 2018

Low income statistics have serious flaws… They measure only one financial resource They have serious trouble accommodating for the diversity in resources & needs of Canadians And thus they make mistakes: Counting non-poor people as poor Counting poor people as not poor In the depth and breadth of poverty experienced by Canadians, and vulnerable groups in particular Canadian Economics Association - Annual Conference 2018

These mistakes bias analyses relying on low-income statistics Analyses estimating the effect of public policy and other societal forces such as the economy & demographics on poverty For example: Counting a poor person as not poor (or vice versa) affects calculations regarding the impact / effectiveness of public policy Spending resources on those mistakenly counted as not poor affects calculations regarding the efficiency of public policy Canadian Economics Association - Annual Conference 2018

Poverty – some definitions ‘Material’ or ‘living standard’ poverty Not having enough resources (especially financial) to achieve an above poverty level living standard (as judged by a majority of Canadians) Examples: Low-income & material deprivation indicators. Multidimensional poverty Being deprived in basic capabilities such as being able to enjoy an adequate living standard, advance your knowledge & skills by getting a high school diploma, getting treatment/support for activity limiting health issues... Examples: Multi-dimensional Poverty Indices by Alkire (MPI) & Curtis (MDP) Material deprivation indicators could feed into a material / living standard dimension of a multidimensional index. You need all indicator information for the same individuals/households Canadian Economics Association - Annual Conference 2018

Examples of non-money indicators for Canada Material deprivation Notten, Charest & Heisz Using the 2013 Canadian Survey of Economic Well-being Multidimensional poverty Curtis Using 5 rounds of the Canadian Community Health Survey Canadian Economics Association - Annual Conference 2018

Canadian Economics Association - Annual Conference 2018 Material deprivation indicators – Objective, unidimensional, outcome-based poverty indicators – Step 1: Derive deprivation items from 10-20 survey questions “Are you and your household able to ….” If yes → Not deprived If no → Follow up question “Is this because you cannot afford it, or for some other reason?" ” If cannot afford → Deprived If other reasons → Not deprived Includes deprivation items such: eating fresh fruits & vegetables once a day, get regular dental care, cover an unexpected expense of $500 from own resources Step 2: Aggregate deprivation items into a composite poverty indicator Alkire & Foster (2011): Counting approach, dual cut-off, various poverty measures Notten, Charest & heisz (2017): A scale consisting of 17 items, a cut-off at 2 deprivations, headcount index, using the Canadian Survey of Economic-Wellbeing (2013) Canadian Economics Association - Annual Conference 2018

Canadian Economics Association - Annual Conference 2018 Material deprivation indicators – Objective, unidimensional, outcome-based poverty indicators – Objective – because they measure respondents’ living conditions & not their views Unidimensional – because they measure the material/financial dimension of poverty Outcome-based because they measure specific living conditions & not resources Poverty indicators because they measure the enforced lack of things that a majority of Canadians & those with lived experience deem necessities for experiencing an above poverty level living standard Canadian Economics Association - Annual Conference 2018

Material deprivation rate in Canada, for various thresholds Canadian Economics Association - Annual Conference 2018

Material deprivation rate in Canada, for various thresholds Canadian Economics Association - Annual Conference 2018

Canadian Economics Association - Annual Conference 2018 Material deprivation & Low-income Sometimes disagreement on vulnerable groups Canadian Economics Association - Annual Conference 2018

Canadian Economics Association - Annual Conference 2018 Material deprivation & Low-income Sometimes disagreement on which group is vulnerable Vulnerable Vulnerable Canadian Economics Association - Annual Conference 2018

Canadian Economics Association - Annual Conference 2018 Material deprivation & Low-income Sometimes disagreement on which group is vulnerable Average Not vulnerable Canadian Economics Association - Annual Conference 2018

Canadian Economics Association - Annual Conference 2018 Material deprivation & Low-income Sometimes disagreement on which group is vulnerable Vulnerable Not vulnerable Canadian Economics Association - Annual Conference 2018

Canadian Economics Association - Annual Conference 2018 Material deprivation & Low-income Considerable disagreement on who is poor Canada Canadian Economics Association - Annual Conference 2018

Canadian Economics Association - Annual Conference 2018 Material deprivation & Low-income Disagreement is larger for vulnerable groups Canada Canadian lone parents Canadian Economics Association - Annual Conference 2018

Multidimensional poverty indicators for Canada Health (2), education (2), living standard(2), housing (3) Source: http://www.iariw.org/korea/curtis-slides.pdf Curtis estimates a multidimensional index using the Canadian Community Health Survey. The index covers nine indicators over four dimensions (health, education, living standard, housing). From the online presentation it is not clear at what level Curtis sets the second cut-off. Second cut-off? Presentation by Lori Curtis using the Canadian Community Health Survey

My recommendations on non-money poverty indicators ‘Shovel ready’ Start annual collection of material deprivation data in the Canadian Income Survey (feasible within one year) Schedule the first periodic review of the material deprivation data within the next five years More thinking needed Collecting microdata suitable for multidimensional poverty analysis is potentially worthwhile but also more complex and costly; requires more dialogue, study and piloting Canadian Economics Association - Annual Conference 2018

Canadian Economics Association - Annual Conference 2018 References Curtis, L. (2017), Poverty in Canada: Unidimensional and multidimensional measures. Presented at IARIW conference. Alkire, S., & Foster, J. (2011). Counting and multidimensional poverty measurement. Journal of public economics, 95(7), 476-487. Guio A.C., E. Marlier, D. Gordon, E. Fahmy, S. Nandy and M. Pomati (2016), Improving the measurement of material deprivation at the European Union level, Journal of European Social Policy, 26(3), 219-333. Matern, R., Mendelson, M. and Oliphant, M. (2009A), Developing a Deprivation Index: The Research Process. Toronto: Daily Bread Food Bank and the Caledon Institute of Social Policy. Matern, R., Mendelson, M. and Oliphant, M. (2009B), Testing the Validity of the Ontario Deprivation Index. Toronto: Daily Bread Food Bank and the Caledon Institute of Social Policy. McEwen A. and G. Notten (2016), Ottawa should invest in an arm’s-length agency to collect data on the well-being of Canadians and measure the outcomes of government policies. Policy Options. Notten, G., Charest, J., & Heisz, A. (2017), Material deprivation in Canada. Faculty of Social Sciences, University of Ottawa, 1-59. Notten, G. (2015A), Child poverty in Ontario: The value added of material deprivation indicators for comparative policy analysis in North America, Journal of Comparative Policy Analysis: Research and Practice, 1-20. Notten, G. (2015B), How poverty indicators confound poverty reduction evaluations: The targeting performance of income transfers in Europe, Social Indicators Research, 1-37. Notten, G. and C. de Neubourg (2011), Monitoring absolute and relative poverty; ‘not enough’ is not the same as ‘much less’, Review of Income and Wealth, 57(2), 247-269. Canadian Economics Association - Annual Conference 2018

Geranda Notten gnotten@uottawa.ca Thank you! Geranda Notten gnotten@uottawa.ca Canadian Economics Association - Annual Conference 2018