Low Income in Canada: 2000-2006 Using the Market Basket Measure - October 2008

3. The Market Basket Measure

3.1 Statistics on Low Income Based on the Market Basket Measure (MBM)

The MBM statistics (Tables 7 to10 in this report) include national and provincial statistics for all persons by main age groups and sex, for all economic families, and for several types of economic families of two or more persons and for unattached individuals (adults who do not live with relatives). These statistics are similar to those provided by Statistics Canada using the LICOs-IAT in its publication, Incomes in Canada.

In addition, for those persons living in families with disposable incomes below their MBM threshold, the depth of low income is reported. The depth measures the difference between their income and the low-income threshold expressed as a percentage of that threshold. Tables 7 to 10 also compare results using the MBM for 2000 to 2006 to those using the LICOs-IAT for 2006.

Both the LICOs-IAT and the MBM are disposable income measures. However, as discussed below, the definition of disposable income for the MBM is much more stringent than for the LICOs-IAT.

3.2 MBM Disposable Income and the MBM "Basket"

As defined by the MBM, a person in low income is someone whose disposable family income falls below the cost of the goods and services in the Market Basket in their community or community size.

• MBM disposable family income is the sum remaining after deducting the following from total family income: total income taxes paid; the personal portion of payroll taxes; other mandatory payroll deductions such as contributions to employer-sponsored pension plans, supplementary health plans, and union dues; child support and alimony payments made to another family; out-of-pocket spending on child care; and non-insured but medically prescribed health-related expenses such as dental and vision care, prescription drugs, and aids for persons with disabilities. For the LICOs-IAT and the LIM-IAT, only income taxes paid are deducted from total family income before comparison to the associated low-income thresholds.
• The basket on which the MBM is based includes specified quantities and qualities of goods and services related to food, clothing and footwear, shelter, transportation, and other goods and services such as personal and household needs, furniture, telephone service, and modest levels of reading, recreation, and entertainment (for example, newspaper and magazine subscriptions, fees to participate in recreational activities or sports, video rentals, tickets to local sports events). The food component is based on the 1998 National Nutritious Food Basket. The shelter component represents median rental shelter costs in the geographical area of interest. The clothing and footwear component is a revised version of the clothing basket developed for the Acceptable Level of Living of the Winnipeg Social Planning Council and Winnipeg Harvest. The transportation component is based on the cost of adult transit passes and taxi fares in urban centres served by public transit and on the cost of financing and running a used car in other areas. (See Appendix A for more detailed descriptions of the basket components.)

3.3 The MBM Thresholds

The MBM thresholds are the sum of the costs of the goods and services in the basket in various communities and community sizes in the 10 provinces for the reference family of two adults and two children. The MBM is thus more sensitive than other low-income measures to the significant geographical variations (both among and within provinces) in the cost (especially for shelter and transportation) of many typical items of expenditure.

The MBM thresholds also take into account that families of different sizes and different numbers of adults and children in the same community will require different amounts of disposable income to purchase the standard of consumption represented by the goods and services in the MBM basket. Statistics Canada's Low Income Measure equivalence scale is used to calculate thresholds for families of a different size and composition than the reference family. For example, using this scale it is estimated that a single adult living alone needs one-half of the disposable income of the reference family of two adults and two children to purchase the standard of consumption represented by the goods and services in the MBM basket (see footnote 7).

Appendix G provides estimates of the amount of disposable income the MBM reference family would have required in each year from 2000 to 2006 to purchase the components of the MBM basket in 19 specific urban centres and in another 29 community sizes in the 10 provinces. In 2006, this amount ranged from $23,781 in urban communities with populations between 30,000 and 99,999 in Quebec to $31,399 in the Toronto Census Metropolitan Area.

The LICOs-IAT thresholds vary by both family and community size to recognize that shelter tends to cost more as the size of the community increases and that larger families require more resources than smaller ones. However, the LICOs IAT thresholds are not adjusted for differences in the cost of shelter within community sizes (which Appendix G indicates are often significant ⁹) and make no allowance for geographical variations in the cost of transportation and other categories of expenditure.