Poverty in Canada

Income Distribution To examine income distribution, economists divide Canadian income earners into groups called “quintiles” To examine income distribution, economists divide Canadian income earners into groups called “quintiles” A quintile represents 1/5 or 20% of the total number of earners A quintile represents 1/5 or 20% of the total number of earners First quintile = lowest earners etc. First quintile = lowest earners etc.

Measuring Poverty What does it mean to be poor? What does it mean to be poor? What characteristics does poverty involve? What characteristics does poverty involve? Economists disagree as to how they should determine who is poor, why people become poor and what needs to be done to reduce poverty Economists disagree as to how they should determine who is poor, why people become poor and what needs to be done to reduce poverty

Absolute Poverty A state of utter destitution A state of utter destitution Due to Canada’s social welfare system, the incidence of this extreme form of poverty is rare in Canada Due to Canada’s social welfare system, the incidence of this extreme form of poverty is rare in Canada

Relative Poverty Not necessarily a Canadian that lacks food, safe water, shelter, or clothing Not necessarily a Canadian that lacks food, safe water, shelter, or clothing A Canadian that feels poor and that other Canadians see as poor compared to (relative to) others A Canadian that feels poor and that other Canadians see as poor compared to (relative to) others

Low-Income Cut-Off Developed by Stats Canada in 1968 Developed by Stats Canada in 1968 Used to identify income levels below which a household is statistically classified as being in a relatively limited income situation Used to identify income levels below which a household is statistically classified as being in a relatively limited income situation

Low-Income Cut-Off Average Canadian household spends 35% of its before-tax income on food, clothing, and shelter Average Canadian household spends 35% of its before-tax income on food, clothing, and shelter A household that is “relatively worse off” spends more than 20% above the national average on the three necessities A household that is “relatively worse off” spends more than 20% above the national average on the three necessities

Before/After Tax Income LICO’s are calculated using both before- tax income and after-tax income LICO’s are calculated using both before- tax income and after-tax income Before-tax income is easier to calculate, but after-tax income is used more…why? Before-tax income is easier to calculate, but after-tax income is used more…why?

Before/After Tax Income …because it provides a truer picture. All necessities are purchased with after-tax dollars …because it provides a truer picture. All necessities are purchased with after-tax dollars Money that people really do not have would have been considered. Money that people really do not have would have been considered.

Poverty Line LICO’s are often used by analysts as indications of poverty LICO’s are often used by analysts as indications of poverty Media often refers to LICO’s as “poverty lines” Media often refers to LICO’s as “poverty lines” They have no officially recognized status, and Stats Canada does not promote the use of the term LICO in this way. They have no officially recognized status, and Stats Canada does not promote the use of the term LICO in this way.

The Poor The working poor – people who work, but whose wages do not keep them out of poverty (absence of unions, market power of employers) The working poor – people who work, but whose wages do not keep them out of poverty (absence of unions, market power of employers) The welfare poor – people who do not work and are experiencing poverty (elderly, poor health, single parents, job loss) The welfare poor – people who do not work and are experiencing poverty (elderly, poor health, single parents, job loss)

Welfare State Early in the 20 th century, Canada established a “welfare state” Early in the 20 th century, Canada established a “welfare state” Philosophy – that governments should use social programs and transfers financed out of taxation to help people who are poor, suffer illness, or are otherwise disadvantaged. Philosophy – that governments should use social programs and transfers financed out of taxation to help people who are poor, suffer illness, or are otherwise disadvantaged.

Progressive Tax System First step of the welfare state was to allow low-income earners to keep most of the money they make First step of the welfare state was to allow low-income earners to keep most of the money they make Progressive Tax System – taxes higher- income at a higher percentage. The more you make the more tax you pay. Progressive Tax System – taxes higher- income at a higher percentage. The more you make the more tax you pay.

Attacking Poverty Programs to combat poverty can be divided into two broad but overlapping categories: Programs to combat poverty can be divided into two broad but overlapping categories: Structural Strategies Structural Strategies Relief Strategies Relief Strategies

Attacking Poverty Structural Strategies – attempt to eliminate the causes of poverty (long term) Structural Strategies – attempt to eliminate the causes of poverty (long term) Relief Strategies – immediate support (food banks, government transfers). Often criticized as “band-aid solutions” Relief Strategies – immediate support (food banks, government transfers). Often criticized as “band-aid solutions”