Census learning centre
Low-income concepts and statistics
Release date: March 29, 2023
Catalogue number: 982000032021012
Hello and welcome to the “Low-income concepts and statistics” video!
This video builds on concepts introduced in the other videos on income. It explains key low-income concepts—Market Basket Measure (MBM), Low-income measure (LIM) and Low-income cut-offs (LICO) and the indicators associated with these concepts such as the low-income gap and the low-income ratio. These concepts are used in analysis of the economic well-being of the population.
- Subject
- Income
- Length
- 00:07:00
- Cost
- Free
- Links
Watch the video
Concept video: Low-income concepts and statistics - Transcription
(The Statistics Canada symbol and "Canada" wordmark appear on screen with the title: "Concept video: Low-income concepts and statistics.")
Welcome to the "Low-income concepts and statistics" video. In this video, we will talk about low-income concepts and their associated indicators.
This video builds on the concepts and ideas presented in the previous videos within this series.
Low-income is one of the key indicators used to monitor and track the economic well-being of individuals, families and households.
It forms a basis for identifying population groups that are at risk of social and economic hardship at a particular point in time, or over time.
Three different low-income concepts are available in the 2021 Census.
First, we will discuss the market basket measure, also known as MBM.
This measure was designated Canada's official poverty line in 2019 under the Poverty Reduction Act.
The other two concepts are low-income measures and low-income cut offs.
Income data is a key input in defining low-income status, because these low-income concepts are essentially thresholds below which individuals are considered to have low income.
(A gauge measuring income, with an arrow marking the "Low income threshold", appears on the screen. The area below the arrow represents "Low income".)
Let us further explore the basic idea behind each of these low-income concepts.
First, let us take a look at the Market Basket Measure or the MBM.
Thresholds for the MBM refer to the cost of a specific basket of goods and services, representing a modest, basic standard of living.
This basket was developed by Employment and Social Development Canada.
It contains specific qualities and quantities of food, clothing, shelter, transportation and other necessities for a family of two adults and two children.
(Images of food, clothing, shelter, transportation and other necessities representing a basket of goods and services necessary for a basic standard of living appear on the screen.)
The prices and content of the basket get reviewed and updated periodically to ensure that they reflect the current state of the Canadian economy and society.
(An infographic titled “Snapshot of the Market Basket Measure” shows what a family of four, two adults and two children, living in Ottawa in 2020 would have to spend to meet their basic needs and maintain a modest standard of living over the course of a year.
Clothing - $2,155
Food - $12,098
Transportation - $4,689
Shelter - $18, 272
Other - $11,602
Total threshold - $48,816
In 2020, a family such as this one with an annual disposable income below $48,816 would be living in poverty.
Source: Statistics Canada. Table 11-10-0066-01.)
The current MBM basket is priced for 53 different geographic areas, to take into consideration the potential differences in cost of the basket in different geographical regions.
Here is an example of the MBM regions and thresholds in Ontario.
(A table listing the MBM thresholds for eight geographical areas in the province of Ontario appears beside a map of Ontario.
Rural areas - $41,840
Small population centres with less than 30,000 persons - $42,531
Medium population centres with a population between 30,000 and 99,999 persons - $42,098
Large urban population centres with a population between 100,000 and 499,999 persons - $44,340
Large urban population centres with 500,000 persons or more - $46,306
Ottawa - Gatineau (Ontario part) Census Metropolitan Area (CMA) - $48,816
Hamilton (CMA) - $44,943
Toronto (CMA) - $49,727)
In 2020, the MBM basket had the lowest price tag, at under $40,000, in rural or small to medium-sized population centres in Quebec.
(A map of Canada appears with the province of Quebec highlighted. A table showing the three least expensive MBM regions appears beside this map.
Quebec - Rural areas - $39,040
Quebec -Small population centres - $38,622
Quebec - Medium population centres - $38,685)
This very same basket cost around $50,000 in three of Canada’s most populous cities - Vancouver, Calgary and Toronto.
(The three most expensive MBM regions are highlighted on the map of Canada:
Vancouver - $50,569
Calgary - $50,223
Toronto - $49,727)
The income measure used to compare against the MBM thresholds is the disposable income for the MBM, and an equivalence scale is used to adjust the thresholds for different family sizes.
This disposable income concept is derived by deducting income taxes and non-discretionary spending, such as mandatory payroll deductions, medical expenses and child care expenses from total income.
When the disposable income of a family falls below the MBM threshold, every member in the family is considered to be in poverty.
Because information for some of the MBM non-discretionary expenses was collected through the census long-form questionnaire, the MBM is only available for the 25% sampled population.
(A gauge measuring disposable income shows the low income threshold. An arrow depicts the disposable income of families below this threshold.)
Next we will look at the low-income measure, or LIM.
The LIM has two variants, one based on after-tax income and one based on before-tax income.
The LIM threshold is defined as 50% of the median adjusted income of households for all persons living in private households.
As with the MBM, an equivalence scale is used to adjust the LIM thresholds for different household sizes.
However, unlike the MBM, the LIM threshold has no geographical variation.
We will now look at the Low-income cut-offs or LICOs.
LICOs also have after-tax income and before-tax income variants.
LICOs represent income thresholds, below which families would likely have devoted a larger share of their income than average to the necessities such as food, shelter and clothing.
LICOs have 35 cut-offs that vary by seven family sizes to account for economies of scale, and five different area of residence sizes to account for potential differences in cost of living in communities of different sizes.
(A table showing the summary of low-income lines appears on the screen. The columns represent the low income concepts of MBM, LIM and LICO and the rows show the Geography, Unit for income, Adjustment factor, Income and Line for these low income concepts.
Geography
MBM: 53 Regions
LIM: One level across Canada
LICO: Size of area of residence
Unit for Income
MBM: Economic families and persons not in economic families
LIM: Households
LICO: Economic families and persons not in economic families
Income
MBM: Disposable income for MBM for economic families and persons not in economic families
LIM: After-tax income of households, Total income of households
LICO: After-tax income of economic families and persons not in economic families, Total income of economic families and persons not in economic families
Adjustment factor
MBM: Square root of economic family size
LIM: Square root of household size
LICO: Different lines based on size of economic family up to the "7 or more members" category
Line
MBM: Price of the basket of goods and services for the reference family
LIM: Half the median of adjusted income
LICO: Income level at which families usually spend 20 percentage points more than the average family on shelter, food and clothing
Source: Statistics Canada, Centre for Income and Socioeconomic Well being Statistics.)
To summarize, four dimensions generally distinguish the low income lines:
- Geography: Geographical variations
- Unit for Income: The aggregation or unit of analysis
- Income: The income variable to test
- Adjustment factor: The equivalence scale for units of different sizes.
Note that the MBM and LICO low income concepts discussed here are not applied in the territories and on reserves because expenditure and price data required for these concepts are not collected in these areas.
Work is underway to establish a Northern MBM which would adapt the basket to represent a modest, basic standard of living in a Northern context.
(A basket of goods consisting of food, shelter, clothing, transportation and other necessities represents the cost of a basic standard of living in the North.)
Starting with the 2021 Census, the LIM low income concept covers the population living in the territories and on reserves.
It is currently the only low-income concept that is applicable to all regions in Canada.
Several low-income indicators and statistics are available for each low-income concept.
The prevalence of low income is the proportion or percentage of individuals with income below a specified low-income line.
(A bar graph titled "Percentage of the population in low income (LIM-AT), 2015 and 2020" shows Canada and its 13 provinces and territories on the X axis and percentage (%) from 0 to 25 in increments of 5 on the Y axis. The light blue bars indicate the percentages from 2015 and the dark blue bars indicate the percentages from 2020.)
For people with low income, the low-income gap is the additional income required to attain the applicable threshold.
For example, if the low-income line is $20,000 and the income of the person is $15,000, the low-income gap would be calculated by subtracting $15,000 from $20,000 which would come up to $5,000.
(The following information appears on the screen:
Low-income line = $20,000
Income of the person = $15,000
Low-income gap = $20,000 − $15,000 = $5,000.)
The low-income ratio expresses the low income gap as a proportion of the applicable low-income line.
For example, if we use the previous low-income gap of $5,000 and we divide it by the low-income line of $20,000 we will end up with a ratio of 25%.
(The following information appears on the screen: Low-income ratio = $5,000 ÷ $20,000 = 25%.)
(The words "Thank you for watching the 'Low-income concepts and statistics' video" appear on screen.)
This concludes the "Low-income concepts and statistics" video.
(The census logo appears with a link, which is also available to view here: Census of Population. The International Standard Book Number (ISBN) 978-0-660-43277-9 appears underneath the link.)
For more detailed information regarding concepts, variables, methodology, historical comparability and other elements, please refer to Statistics Canada's census pages.
(The "Canada" wordmark appears.)
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