Canada’s model for the “poverty line,” which by the way, doesn’t really measure poverty, as we’ll discuss later, is one of the most skewered models for measuring poverty. The poverty line should be re-evaluated on a regular basis, and I’m not saying that there shouldn’t be some formula behind it, but I think there is a problem with how the measurement is achieved.

The Canadian Fact Book on Poverty (1994) states:

“Although there is no official measure of poverty in Canada, the Statistics Canada measure is probably the best known. Virtually all of the statistics used by other national measures of poverty in Canada come from Statistics Canada's annual survey of incomes. Statistics Canada itself does not claim to measure poverty; rather, it defines a set of income cut-offs below which people may be said to live in straitened circumstances. The difference between straitened circumstances and poverty is moot, however, and most social policy analysts, politicians and editorial writers treat the cut-offs as poverty lines... A Statistics Canada survey of family expenditure in 1959 determined that the average Canadian family spent about one-half its income on food, clothing and shelter. Statistics Canada concluded that a family that spent significantly more (i.e., 20 percentage points more) than half its income on essentials was living in straitened circumstances. As a result, it adopted 70 per cent of income as the cut-offs point: families that spent more than 70 per cent of their income on essentials would have little or no income left to spend on transportation, health, personal care, education, household operation, recreation or insurance. Applying this measure to 1961 income data, the Economic Council of Canada reported in its 1968 Review that 27 per cent of the overall nonfarm population and 25 per cent of families were living in poverty.”

Get any of that? It gets more confusing. Let’s continue further down the line:

“Statistics Canada has always varied its cut-offs levels with the number of family members. Since 1973 it has also distinguished between urban and rural communities (a distinction that it has applied retroactively to its data for 1969 through 1972). The larger the community, the higher the low income cut-offs for any family size. The accommodation of these two factors - family size and community size -results in 35 separate low income cut-offs... The survey's measure of income is comprehensive. It includes wages and salaries (before deductions), net income from self-employment, investment income, government transfer payments (such as Unemployment Insurance, social Assistance, old age pensions, refundable tax credits), training allowances and the like, private pensions, scholarships and alimony payments. The only exclusions from income are gambling gains, lump-sum inheritances, capital gains, loans and income in kind, such as free meals and food produced on the farm for domestic use. The survey includes the income of all household members over the age of 15.

The definition of family used by Statistics Canada in assessing poverty is the so-called economic family. It includes all occupants of a dwelling unit who are related by blood, marriage or adoption. It also includes couples living together in common-law relationships. An unattached individual is a person who either lives alone or shares a dwelling unit, but is unrelated to the other occupants by blood, marriage, adoption or common-law relationship. In this book, both families and unattached individuals are referred to as households, even though this usage does not strictly coincide with the definition of a household that Statistics Canada uses in other surveys.

The fact that Statistics Canada frequently updates its poverty lines based on changes in the proportion of average income devoted to essentials, which has fallen as the Canadian standard of living has increased, implies a commitment to the view that poverty has a relative definition rather than an absolute one.”

I didn’t quite get any of it either. Here’s how it works (I think): First of all, this formula measures low income. I believe low income and poverty are two different things, but right now, that’s besides the point. Anyways, there are so many factors contributing it is literally impossible to put this into a mathematical formula. The factors included are: household income, family size, population of community, expenditures for necessities - food, shelter, etc- benefits and bonuses, and possibly more. I’m also going to define here how each of these factors contributes to how Canada calculates the poverty line.

Family Size

A family size is calculated as the number of people living in a household. Family, as it is defined for this purpose, is not just limited to blood or common law relations, but also to individuals who are boarding, or renting. The larger the family, the higher your low income cut off would be.

Household Income

Because the low income cut off is a ratio of your income against all these other factors, your household income is also calculated. Your household income is the entire earnings of your family before taxes (as defined in family size) provided that each earner is over the age of 15 years old. Therefore, a 13 year old working at a fast food restaurant would not be included. However a 16 year old working as a dishwasher would be included. Other earnings not included are: gambling, loans, income-in-kind (such as free food produced on a farm for domestic use), and inheritances. The higher your household income, the less likely it is that you would be considered living in poverty.

Population

This is a category based on the population in which you reside. The categories are: rural (not in a small community); less than 30,000 citizens; 30,000-99,999 citizens; 100,000-499,000 citizens; and 500,000+ citizens. The larger the community, the higher your low income cut off would be.

Expenditures for Necessities

This category represents how much you spend on rent, mortgage payments, food, and other things that are necessary for life. It does not include transportation, education, or other luxuries, regardless of how necessary they may be. The theory is the more you spend on shelter, food, and clothing, the less you have to spend on other things that contribute to a quality of life, such as education, transportation, entertainment, and others. The more your household spends on necessities, the more likely you’ll fall below the poverty line.

Benefits and Bonuses

These are “bonus” incomed that do not count as household income. These include gambling winnings, inheritances, loans, and the like. These are not counted as part of the calculation, because they are automatically removed from your household income.

I hope that makes the poverty line a little easier to understand. Remember, because of all these factors, there are 35 different cut-off points for what is considered “poverty.”

There are problems however with this system. Here would be an example:

A renter, renting a room from a family of four, paying $500.00 a month, plus she has to pay for most of her own groceries. She makes $9.50/hr and works 38 hrs per week. The household is in a large city.

$9.50x38x4 = $1444.00/m personal income.

-$500.00/m rent = $944/m

She goes through, say, 4 litres of milk per week. A carton of eggs, and 2 loafs of bread (she makes her own brown bag lunches). She uses lunch meats, butter, mayonnaise, lettuce, tomatoes. For breakfast she usually has a bowl of cereal and 2 pieces of toast, and a glass of milk and orange juice. On weekends, she has scrambled eggs as well. For dinner, she has mashed potatoes, pasta, rice and stir-fry, or other such foods. She also enjoys coffee every now and then. Let’s break her food bill down:

16 litres of milk per month = $16.00 (at 3.99/ 4L jug)

4 cartons of eggs per month = $14.00 (at $3.49/dozen, the Canadian average)

8 loafs of bread = $15.00

Lunch meats = $28.00

Butter = $15.00

Mayonnaise = $10.00

2 heads Lettuce = $4.00 (varies with time of year)

8 tomatoes = $8.00 (Varies with time of year)

2 boxes of cereal = $10.00

Pasta = $15.00

Tomato Sauce = $5.00

Ground beef = $10.00

Mashed potatoes = $25.00

Gravy = $4.00

Instant Rice = $8.00

Vegetables for Stir Fry = $40.00 (Bok Choy, Sweet Peas, Red and Yellow Peppers, Onions, etc.)

Soy Sauce = $4.00

Home-brewed Coffee = $10.00

That’s $241.00 per month on household groceries. Prices may vary depending on region and time of year. Plus let’s not forget that’s a very basic diet without any variety. And I also never brought in Salt, Pepper (add another 5 bucks), vinegar, or other seasonings. That’s not a very healthy diet, high in starch and carbohydrates, average in protein, and very low on vitamins. Let’s add an apple a day to her lunch, at an average of $1.00 per apple (varies on weight and region). And on weekends she snacks on grapes. Once her Travel mug is empty, she also now has buy coffee while she’s at work. And since this is not an office job, let’s assume that she has to pay about $2.00 for a coffee. She only does this once a day. We’ll also give her the occasional banana as a treat for potassium.

Salt and pepper = $5.00

Apples = $28.00

Grapes = $20.00

Travel Coffee = $48.00

Bananas = $5.00

That’s now $347.00 on groceries. Now let’s have some real fun. In addition to her rent, she also has to pay a share of the electricity and water, and full for a private phone line.

Utilities = $40.00

Phone = $30.00

These fees are non-negotiable, so we’ll throw them in with shelter costs. She also has to pay for her own work uniform.

Uniform $30.00

Now for a total monthly income of $1,444.00/m (pre-tax) she is spending $947.00 on mandatory expenses. Right now, the poverty line is approximately 52% or more of your income (pre-tax) being spent on necessities. Our example? 65.6% of her income is being spent on necessities. This woman is experiencing poverty. But this woman is not necessarily considered living in poverty. Why? Because she’s considered part of the household she rent from.

Let’s say the owners of the house are a mother and father with two kids, aged 12 and 16.The mother is an accountant who makes about $60,000 per year ($5,000/m), and the father is a plumber who makes $30.00/hr ($4,800/m). The 16 year old works at a fast food restaurant 12 hours per week for $8.50.hr. The 12 year old works on a paper route, but his income is not counted because he is under the age of 15. The total monthly income of the household (including the renter) is $11,652.00/m. Let’s say the family she lives with spends about $600/m on groceries, and $700/m on mortgage payments. They also spend about $150.00/m on clothes. Utilities is about $130.00/m and the phone bill is $50.00/m. The total expenditures of the household (not including the renter’s utilities, rent, phone, because that stays in the household) is $2,007.00 in other words, 17.2%. This household is not living in poverty, and neither is our example renter. And that’s kind of moot anyways, and here’s why.

There are also fixed dollar amounts for what is considered poverty. This amount is based on the variety of things we discussed: household income, household size, community size, and the like. If our example lived in an apartment by herself with the same expenses, same rent, and same earnings (expenses of $ 11,364.00/annum, income of $17,328.00/annum) would be below the poverty line. A single person in a large city with no dependants (household size of 1) is considered below the poverty line if their earnings are below $18,841 per year.

A household of 5 in the same city would be considered below the poverty line if their total income is less than $39,633/annum. Our example would still be experiencing poverty, but statistically, she is not considered living in poverty in either way we do the calculation. Still confused? Me too. And that, my faithful followers is why this statistic is more skewered than a shish kabob.