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When Working is not enough to Escape Poverty: An Analysis of Canada's Working Poor - August 2006

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Executive Summary

There is a tacit agreement among Canadians that individuals who work hard should be able to provide a decent living for themselves and their families. However, for many Canadians, having a worker in the family is not a ticket out of poverty. This situation is not new in Canada. In the 1960s, research showed that a significant proportion of low-income families included at least one worker. While the United States has been monitoring the working poor for almost 15 years and European countries started to do so lately, relatively little is known about this group in Canada. There is no generally accepted definition of working poverty and the few researchers that have looked into this issue have provided descriptive profiles of working poor Canadians using various definitions.

This study first discusses the pros and cons of the various definitions that have been used to investigate the phenomenon of working poverty in Canada, and argues for the use of a new definition. In this study, working poor individuals are defined as individuals aged 18 to 64 who have worked for pay a minimum of 910 hours in the reference year, who are not full-time students, and have a low family income according to the Market Basket Measure of low income. The study then uses data from Statistics Canada's Survey of Labour and Income Dynamics to identify working poor Canadians and to shed light on many questions that relate to this population. In addition to providing a detailed descriptive profile of working poor Canadians, the study identifies the main determinants of low income for workers, and looks at the dynamics of work and low income for the working poor.

Many of the findings that came out of this research can be summarized in the form of “myths and facts” because they go counter to several popular beliefs in Canada.

Myth: The poor do not work.
Facts:
  • In 2001, there were 653,300 working poor persons in Canada. Including dependants, 1.5 million Canadians were affected by working poverty, of which about one third were children under 18. These 1.5 million individuals accounted for about 40% of all low income Canadians in 2001.
  • Over a six-year period (1996-2001), about one in ten working-age adults experienced at least one year of working poverty.
Myth: The working poor do not work hard.
Fact:
  • In 2001, working poor Canadians worked, on average, as many hours as other workers (around 2,000 hours). Nevertheless, fewer of them worked full time, year round and the number of hours that they worked was slightly more volatile over the longer term.
Myth: The working poor are low paid.
Facts:
  • In 2001, salaried working poor Canadians earned on average $12 per hour. In fact, fewer than 50% of them were low-paid and less than 7% earned the minimum wage.
  • Furthermore, in 2001, 88% of low-paid salaried workers (i.e. those who earned less than 10$/h) were not poor.
Myth: Self-employed workers are wealthy professionals.
Fact:
  • In 2001, more than 40% of working poor Canadians were self-employed, and the incidence of poverty was four times higher among the self-employed than among salaried workers.
Myth: Bad jobs are the main cause of poverty among workers.
Facts:
  • Family characteristics are the most important determinants of poverty for workers. Workers who are the sole breadwinner in their families are much more vulnerable to low income.
  • Being low-paid is a significant risk factor but, contrary to popular belief, it is not the most important determinant.
  • Self-employed workers are at greater risk of low income than low-paid salaried workers.
Myth: Working poverty is a short transition between welfare and ‘decent’ work.
Facts:
  • Although working poor Canadians are more likely than other workers to be social assistance (SA) recipients, most of them never relied on SA.
  • The working poor are more likely to escape poverty in the longer run than the "welfare" poor. However, between 1996 and 2001, the working poor spent on average three years in low income and 40% of them experienced persistent poverty.
  • Furthermore, many of those who exited poverty over the same period did so mainly because of a change in their family circumstances, not because of their progression in the labour market.
  • In fact, five years later, close to 50% of those who were working poor in 1996 still had low earnings and would not have been able to provide for themselves had they lived alone.


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Date Modified: 2006-09-20

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