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    Poverty Cut-offs in Canada

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    I am doing a paper on poverty trends in Canada. I have a question: What does the Canadian government use as a standard of measure to determine who lives below the poverty line? Thanks.

    © BrainMass Inc. brainmass.com December 24, 2021, 4:53 pm ad1c9bdddf

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    The following information, contained in "FACT SHEET: DEFINITIONS OF THE MOST COMMON POVERTY LINES USED IN CANADA - June 2003," seems to answer your question:

    1. Low-Income Cut Offs (LICO)

    Statistics Canada's Low Income Cut Offs define a low-income household as one which spends a disproportionate amount of its income on the necessities of life - food, shelter, and clothing. Statistics Canada has decided over the years - somewhat arbitrarily - that 20 percentage points is a reasonable measure of the additional burden.

    LICOs vary by the size of the family unit and the population of the area of residence. There are seven categories of family size, from one person to seven or more persons, and five community sizes ranging from rural areas to cities with 500,000 or more residents. The result is a set of 35 cut-offs. The cut-offs are updated annually by Statistics Canada using the Consumer Price Index.

    LICO is based on income after government transfer payments such as the Canada Child Tax Benefit, Old Age Security pension, GST Credit, Employment Insurance benefits and provincial of territorial welfare payments but before federal, provincial or territorial income taxes are deducted.

    2. Pre-tax and Post-tax Low-Income Cut Offs

    LICOs can be calculated using pre- or post-tax numbers. The pre-tax LICO is based on spending necessities before paying income tax. Post-tax LICO is based on spending necessities after paying income tax. The trend of the two LICO measures over time are generally the same, however, using the post-tax measure, the proportion of low-income households is lower by about four percentage points.

    3. Low Income Measure (LIM)

    LIM is equal to one-half of median family income adjusted for family size, that is, half of the family income exactly in the middle of all families' incomes - half the families have incomes higher than it, and half have incomes lower. LIMs vary with family size and composition, but they are the same in all parts of the country. There is only one LIM for all of Canada so it does not reflect the reality of higher costs of living in large cities and lower costs of living in rural areas. LIMs and similar measures provide interesting comparisons at a given point in time, but they tend to be 'flat' over time and do not track well against the ups and downs of the economic cycle. One-half of median family income adjusted for family size is the approach most often used in international comparisons of poverty.

    4. Pre-Tax and Post-Tax Low Income Measure (LIM)

    LIMs can be calculated using pre- or post-tax numbers. Pre-tax LIM is based on spending necessities relative to before paying income tax. Post-tax LIM is based on spending necessities relative to after paying income tax.

    5. Market Basket Measure (MBM)

    The MBM attempts to calculate the amount of income needed by a given household to meet its needs. The MBM that was released by Human Resources Development Canada in May 2003 estimates the cost of a specific basket of goods and services for the year 2000 assuming that all items in the basket were entirely provided for out of the spending of the household. A report with numbers for 2001 will be released later in 2003 (already released). According to the MBM a person in low income is someone whose disposable family income falls below the cost of the goods and services in the market basket in their community or community size.

    The following deductions are made from total family money income before comparing it to the cost of the basket: out of pocket spending on child care; out of pocket spending on non-insured health care costs recommended by a health professional such as prescription drugs, health insurance premiums, aids for persons with disabilities and dental and vision care; personal income taxes and the personal portion of all payroll taxes such as Canada/Quebec Pension Plan contributions and Employment Insurance premiums; spousal support and child support payments made to another family; all mandatory payroll deductions for employer-sponsored pension plans, union dues and employer-sponsored supplementary health care plans.

    The MBM thresholds recognize that families of different sizes and compositions in the same community will require different amounts to purchase the standard of consumption represented by the good and services in the MBM. The market basket on which the MBM is based includes specified quantities and qualities of goods and services related to food, clothing and footwear, shelter, and transportation. It also contains other goods and services such as personal and household needs, furniture, telephone service and modest levels of reading, recreation and entertainment.

    You may find other pertinent information from the following three links:

    . http://www.ncwcnbes.net/htmdocument/reportwelfinc02/WI2002PLAVsinglepeople.pdf
    . http://www.ncwcnbes.net/htmdocument/reportwelfinc02/WI2002PLAVcouple.pdf
    . http://www.ncwcnbes.net/htmdocument/reportwelfinc02/WelInc&PovLin02.htm

    I hope this helps. Good luck on your paper.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

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