NCPA - National Center for Policy Analysis


December 22, 2004

A recent report by Campaign 2000, a coalition of anti-poverty groups, reveals that one million, or about 15 percent, of Canada's children live poverty. It sounds scary, but the measure is relative and exaggerated, says Niels Veldhuis of the Fraser Institute.

According to Veldhuis, the so-called poverty measure is based on income thresholds at which families are more likely to allocate larger proportions of their income to basics -- food, clothing and shelter. But these thresholds change when average spending on food, clothing and shelter changes.

For example:

  • In 2002, a family of four whose after-tax income was less than $30,576 (in Canadian dollars) was considered low income, even though they could afford nutritious food, housing, clothing, medical care and other services.
  • Additionally, the low-income cutoff is based on before-tax income and does not factor in the wealth redistribution of Canada's tax system; when measuring after-tax income, the poverty rate of Canadian children falls to 10.2 percent.
  • Finally, the poverty numbers do not take into account the fact that being low-income is transitory; in fact, most families move out of that category within six years.

Chris Sarlo of Nipissing University (Canada) has created a more realistic approach, the Basic Needs Line, which measures the level income needed to meet basic needs, such as food, decent housing, clothing, health care and other services such as telephone and transportation.

When using the Basic Needs Line, only 10 percent of Canadian children were in poverty in 1996, compared with 16.7 percent using the low-income cutoff. The Basic Needs Line reduces the exaggeration of poverty statistics by 40 percent.

Source: Niels Veldhuis (Fraser Institute), "Lies, Damn Lies, and (Poverty) Statistics," Canstats Bulletin, Canadian Statistical Assessment Service, December 6, 2004.


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