Misleading measure of ‘poverty’ does little to help those most in need

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Appeared in the National Post, December 22, 2015

Many Canadians are rightfully concerned about the plight of children living in poverty. As a recent report published by Campaign 2000, a coalition of anti-poverty groups, notes: “Choosing to allow child poverty to continue forces children to endure hunger, deprivation and exclusion, and compromises their health and life chances.” Unfortunately, the report uses a misleading measure of “poverty” that obscures reality and does little to help determine who is most in need and how best to help them.

As its measure of “poverty,” the report uses Statistics Canada’s Low Income Measure (LIM). By this measure, a household with income below half the median income is classified as living in poverty (the median is the middle value of the income distribution). Critically, LIM is based on relative differences in income—not whether a household is living in deprivation and unable to attain basic necessities such as food, clothing and shelter. Even if everyone in society can comfortably afford much more than the basic necessities, households can still have incomes below the LIM threshold simply by virtue of differences in income within society.

In other words, Campaign 2000 is crudely measuring income inequality, not poverty. Statistics Canada explicitly considers LIM a measure of low income and not poverty.

So what’s the true extent of child poverty in Canada?

A more telling measure examines the ability of a household to afford basic needs such as food and housing. Nipissing University professor Chris Sarlo has developed such a measure, referred to as the basic needs poverty line (BNL), which is the income level that allows a household to afford a nutritious diet, adequate housing, clothing, health care, and a number of other basic goods and services required for long-term physical well-being. The advantage of the BNL is that it captures whether a household has adequate resources to escape deprivation. That is, it is a proxy of absolute poverty.

According to Prof. Sarlo’s measure, 5.5 per cent of children were living in poor households in 2009 (latest year of published data)—a far cry from the nearly one in five children (20 per cent) reported to be in poverty by Campaign 2000. In contrast to the claim that child poverty has gotten worse since 1989, the BNL shows that the child poverty rate has actually dropped by a third from 8.3 per cent in 1986 (data for 1989 is not available).

Also problematic, Campaign 2000’s report provides a snap shot of low income without accounting for the fact that low income is typically a temporary situation, as oppose to a long-term condition. Young people, for instance, often have relatively low income when they first enter the workforce but that changes as they gain education, skills and experience. In addition, families may encounter temporary money problems, perhaps due to a loss of employment, from which they recover relatively quickly.

Even by Campaign 2000’s own measure (LIM), the vast of majority of children do not experience persistent low income. Only 2.8 per cent of children under 18 were in low income every year from 2005 to 2010. Moreover, a little more than a third of the children in low income in 2009 had moved above the LIM threshold in 2010. Understanding why some households with children move out of low income relatively quickly while others get stuck is important for developing policies to help them.

Tackling child poverty is obviously a laudable goal. No Canadian child should go without basic necessities. However, it’s not helpful to overstate the problem in a way that obscures efforts to identify those most in need.

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