dp Farm, Rural and Urban Families and the Incidence of Low Income in Canada Second Meeting of the Wye City Group on Statistics on Rural Development and Agriculture Household Income June 11-12, 2009 Rome, Italy

dp 2 Purpose 1.To illustrate, using Canadian data, the complexities of measuring farm family income and well-being 2.To compare the income levels and incidence of low income for farm, rural and urban families in Canada

dp 3 Presentation Outline 1.Family Data in Canada 2.Type and composition of families 3.Annual versus Longitudinal Data 4.Measures of Low Income 5.Summary

dp 4 Family Data in Canada  Tax records provide both annual and longitudinal data on Canadian families  Annual data 24 million tax filers in 2006 Individual tax filers are matched with family members Series available from 1982 to 2006  Longitudinal data 20% sample of the annual tax family file Sample of 5 million tax filers in 2006 Series available from 1982 to 2006

dp Type and Composition of Families Type and Composition of Families

dp 6 Family composition is a major factor in determining family income levels Median and Per Capita Income of Individuals and Families, Canada, 2006 Median income ($)Per capita income ($) Individuals 22,800 32,800 Families 63,600 28,200 Couple families 70,400 30,000 Lone-parent families 33,000 16,700

dp 7 Farm families account for a small share of all Canadian families; most farm families are couple families Average All families and individuals Couple families Couple families as a % of all families and individuals % of all families% Small-Farm Medium-Farm Large-Farm Very Large-Farm All Farm Families Rural Non-Farm Urban Non-Farm All Families

dp 8 Mean and median income levels of all families and individuals were generally higher for farm families compared to non-farm families All families and individuals ( ) Mean Family incomeMedian Family Income Mean-Median difference Small farm70,46051,10019,360 Medium farm65,14050,52014,620 Large farm74,54056,66017,880 Very large farm94,88054,84040,040 Rural non-farm49,96038,14011,820 Urban non-farm60,82042,96017,860 …The larger difference between the mean and median income for very large farm families indicates high incomes in this population

dp 9 Mean and median income levels of couple families were generally higher for large and very large farm and urban non-farm families Couple families ( ) Mean Family incomeMedian Family Income Mean-Median difference Small farm 78,640 58,580 20,060 Medium farm 68,100 53,580 14,520 Large farm 76,660 59,060 17,600 Very large farm 98,080 57,440 40,640 Rural non-farm 67,320 56,840 10,480 Urban non-farm 85,540 68,000 17,540

dp 10 Family definition has a significant impact on the median income of non-farm families For farm families, the family definition had much less of an impact on the median income level

dp 11 The incidence of low income was higher for farm couple families compared to non-farm couple families All families and individuals Couple families Small-Farm Medium-Farm Large-Farm Very large-Farm All Farm Families Rural-Non-Farm Urban-Non-Farm All Families Incidence of low income, by family definition and family type, using LIM-IBT*, (%), , Canada * Low Income Measure – Income Before Tax (LIM- IBT)

dp Type and Composition of Families Annual versus Longitudinal data

dp 13 Comparing annual data with longitudinal data is complex Annual dataLongitudinal data Families Family members of all tax filers matched annually to create a family file 20% sample of tax filers Longitudinal profile is created (of individual tax filers and their families over years) using a special identification number to select same individual tax filer in each year Farm families Farm families are families with Gross Farm Income (GFI) >0 in that year Farm families must report GFI>0 in all five years

dp 14 Annual dataLongitudinal data Rural- Urban Families living in a rural/urban area in that year Families must have been living in a rural/urban area in all five years Low Income Families with income below the low income threshold level in that year Families with five-year average family income below five-year average low income threshold level …Comparing annual data with longitudinal data is complex

dp 15 Longitudinal data has certain advantages over annual data Performance can be measured over time taking into account both low and high income years The persistence of both high and low income over years can be measured Variability of incomes of individual farms over more than one year can be measured Farms that enter and exit can be eliminated from the sample

dp 16 Longitudinal data resulted in a lower incidence of low income for all farm families except those operating a small farm, compared to non-farm families Percentage of families with income below LIM-IBT, 2002 to 2006 Annual data (Couple families) Longitudinal data (All families) Small-Farm Medium-Farm Large-Farm Very large-Farm All Farm Families Rural-Non-Farm Urban-Non-Farm All Families

dp Type and Composition of Families Measures of low income

dp 18 The frequency of low income can change depending on the low income measure used The Low Income Cut-Off (LICO) –Based on consumption: the percentage of family income spent on the basic necessities of food, clothing and shelter The Low Income Measure (LIM) –A relative measure based on income –Equal to one-half of the median of adjusted family income –Family income adjusted according to the number of family members using an equivalence scale

dp 19 The LICO Based on expenditures on basic necessities (food, clothing and shelter) of an average Canadian family in a base year (1992) The average family spent 43% of income on basic necessities in 1992; the LICO = the income level at which 63% of income would be spent on basic necessities Adjusted for inflation every year A separate LICO is calculated for each of: –income before-tax and income after-tax; –rural areas and for four urban community sizes; and –up to seven family members

dp 20 The LICO varies over a wider range of values compared to the LIM Rural areas Urban areas Less than 30,000 30,000 to 99, ,000 to 499, ,000 and over LICO- IBT Family of 427,11830,85133,71633,92539,393 LIM- IBT 1 adult, 3 children 34,874 2 adults, 2 children 34,874 3 adults, 1 child 36,618 4 adults38,361 Low Income Threshold Levels for a family of four, LICO-IBT vs. LIM-IBT, Canada, ($), 2006

dp 21 A lower percentage of farm families were in low income using the LICO-IBT Incidence of low income, by family type, LIM-IBT and LICO-IBT, , Canada Percentage with income below LIM-IBT Percentage with income below LICO-IBT Small-Farm Medium-Farm Large-Farm Very large-Farm All Farm Families Rural-Non-Farm Urban-Non-Farm All Families

dp 22 Summary This presentation illustrates some of the complexities of comparing income levels between farm and non-farm families The majority of farm families are couple families; therefore couple families provide the most direct farm vs. non-farm comparisons of income Using a broad definition of family is useful in identifying overall low income rates in a country Longitudinal data has certain advantages over annual data –The family income situation can be observed over more than one year –Income variability can be smoothed by averaging income over years which had the largest impact on large and very large farms The method used to determine the low income threshold level can lead to different results Taking into account a lower cost-of-living in rural areas results in a lower percentage of families in low income in rural areas

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