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Financial Security - Low Income Incidence

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Canadians who experience low income may not have the resources to afford food, shelter, and other necessities or to ensure their financial security.

(See also Low Income Persistence.)

Summary

• National Picture — In 2010, 9.0% of Canadians had low income. The rate of low income has declined since 1996 when more than 15% of Canadians were experiencing low income.
• Gender — Historically, the rate of low income has always been higher among women than men. In 2010, the rate for women (9.3%) was slightly higher than that for men (8.7%).
• Age — The greatest decrease in low-income rates since 1980 has been for seniors. Low income affected 5.3% of this group in 2010, about half of the Canadian average.
• Low Income among Various Groups — In 2010, lone parents, unattached individuals, recent immigrants, people with disabilities, and Aboriginal people were more at risk of experiencing low income than other Canadians.
• Regions — In 2010, the proportion of people with low income varied from 3.9% in Prince Edward Island to 11.5% in British Columbia.
• International Picture — In the period from 2006-2008, the Canadian rate of low income was slightly higher than the average for OECD member countries.
• Low Income Incidence by Market Basket Measure — An alternative measure for low income, the Market Basket Measure (MBM), uses a more stringent definition of disposable income and therefore shows a higher rate of low income (9.9%) in 2010, especially for children (10.0%). 
• Working Poor — Working is not always enough to escape low income. In 2010, 3.2% of all individuals living in households where the main income recipient had at least 910 hours of paid work lived in low income.

National Picture

In 2010, 3.0 million Canadians (or 9.0% of Canada's population) lived in conditions of low income, an all-time low rate. In 1996, the low-income rate reached its highest level since 1976 at 15.2%. Between 1996 and 2010, the number of Canadians living in low income dropped by 32% (from 4,397,000 to 3,008,000 people).

During the latter half of the 1990s, the low-income gap ratio, (the average percentage difference between the incomes of low income persons and their low income thresholds), continued to increase while low-income rates were dropping[1]. After having decreased from about 37% of the thresholds in 1977 to about 30% in 1989, the average low-income gap ratio began to increase again, to reach 34.1% in 1998 and 34.6% in 2005. In 2010, the average gap ratio was 33.3%.

Gender

Women more often face low-income conditions than men. Over time, the difference in low-income rates between women and men has decreased from 3.7 percentage points in 1976 to 0.6 percentage points in 2010 when the low-income rates stood at 8.7% for men and 9.3% for women.

Age

The low-income rates for children and working-age adults have closely followed the overall rate. Between 1976 and 2000, the rate for children was slightly higher than for working-age adults, by 2 to 4 percentage points. Since 2006, children have experienced lower rates of low income than working-age adults.

Trends for low income among seniors do not resemble the overall trend and have been decreasing over time. The low-income rate among seniors fell below that of the overall population in 1990 and continued to decrease, reaching 5.3% in 2010 (see Retirement Income).

Low Income among Various Groups

Five specific groups of working-aged Canadian adults experienced higher rates of low-income in 2010 than other Canadians. Over one in every three unattached individuals, aged 45 to 64 years old, experienced low income in 2010. Among people with disabilities, over one in every five experienced low income. Among off-reserve Aboriginal people and recent immigrants (those who arrived in Canada after 2000) one in every six individuals experienced low income. Finally, low income affected about one in five lone parents (of whom four out of five were lone mothers).

Regions

In 2010, the proportion of Canadians with low income varied across the country. The low-income rate was the highest in British Columbia (11.5%) and Québec (10.0%). It was the lowest in Prince Edward Island (3.9%).

Canadians experiencing low income were more likely to live in one of the largest urban areas than in a medium or small city or rural community. In 2010, 10.9% of Canadians living in one of the large urban areas experienced low income compared to 5.9% in other areas.

International Picture

In the period from 2006-2008, the low-income rate in OECD countries ranged from 5.5% in the Czech Republic to as much as 21.0% in Mexico.  For international comparisons, a threshold similar to the after-tax Low Income Measure (LIM) is used.

Using this measure, 12.0% of Canadians experienced low-income conditions, a rate slightly higher than that of the average for all OECD member countries (11.1%). Among the G7 countries, Canada had the third highest rate of low income while the United States had the highest rate at 17.3%.

Low Income Incidence by Market Basket Measure

Analysts measure low income using different methodologies. A relatively new measure is based on the absolute cost of a specified basket of goods and services that a family would consume. This method is called the Market Basket Measure (MBM). The MBM produces estimates of how many Canadians live in families that lack the disposable income to purchase the goods and services in the basket.

Using the MBM, the low-income rate in Canada stood at 9.9% in 2010. This rate is slightly higher than the rate based on the LICOs measure (9.0%). The difference between the measures is the greatest for children. Based on the MBM, low-income conditions affected about 10.0% of children under the age of 18, some two percentage points more than under the LICOs measure (8.2%). The higher rates under the MBM result from a definition of 'disposable income', that is more stringent than 'after tax income' (i.e., in addition to income taxes, the MBM deducts items such as payroll taxes, out-of-pocket costs for child care and prescription drugs before arriving at disposable income).[2],[3]

Working Poor

Based on the Market Basket Measure (MBM), low income conditions affected some 785,000 individuals in households where the main income recipient was aged 18-64 and worked for pay at least 910 hours in 2010. This represented 4.3% of Canadians of all ages living in such households. For these Canadians, family income from all sources, was lower than the cost of family needs for basic necessities such as housing, food, and clothing.

Overall, 25% of Canadians under age 65 with low income as measured by the MBM in 2010 depended on a working-poor individual as the main income-earner of the economic family.

Low income persistence for persons in working households was lower than for other non elderly Canadians. Among individuals in families whose main income recipient was aged 18-59 in 2005 and worked 910 or more hours in that year, 1.9% experienced low income at least four years between 2005 and 2010 compared to 4.6% for all persons in households whose main income recipient was aged 18-59 in 2005.[4]

Footnotes

1. Garnett Picot and John Myles, 'Income Inequality and Low Income in Canada: An International Perspective', Analytical Studies Branch Research Paper Series. Ottawa. Statistics Canada, 2005 (Cat. No. 11F0019MIE, No. 240).

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2. Statistics Canada. Persons in low income families, annual (CANSIM Table 202-0802). Ottawa: Statistics Canada, 2012.

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3. A similar measure based on basic needs has been developed by Chris Sarlo. Sarlo's methodology produces trends in low income that are similar to those produced using MBM, but provides lower estimates of the incidence of low income. For further information, see Chris Sarlo, 2006, Poverty in Canada: 2006 Update, Fraser Institute.

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4. For discussion of the definition of the working poor see Fleury, Dominique, and Myriam Fortin. When Working is not enough to Escape Poverty: An Analysis of Canada's Working Poor. Ottawa: Human Resources and Social Development Canada, 2006 (SP-630-06-06F).

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Date Modified:

2013-05-22