Measuring Poverty and Inclusion Measuring Financial Vulnerability in Canadian Cities and Communities 2013 Community Data Canada Roundtable Wednesday, June 19, 2013

Why Measure Poverty? Measures of poverty and low income are some of the most important social statistics in any society – on a level with GDP, the employment rate and household income Need reliable, comprehensive and comparable measures of low income to: – track well-being and living conditions of least well-off; – assess the vitality of the economy and social life; – inform the development poverty reduction policies and programs; and – provide clear benchmarks against which to monitor progress in improving lives and prospects of the poor.

Measuring Poverty

“Indirect” Income-based Approaches Income-Standard Measures (Relative Measures) Measures the number / proportion of individuals and households falling below an established income threshold, typically set in relation to median or mean income. Examples: Canada: Low Income Measure (LIM)  Threshold set at 50% of median equivalized income Canada: Low Income Cut-offs (LICO) – hybrid  Household in “strained circumstances” if amount spent on food, clothing and shelter is 20 percentage points greater than the average equivalent household  35 different LICOs (covers five community sizes and seven family sizes)  Revised annually for inflation; rebased periodically (last year: 1992)

“Indirect” Income-based Approaches Budget-Cost Poverty Measures (Absolute Measures) Measures poverty in relation to the cost of a specific basket of goods and services, constructed to satisfy a low income standard of living. Examples : Canada: Market Basket Measure (MBM)  designed by an expert committee to represent a “credible” standard of consumption  estimates the cost of a specific basket of goods and services, taking into account differences in family size and geographic location.  estimates of low income publicly available for the 2000 to 2010 period.

Comparing Poverty Measures

“Direct” Approaches Deprivation Measures Directly measures whether individuals or households have, or have access to, socially perceived necessities understood as fundamental to individual and community well- being. Examples : Ontario Deprivation Index  identifies a household as “lacking necessities” if one or more of a list of items is involuntarily absent from the household. For example, the index includes questions such as, "Are you able to get dental care if needed?" and "Do you eat fresh fruit and vegetables every day?" New Zealand Economic Living Standards Index (ELSI)  ELSI uses a formula to score individuals, from 0 to 60, based on their access to 40 items, sorted into four groups: economic items; ownership restricted due to cost; social participation restricted due to cost; self-assessment of standard of living  scale is divided into seven levels, from “very good” to “severe hardship

Conclusions A suite of low-income measures is desirable, as each measure gives us different type of information. No one measure is sufficient to give a comprehensive picture of low income. Together, a suite of measures should provide tools to examine low income trends in all parts of the country, reflecting regional differences, as well as to situate these trends in an international context. There is potential to add to the existing suite of measures. A financial security indicator – measured at the national and community levels – would be a very welcome addition to Canada’s existing complement of poverty indicators.

Contact Information For additional information, contact: Katherine Scott Canadian Council on Social Development (613)