A Measure of Progress Against Poverty

A Measure of Progress Against Poverty

Introducing his famous motion in Parliament committing the government of Canada to abolish child POVERTY by the year 2000, NDP leader Ed BROADBENT conjured a Dickensian vision of Canada. "Being a poor kid means box lunches from food banks and soup from soup kitchens. Mr. Speaker, to be a poor kid means trying to read or write or think on an empty stomach ... One quarter of our children are wasting away." The motion passed, unanimously.

That was on Nov. 24, 1989. Twenty years later, writing in the Globe and Mail, Broadbent found little improvement. "Canada's level of poverty is virtually unchanged ... After two decades, the child-poverty rate has dropped a mere two percentage points, to 9.5 per cent. Why do more than 600,000 Canadian kids wake up hungry and go to school trying to read, write and think on an empty stomach?"

The answer is: they don't. More than 600,000 Canadian kids are not waking up hungry today, any more than one quarter of Canadian children were "wasting away" 20 years ago. What Broadbent means by poverty is clear from his rhetoric: a state of absolute privation - hunger, an empty stomach, wasting away. But the numbers he cites are all based on relative measures: that is, how many children were less well-off than other children.

That eye-popping one-quarter figure from 1989 was the number of children living in families with less than one-half the median income before tax. The somewhat more subdued 9.5 per cent figure for 2007, down from 11.9 per cent in 1989, was based on yet another measure, STATISTICS CANADA's Low Income Cut-off (LICO). LICO doesn't measure poverty, and it doesn't pretend to: indeed, the agency takes every opportunity to state explicitly that LICO is not a poverty line, and shouldn't be used as such.

The problem is it's hard to say what LICO does measure. It's clear that "one-half the median" is a relative measure, and it's clear what it means. But LICO? Here's how StatsCan calculates it. First, they figure out how much a family on average income spends after tax on certain essentials of life: food, shelter, clothing. Then they take that proportion - for 2007 it was 43 per cent - and add 20 points to it. (Why 20 points? Why not?) Finally, they take the level of income at which a family would be spending 63 per cent of its income on essentials,if it spent as much as the average family, and deem that family to be living on low income. How much is that? For 2007, it ranges from $11,745, for an individual living in the country, all the way up to $47,084 for a family of seven in a large city. That's hardly princely. But it's not starvation, either.

In other words, LICO is a relative measure, disguised as an absolute measure. Or at any rate, it hopelessly muddles the two. Which is how people like Broadbent, or the activist group Campaign 2000, can claim that Canada has made virtually no progress against child poverty in the last 20 years. Indeed, how could it have? A relative measure means that even if everyone's income rises, the poverty rate does not change - not unless the distribution of income changes. It's a measure of inequality, not poverty. StatsCan now counts as poor anyone who spends more than 63 per cent of their income on necessities. But that would have described a middle-class family in the 1950s.

Do not misunderstand: inequality matters, too. There are consequences when societies develop an underclass, demoralized and falling out of contact with the mainstream. The inequality that matters here is not between rich and poor - how much the top quintile earns versus how much the bottom quintile does - but between the poor and the middle class. A poor family is not demoralized because it cannot afford a yacht, but because it cannot aspire even to the sorts of everyday things that average families take for granted.

Further, the line between absolute and relative concepts is not so clearly drawn as all that. Our notion of what is absolute privation will change over time, in line with prevailing notions of decency. Similarly, relative definitions have an element of the absolute to them: will we still define one-half the median as "low income" when the median is a million dollars?

So there would be value in collecting data using both criteria: relative and absolute. We've got a useful relative measure in one-half the median, widely used in other countries. And we've got the basis for a good absolute yardstick in the "basic needs" index pioneered by professor Christopher Sarlo for the Fraser Institute, and in the Market Basket Measure provincial welfare departments use to set social assistance rates.

Why do we need an absolute measure of poverty? Not, as critics charge, so we can define poverty out of existence, but so we can tell whether we're making any progress against it. What's important here isn't the level of any such measure - perhaps Sarlo's assessment is too stingy - but whether it allows us to make meaningful comparisons: over time, and between countries. As it happens, the news here is rather better. Sarlo calculates the level of child poverty has in fact fallen over the last two decades to roughly five per cent - as you would expect, given the efforts of governments to address it through programs like the Canada Child Tax Benefit and associated supplements. Moreover, we score quite high on the international standings, as compiled by the Luxembourg Income Study - not far behind the Swedes and the Norwegians, though we perform rather less well on relative measures.

Let's publish both sets of data, then, absolute and relative, and learn what we can from both. But it's long past time we retired LICO.

Maclean's December 14, 2009