Poverty statistics misleading

It goes on to show how Manitoba has held that highest ranking for eight of the last 19 years and second highest ranking for an additional five of those years. Unfortunately, these are very misleading statistics which are extremely unfair to Manitoba because they are based on a faulty yardstick -- the pre-tax low income cutoffs (LICOs) developed by Statistics Canada more 40 years ago.

The pre-tax LICOs are a set of low-income lines which reflect that level of pre-tax family income at which, on average, 55 per cent of the income is spent on the basic necessities of food, clothing and shelter.

There are a number of problems with this measure. First, it doesn't reflect the actual level of family income available for consumption because income taxes and compulsory payroll deductions haven't been deducted from the amount.

Second, it is based on an arbitrary mark-up of 20 percentage points of the amount the average family spends on basic necessities (35 per cent), rather than on the pricing of a basket of goods and services deemed to be adequate to meet family needs.

Third, and most importantly for Manitoba, the thresholds are the same for all cities in Canada of the same population size group, regardless of the actual cost of living in each city.

For example, for cities of 500,000 and over, the pre-tax LICO threshold for 2007 was $40,259. By comparison, the actual cost of living for a family of four in Winnipeg for basic necessities was only $27,256.

Similarly, for cities of between 30,000 and 100,000, the pre-tax LICO threshold was $33,946 in 2007, compared to the actual cost of basic necessities in Brandon of $26,156.

It is these artificially high poverty lines for Manitoba's two largest population centres that drive up the poverty rates for Manitoba and lead to a serious misrepresentation of the actual rates of poverty in Manitoba, relative to the other provinces.

Fortunately, Statistics Canada has been using an alternative poverty line since 2000 called the market basket measure (MBM) of poverty. It is based on the actual cost of basic necessities priced annually in each province and areas within each province.

Health Canada's nutritious food basket is used as the food benchmark and shelter is priced at median market rents. The MBM budget for clothing and footwear for Manitoba is 67 per cent of the median amount spent by Canadian families, and urban transportation includes monthly bus fare and access to taxis once per month.

Thus, the levels set for the items are above subsistence and below average consumption levels for most items.

In Manitoba, the MBM is priced in Winnipeg, Brandon, other urban centres and rural areas. Furthermore, it is based on income after-tax and compulsory payroll deductions and allows for deductions for out-of-pocket medical expenses and child care before comparing family income to the poverty lines to determine the family's poverty status.

When the poverty rates are compared across the 10 provinces in Canada, using the MBM measure and the pre-tax LICO measure, the difference is very striking.

The pre-tax LICO puts Manitoba's child poverty rate at 18.8 per cent, the highest in the country. The MBM shows Manitoba's child poverty rate to be 10.1 per cent, third lowest in the country behind Quebec and Alberta.

The main reason for this dramatic shift in inter-provincial ranking is the use of poverty lines that are priced locally instead of being imposed across all cities of a particular size.

It is important to emphasize that poverty is not being defined away by the use of the MBM. The levels of consumption set for each item in the basket allow for an adequate but less than average level of existence. In addition, for some groups like single parents, the MBM poverty rate is higher than the post-tax LICO poverty rate -- 21.9 per cent versus 18.7 per cent in Manitoba in 2007. This is because more items are deducted from family income before being compared to the poverty line.

For social advocacy groups in Manitoba, embracing the MBM as the measure of poverty has two advantages. First, it will give their reports credibility with the policy makers who are squarely behind the use of the MBM as the yardstick for measuring progress in reducing poverty. Second, it enables them to assess the adequacy of the welfare budgets set out in legislation.

Not since the 1970s has the province priced the cost of the basket of goods and services they guarantee in the Income Assistance Act. The value placed on the cost of the basic items like shelter, food, clothing and footwear, household supplies and personal needs is completely arbitrary and the amount has not been indexed since 1993 and are sorely in need of adjustment.

Harvey Stevens is a retired civil servant who worked for 18 years as a senior policy analyst with Family Services and Housing. His area of expertise is poverty measurement and income assistance policy. He tried championing the use of the MBM for setting welfare rates while in government but was unsuccessful.

Republished from the Winnipeg Free Press print edition December 5, 2009 A20