Release date: October 17, 2022
Catalogue number: 45200003
ISSN: 2816-2250
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It used to be that Statistics Canada didn't measure poverty. Not exactly. Poverty is complex, and there wasn't a single definition that everyone agreed on. So while StatCan did measure low income and other income inequality indicators, it didn't measure poverty per se. That is, until 2018, when the government chose to use the Market Basket Measure, or MBM, as Canada's Official Poverty Line. That means that the government now uses the MBM to track its poverty reduction targets.
But something strange happened during the pandemic: in 2020 the poverty rate fell. And it fell quite a bit. In fact, the poverty rate dropped in one year almost as much as it had in the four preceding years.
But why? What happened? Will the poverty rate continue to fall? And what happens if it hits zero? How would health outcomes change? Education outcomes? People's general happiness and well-being?
Has there ever been a time and place in Canada where the poverty rate was zero? The closest may be the Mincome Experiment of the 1970s in Manitoba. Many Canadians have never heard of this guaranteed income experiment, but it offers a glimpse at what eliminating poverty might look like.
To learn more we spoke with Burton Gustajtis, an economist from Statistics Canada, Evelyn Forget, a Professor of Economics and Community Health Sciences at the University of Manitoba and Kevin Milligan, a Professor of Economics in the Vancouver School of Economics at the University of British Columbia.
Host
Tegan Bridge
Guests
Burton Gustajtis, Evelyn Forget, and Kevin Milligan
Listen to audio
Eh Sayers Episode 10 - Why Haven't We Ended Poverty Yet?- Transcript
Transcript
(Theme)
Tegan: Welcome to Eh Sayers, a podcast from Statistics Canada, where we meet the people behind the data and explore the stories behind the numbers. I'm your host, Tegan Bridge.
It used to be that Statistics Canada didn't measure poverty. Not exactly. Poverty is complex, and there wasn't a single definition that everyone agreed on. So while StatCan did measure low income and other income inequality indicators, it didn't measure poverty per se. That is, until 2018, when the government chose to use the Market Basket Measure, or MBM, as Canada's Official Poverty Line. That means that the government now uses the MBM to track its poverty reduction targets as well as progress made towards Canada's sustainable development goal for the elimination of poverty.
Something weird happened during the pandemic: in 2020 the poverty rate fell. And it fell quite a bit.
The poverty rate dropped to 6.4%, down from 10.3% in 2019, that's more than a third. In that single year, the rate dropped almost as much as it had in the four preceding years.
But why? What happened? Will the poverty rate continue to fall? And what happens if it hits zero? Could we be on the brink of solving poverty in Canada?
We're going to talk about what happened, but first, it would be helpful to understand what the Market Basket Measure is and how it works.
Burton: My name is Burton Gustajtis. I'm an economist at Statistics Canada.
Burton: In general, the MBM is an absolute measure of low income. It's based on the cost of a specific basket of goods and services mentor represent a modest basic standard of living for a family of four
Tegan: The MBM is like a shopping cart filled with all of the things that you need: food, clothing, footwear, shelter, transportation, and other necessities.
Burton: Each of these components, where appropriate, follow standards created by experts in their given domains. For example, the food component is based on a commonly consumed food item that represents a nutritional diet. Using the 2019 National nutritious food basket developed by Health Canada, and it's consistent with the latest Canada Food Guide.
Tegan: Experts at StatCan then look at that full shopping cart and estimate how much it costs, and that cost becomes the threshold. If you have enough disposable income to purchase that shopping cart of goods, you're living above the poverty line. If you can't, you're below it.
What about people who don't necessarily fit into a family of four structure?
Burton: For different family sizes, we use an equivalization methodology, which is an internationally recognized method of adjusting low income thresholds and income estimates for different family sizes.
Tegan: Is that like an equation?
Burton: Yes, it's called the square root equivalization methodology. So basically, the idea is that the cost for a family increase but at a decreasing rate. So the more people you get in your family, the more expensive your basket will be. But it's not at a, at a linear rate. It's at a decreasing rate.
Tegan: Gotcha. So every additional person that's not like you double the number every single time.
Burton: Yeah, exactly. That's right. Yeah. It increases, but not at a constant but constant rate like that, yeah.
Tegan: So, in addition to having some allowance for different family sizes, there's also a regional component.
Burton: This basket is costed in 53 regions across the provinces.
Tegan: Things can cost different amounts depending on where you live. The same, say, loaf of bread might have a different price if I were to buy it in Halifax, or rural Alberta, or Montréal. So the MBM takes into account the area where people live.
Does the basket change with inflation?
Burton: It does, yeah. So it's an absolute measure of poverty like I mentioned. So the contents of what that means basically is that the contents of the basket are held constant in a base year. Our current base year is 2018. And then it's adjusted annually for inflationary changes, price changes only. The contents of the basket is held constant, but the price is adjusted using the connect consumer prices index.
Tegan: The MBM thresholds are published annually. Therefore, changes in inflation you see from one month to the next are reflected in the annual updating of the MBM items' prices. We did an entire episode this past January, January 2022, about inflation and the CPI, called "Why Should You Care About Inflation?" Check that out to learn more!
Does the Market Basket measure fully capture poverty in Canada?
Burton: That's a good question. Poverty is a complicated concept. It's not just low income defined like the Market Basket Measure. It uhh, it's also, multidimensional. It's, you know, inequalities in the income distribution, being below the poverty line, entry and exit in and out of poverty. It's access to education, a well-paying jobs, social integration. You know, it's not just low income.
Tegan: The Market Basket Measure is a great tool: it's easy to understand, it takes into account differences in geography and allows for some differences in family size, and it's continually being updated, or rebased, which is the technical term, by StatCan and their partners at Employment and Social Development Canada, to ensure that it reflects the up-to-date cost of a basket of goods and services representing a modest, basic standard of living in Canada and to improve the tool and address any potential shortcomings. The Market Basket Measure is useful, but it's not the only way to track poverty. StatCan has a poverty dashboard on the website called the Dimensions of Poverty Hub with 12 additional indicators that you can check out to get a fuller picture.
Now, as I said at the top of the show, the poverty rate had been trending down before the pandemic. Between 2015 and 2019, it dropped from 14.5% to 10.3%, a difference of 4.2 percentage points over four years. What's noteworthy about 2020 is that the poverty rate dropped to 6.4%. Again, that's down from 10.3% in 2019, a difference of 3.9 percentage points, or more than a third. In that single year, the rate dropped almost as much as it had in the four preceding years.
In response to the COVID-19 pandemic, and the shutdowns and restrictions put in place to manage it, the Government of Canada introduced new income supports for individuals as well as businesses, like the Canada Emergency Response Benefit and the Canada Emergency Student Benefit.
Burton: The impact of the pandemic was not felt equally and many families did suffer. What many families do not suffer losses to employment or earnings, rather, earnings employment losses tended to be concentrated among that families and individuals on the lower, but that had lowered market income. So in response to these losses in employment and earnings a number of Canadians turned to the existing and newly announced income support measures that were put in place. These programs provided approximately $82 billion dollars in income and supported about 8.1 1,000,000 Canadian families and unattached individuals in 2020. And overall result of this was that the poverty rate fell by more than 1/3 in 2020. The decreases were universal. They were across all provinces, family types, demographic groups, although I should caution the gaps between the at risk populations and those not typically at risk of poverty remained so that although poverty decrease for everyone, the gaps between the address populations remain the same.
Tegan: It's important to note that these shifts in the poverty rate were caused by temporary government supports, so we can't expect these changes to be permanent.
We learned about the poverty rate's impressive drop, and it really got everybody on the podcast team thinking. What would Canada look like if the poverty rate hit zero? How would health outcomes change? Education outcomes? People's general happiness and well-being?
This made us really curious. Has there ever been a time and place in Canada where the poverty rate was zero? The closest may be the Mincome Experiment. We wanted to learn more, so we knew we needed to find an expert.
Evelyn: My name is Evelyn Forget. I'm a professor in the Department of Community Health Sciences at the University of Manitoba.
Tegan: Could you tell us what was the Mincome experiment?
Evelyn: the Mincome experiment happened in the mid-1970s in Canada at a time when the federal government and the various provincial governments were rethinking a lot of the social programs that were delivered in this country. And what it was guaranteed annual income experiment. That's what it was called at the time. What it meant was that everybody who participated in the experiment would receive a promise that they would receive a certain agreed upon amount of money if they had no other source of income. If they did have another source of income. If, for example, they worked and earned a little bit of money, the benefit would be reduced, but it would be reduced less than proportionately. So the guaranteed income acted both as a supplement to low wage workers and as a replacement for provincial income assistance at the time. There were two sites in Manitoba that were chosen to participate in the experiment. Winnipeg and a small town known as Dauphin Manitoba.
Tegan: Families received money for three years, from 1975 to 1978, and one of the goals was to evaluate the impact of a guaranteed annual income on the work behaviour of recipients, to test the theory that if you give people money they won't have the same incentive to work, and they'll cut their hours at work or even quit their jobs.
And what were the results of this experiment?
Evelyn: During the 1980s, there were a couple of economists at the University of Manitoba who looked at the labor market results. Derek Hum and Wayne Simpson. And they discovered what's been discovered in many other basic income and guaranteed income experiments. And that is that there really isn't much of a labor market response people who were working before the experiments started to pretty much continue to work. People who weren't working ahead of time for the most part didn't start working and didn't stop. So there. There wasn't much of a change in participation in the labor market that was caused by the basic income experiment or the guaranteed annual income experiment.
Tegan: But there were two notable exceptions to this.
Evelyn: There were, in effect, two groups of people who did work less during the experiment. One of those groups of people. Were new mothers. Umm. So if you think again back to the 1970s. Maternity leaves. Were not what they are now. There was no one year parental leave and for the most part, women were guaranteed four weeks off when they gave birth. And there were a lot of new mothers who thought that that was a rather miserly response to childbirth. And I think predictably, many of those families use the Mincome to buy themselves longer parental leaves. But the other group of people who did work less were-- and here the language turns out to be really, really important. And the language that was used in the report was young, unattached males, that is, young men who hadn't yet formed families. They weren't married. They weren't. They weren't living in, in, in committed relationships. They didn't have children, and they work less, and that seemed to feed a lot of the prejudices people had a lot of worries that people had about guaranteed income. And what I was able to do was to go back and to find some of the educational records during the period. And one of the things I showed was that there was. And nice little bubble in high school completion rates exactly during the Mincome experiment. And what that meant was that people who probably wouldn't have finished high school were able to finish high school because their families received Mincome support.
Tegan: People thought that these young men were doing as everyone feared, taking the money and running, but Evelyn's findings suggests that what might have happened instead was that young men who might otherwise have dropped out of high school to help support their families were instead given the opportunity to complete their education and graduate.
Did this experiment have any kind of impact on what kinds of work people did?
Evelyn: Well, I don't have data looking specifically at the kinds of jobs that people were doing. What I have are a lot of anecdotal reports from people who participated in the experiment. And so I was able, for example, to talk to people who use the opportunity to keep small businesses alive or to start small businesses. And I thought that was a really interesting outcome. One woman I talked to living in Dauphin. I have opened a small record shop selling, you know record players and vinyl records during the period. And she said she remembered the Mincome period as being a time when everybody had a little bit of money in their pockets. But there were a lot of stories of people using the Mincome money to invest in small businesses that were already preexisting, Umm, a lot of the people in Dauphin, for example, were farmers or related in some way to agriculture. And so Mincome stabilized their income and allowed them to invest in new equipment to build their businesses.
Tegan: So in terms of people's health, did this have any kind of impact on people's physical or mental health?
Evelyn: One of the reasons I went back looking for the Mincome records was to find out whether people's health improved. I was particularly interested in mental health, but I was interested in health and all kinds of ways. And what I was able, I was very lucky actually, because Manitoba had just moved to Universal health insurance just before the experiment began. And what I was able to do was to track down some of the participants in the Medicare Records and to look at what happened to their health. And so I was able to compare people in the experiment to a match group of people who were living in similar kinds of places the same age and sex, who didn't receive income support. And I was able to show that hospitalization rates fell pretty substantially during the experiment. Overall, the hospitalization rate fell by about 8.5%. And that's a pretty dramatic finding, a big reduction in hospitalization rates. When I looked at it a little bit more closely to find out why hospitalization rates fell, there were really two categories that stood out. The first were accidents and injuries. No, that's a big category that picks up all kinds of acute hospital admissions. You know, people have been in car accidents, accidents of all types and so on. But the other category was mental health. There was a big reduction in hospitalizations related to mental health. So that was one of the big findings, I think during this experiment it was certainly it was certainly an interesting outcome to see from a guaranteed income experiment.
I think we find similar results every time we run the similar kinds of experiments. I think that people's health inevitably improves when their income goes up. I think that's not a surprise. We see it in a lot of different kinds of programs. Umm, I think that one of the things that becomes very obvious to people is that poverty imposes a lot of costs on the economy and on society. And if you can do something that reduces the rate of poverty, you could improve living standards not only for people who are receiving the money, but for everybody who lives in a town. Everybody who lives together. Umm, so I think those things are very positive. But the basic findings I think are things we see over and over and over again. That poverty has a cost. We feel that cost and in very personal terms, in terms of our health, in terms of our wellbeing, that if you give people money for the most part, they spend it on things that improves the quality of life for themselves and their family. They invest in education, they invest in better housing, better food. So in some sense, there are no surprises there.
People who receive money at vulnerable periods in their lives can really make changes that are going to affect their health that are going to affect their lives for years and years and years to come.
Tegan: So, back to the MBM…what would happen if everyone lived above the threshold of the MBM? , by definition that would mean that there would be no poverty. Now, I'm not going to lie. We, and by 'we', I mean the podcast team who are most definitely not experts, might have gotten a bit carried away with this idea.
We asked our StatCan expert about using the Market Basket Measure in a Mincome-like way, and he very kindly explained some of the issues.
Burton: It's a statistical tool meant to be used in parallel with an income concept given the construction of its disposable income like the tenure type adjustments and the fact that, like you mentioned, the costs are not defined independently for different family sizes or constructions. It can't be used in that manner for program eligibility or sending minimum wage or for a basic income concept that it's, it's not, it's a great tool for model, for measuring poverty and income distribution, but it shouldn't be seen as a universal tool that can solve all of these problems.
Tegan: We wanted to learn more about poverty and why it's so complex, and also why we shouldn't try to use the MBM as a universal tool.
Kevin: I'm Kevin Milligan. I'm a professor of economics at the Vancouver School of Economics at the University of British Columbia.
Tegan: The market basket measure is a great reporting tool, but it reports after the fact. So , it isn't used to address need.
Kevin: So just to give an example, you know right now we have a lot of income transfers that are based on your family income and your family circumstance. Think of the Canada Child benefit, think of the GST tax credit, that lower income Canadians get and many of us got when we were students, you know, you got that check every quarter that direct deposit. Those are based on the tax filing schedule and so we just filed our taxes and April 2022. Those benefits are all being adjusted quite shortly in July 2022 for the 12 months from July 2022 to June 2023. So if you think about it, if I lost my job tomorrow, when would my Canada child benefit? When would my GSE tax credit be updated? Well, I file my taxes in April 2023, so July 2023, my check will be updated, which is maybe not great because what if my upgrade income needs are now? So that's one big challenge that you face is that cycle of how things repeated now you could argue that maybe there's ways we can do things more quickly. We could not key things off the income tax cycle and do it in some other way. But that that's the kind of challenge you have to face is how do you actually get checks into people's hands based on their current circumstance? And that's one of the many challenges that we face.
Tegan: The Market Basket Measure doesn't take into account different circumstances, like family shape and size. A family of four could mean two parents and two children, but it could also be one parent and three children. These two families would have very different needs. And that's before you add things like disability to the mix. Kevin explains.
Kevin: Our current system is really strongly based on your needs. So if you're someone who is with a disability, you're gonna have a different kind of income structure. If you're someone and even varies by disability, depends on your family circumstance, depends on a lot of different aspects of your life. So we have a whole panoply of government programs. They're pretty complicated. They often interact in poor ways, and those are not good things. But we have to understand the reason why they exist is that there are a variety of different needs. If we were to replace that whole basket, inference programs with a 'one-size fits all' program. That's kind of a flat check of some kind that doesn't depend on your needs. Then if you think about it, the people who gonna be hurt most are the people with the biggest needs because that one size fits all check is not gonna touch all the bases. That they might have in terms of their needs. And so that's a great challenge for a basic income approach is that if you try to make sure that the people with the highest needs are made whole, that they get the same kind of income transfer, you end up, kind of, well, you have to take into account all of their different kinds of disability, all of their family circumstances, all of their income patterns, and you essentially end up recreating all the complexity of the existing system. So what I'm suggesting here is no magic solution here. Sometimes. Basically income is thought of as a magic solution to things that we can wipe the table with all the complexity. And what I'm asking everyone to think about is the reason why that complexity exists is that people have complicated lives. Doesn't mean we shouldn't push back on the complexity and try to improve it to make the points of access easier for low income Canadians to access their benefits. But it does suggest that there's no magic wand here.
I wouldn't walk into that discussion thinking I'm gonna solve that in a day.
Tegan: Don't get me wrong. All of this isn't a criticism of the Market Basket Measure. It's a tool designed for a specific purpose that doesn't always work when it's taken out of context and applied to a new purpose for which it wasn't designed. The market basket measure is a great tool to measure one key aspect of poverty, but isn't a perfect measurement of all of the areas of need in the country. It's just one indicator, and there are many more.
What are some of the issues that can arise when we only use one measurement to capture something as complex as poverty?
Kevin: The different measures capture different elements of things. So there's nothing measure called the low income measure, which looks at how family is doing relative to the typical family, takes the median family income in Canada and compare draws a line based on that. So that one measure sometimes has kind of a different picture because it bases on kind of compares the low end to the middle. And so what's interesting about that measure is in the 1990s, the median income. The typical family in Canada, their income was actually falling. What that meant was, uh, the low income measure, which was keyed to that median income, was actually getting lower and lower every year, so it was easier to be out of poverty. So we saw poverty measures, poverty outcomes falling based on that one because it was getting easier to pass it. But that doesn't sound like a good thing. If everyone's income is falling. But the low income is falling slightly different speed than the median income. It just doesn't sound good. That's one of the reasons that the Market Basket measure provides a different picture. What's interesting is it doesn't compare like the low to the middle. So that depending on how the middle is doing that change is poverty. It just says, look, what do you need in Canada in 2022 to have an adequate life and so they uh, people StatCan and all of the round tables and discussions have come up with the basket and that doesn't depend on what the median income is doing. It doesn't bounce around it that way. So it's a bit more stable in that way and is arguable. I saw I've measure of deprivation. It's not to say that the low income measure doesn't have its uses just to give an example of that. That is something that's used in international poverty comparisons because whatever is in the Canadian basket for the Market Basket measure makes sense for Canada but might not make sense for Italy. Might not make sense for Japan. They're just gonna have different basket of goods, different cultures, different economies. So international comparisons tend to stick to something like the low income measure, which compares the low to the middle, because that's something you can implement more easily across countries.
Tegan: There's a reason why there are 12 different indicators on the StatCan's poverty hub. One indicator just can't tell the full story on its own.
I feel like I got a little bit of a crash course as a junior policy analyst or something doing this episode.
Kevin: There you go. This is the kind of work a lot of folks in the ESDC and Department of Finance do all the time and trying to design these income programs and it it's a great challenge. It's also very rewarding because when you think about what you're doing, you're trying to help out families who are really in need as best you can. I was using, making great use of Statistics Canada surveys and products to do the best job as we're trying to help design those things. Me on the outside as a researcher and those in government on the inside. But yeah, I think it's a fascinating thing because it's so difficult. It's a real challenge. If it were easy, it'd be done by noon and it would be great. But it's those challenges and trying to find ways of finding wins is a great challenge and one that I have enjoyed working on.
Tegan: As you've said before, if it were easy, somebody would have done it already.
Kevin: Yeah. Yeah, I think that's right.
Tegan: It's difficult to eradicate poverty, but that doesn't mean it's not worth doing. Canada has a poverty reduction strategy in line with the UN's sustainable development goals.
How would eradicating poverty change outcomes for an individual? Well, for somebody who's experiencing poverty, how would that change their lives?
Kevin: So in two ways. So, I would phrase it in terms of having more income for people who are in low income I think it would change in a couple of ways. One is through just the ability to purchase more things that might help out in sustaining there well-being, so this would be better food, better living circumstance, adequate clothing, things like that. But the other more subtle but perhaps also more important, channel is through thinking of the stress that a family undergoes when they don't have enough income when they don't feel like they their kids can keep up with their neighbors in terms of how they're able to participate in things that school, that kind of stress of having a tight budget is has been shown by research to be quite important to one's own well-being and also to the long run impacts of living in poverty. What people remember if they grew up in poverty, is perhaps some hungry nights, but more often than that, it was the uuh, you know, pain in the stress of having a tight budget, whether that led to. I you know, bad behavior in the household or just a shame and embarrassment at school, those memories and the real impact of that is in certain ways even stronger than going at night without a big dinner.
Tegan: In a previous episode, "Unravelling," from season one, our guest, Dr. Kelley, spoke about the impact of stress on kids. Check it out to learn more.
What does it cost not to do our best to eradicate poverty?
Evelyn: Ohh, I think the cost of poverty are immense in this country. Umm, I think, if you start looking at, there's not a single social problem in Canada that's not made worse by poverty. If you look at the healthcare system, for example in 2010. There was a study done on hospitalizations, for example. And I'm looking specifically at what are called ambulatory care sensitive conditions. Now, these are hospitalizations that occur because people didn't receive appropriate primary care. Umm, looking specifically at those kinds of hospitalizations, the authors found that 30 to 40% of hospitalizations are driven by low socioeconomic status. So driven by poverty. If you look at education, a lot of educational funding is required to help children stay current when they change schools. Why don't you children who change schools many times over the course of a year? Why do children change schools? One of the reasons is that parents can't pay the rent and they move. And so you get that kind of mobility among families that and that makes it harder for kids to stay current. And it makes it harder for the educational system to pay for kids. If you look at something like incarceration, 80% of women who are incarcerated. Are incarcerated for poverty related crimes. 80% I mean the cost of incarceration are immense in this country. So we're paying for poverty, we're paying for it in, in, in terms of every social program you can think of. It's not just the money we put out in terms of provincial social assistance or other kinds of programs. It's every single social program that we've gotten place to assist people.
Tegan: And this might be it. Just a question that's not answerable. But how do we measure the worth of breaking the cycle of poverty for a family?
Evelyn: I think that's your rhetorical question to end with. Well, I yeah, I don't have an answer for that. I don't have an answer for that because I think ultimately it's a moral question. It's an ethical question. Umm, you know, it's in the in a sense it, In a sense, I think it undermines the importance of the issue. If I say, well, I benefit, I benefit. If I'm not living. You know next door to people who need help and don't receive it. We all benefit, I think, but we've benefit in in very practical and monetary terms. But we especially benefit, I think, in broader social terms, in terms of the kind of cohesion, the kind of society we want to live in.
Tegan: If someone would like to learn more about the Market Basket measure and how Statcan measure poverty, where can they go?
Burton: So the dimensions of poverty hub at Statistics Canada is a great resource for the latest information on the Market Basket measure and the work that we're doing on creating the Market Basket measure thresholds for the territories that different indicators of poverty that are identified in the opportunity for all Canada's first Poverty reduction document. So I would start there.
Tegan: You've been listening to Eh Sayers. Thank you to our guests, Burton Gustajtis, Evelyn Forget, and Kevin Milligan for sharing their expertise.
You can subscribe to this show wherever you get your podcasts. There, you can also find the French version of our show, called Hé-coutez bien. If you liked this show, please rate, review, and subscribe. Thanks for listening!
Sources
"Dimensions of Poverty Hub." 2018. Statistics Canada. Statistics Canada. December 4, 2018. Dimensions of Poverty Hub
Forget, Evelyn L. 2011. "The Town with No Poverty: The Health Effects of a Canadian Guaranteed Annual Income Field Experiment." Canadian Public Policy 37 (3): 283–305. The Town with No Poverty: The Health Effects of a Canadian Guaranteed Annual Income Field Experiment.
"The Daily — Canadian Income Survey, 2020." 2022. Statistics Canada. March 23, 2022. Canadian Income Survey, 2020.