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Lexicon

This section contains a list of terms, accompanied by a description, which are used by the Centre d'étude sur la pauvreté et l'exclusion sociale.

Census family

A census family is a married couple or a common law couple (with or without children), or a lone parent living with at least one child. The children may be of any age. The grandchildren living in the household of at least one of their grandparents (but without their parents) are considered as being part of the census family of their grandparents.

Disposable income

Disposable income corresponds to total income less income tax. It is also called “after-tax income.”

Economic family

An economic family is composed of two persons or more who share the same dwelling an who are related by blood, affinal relationship or by adoption, or who live in a common-law relationship.

Employment income

Employment income corresponds to gains or employment income from salaried income (salaries and wages) and from self-employment.

Equivalence scale

The question of equivalence scales regularly arises when it comes time to measure low income or inequality. Intuitively, one may presume that consumption expenditures for a family of four are not four times higher than for an unattached person given the economies of scale (sharing of housing and food costs and other goods and services). It is therefore essential to take this element into account when comparing the living standards of members of these family units. Adopting the square root of household size, as recommended by the CEPE, should in fact help bring us closer to the norms of European countries and international organizations as regards equivalence scales.

European Union Laeken indicators

Laeken indicators are the official statistical tools retained by the European Union (EU) to support its fight against poverty and social exclusion. Established during the summit of the same name in 2001 in Belgium, they are the result of an important process based on comprehensive research methodologies and now constitute the basis of social policy for member states of the EU.

Family units

Family units include unattached persons and economic families of two or more persons within the meaning given by Statistics Canada.

Gini coefficient

The Gini Coefficient measures the degree of inequality in income distribution across different populations or within the same population over time. It is published for different measures of income, such as market income, total income and after-tax income. The Lorenz curve (figure 1) presents the ratio between the cumulated proportion of the population, arranged according to income level, and the cumulated proportion of total income of the population. The Gini Coefficient is taken from the calculation of the area between the Lorenz curve and the right of perfect equality. The greater the area the more evident is the inequality. The values of the Gini Coefficient vary between 0 and 1. A value of 0 indicates that the income is also divided among all members of the population, these members receiving exactly the same amount of income. However, a value of 1 denotes a perfectly unequal distribution within which a single unit has all the income of the economy. A decrease in the value of the Gini Coefficient can be interpreted as a decrease in inequality, and vice versa. The Gini coefficient is part of the Laeken indicators.

Figure 1: Lorenz curve

Lorenz curve.

Income tax

Income tax is the amount of federal and provincial tax on the income of persons (owed) for the tax year. Included in the income tax are the tax on capital gains and the tax on withdrawals from RRSPs (registered retirement savings plans), once exemptions, deductions, non-reimbursable tax credits and the reimbursable Québec tax abatement have been taken into account.

Index of material and social deprivation

The index has a material and a social component. The material component includes: education (proportion of persons who have no secondary diploma), the relationship employment-population and individual average income; the social component includes distance with respect to a social network in the case of separation, divorce, widowhood (proportion of separated persons, divorced or widowed), sole parenting (proportion of single-parent families) or the fact of being a single person (proportion of persons living alone). The adopted procedure consists first in dividing the population of Québec in groups of 20 % – in quintiles – on the basis of each component of deprivation, then to cross these groups so as to find the most deprived group simultaneously with respect to one or another of the components (quintiles 5 and 5), that which is the least (quintiles 1 and 1) and that which has an intermediate position. The rate indicates the percentage of the population living in enumeration areas (unit of 700 to 900 persons) where the average of the indicators situates them under the threshold corresponding to the quintile for all of Québec.

Low Income Cut-Offs (LICOs)

Statistics Canada’s low income cut-offs (LICOs)  are the thresholds, based on the analysis of data on family expenditures, at which families set aside a greater portion of their income for necessities (food, shelter and clothing) than does the average family. In order to arrive at the differences in the cost of necessities among various sizes of communities and families, the LICOs are calculated for five sizes of communities (rural regions, urban regions of less than 30 000 population, of 30 000 to 99 000 population, of 100 000 to 499 999 population and for 500 000 population or more) and seven sizes of families (1 person, 2 persons, 3 persons, 4 persons, 5 persons, 6 persons, 7 persons or more). The approach consists essentially of estimating an income cut-off at which families spend 20 points more than the average family for food, shelter and clothing. The 20 points are based on the hypothesis that a family that spends 20 points more than an average family is living in straitened circumstances. According to the most recent benchmark used for LICOs, as collected from the Family Expenditure Survey of 1992, the average family sets aside 43 % of its after-tax income on food, shelter and clothing.

Low-Income Measure (LIM)

The LIM for Statistics Canada is a fixed percentage (50 %) of median “adjusted” family income, the term “adjusted” taking into account the size and the composition of families and therefore the resulting variable needs of the family. In order to calculate LIMs, the adjusted size of each family must first be determined using an equivalence scale. This means that the oldest member is given a factor of 1, the second oldest and all other members 16 years of age or more a factor of 0.4, and all other members a factor of 0.3. Next, the “adjusted” family income for each family must be calculated by dividing the income by the “adjusted size of the family.” The median “adjusted” family income is then determined as this is the dividing line between two equal categories (50 %), according to whether the adjusted income of the family is higher or lower. The LIM for a family of one person is 50 % of the median adjusted family income and the LIMs for the other types of families equivalent to this value multiplied by the “adjusted size of the family”. Like Statistics Canada, in the case of LIMs, the Organization for Economic Cooperation and Development (OECD) fixes 50 % as the percentage of the median adjusted family income to determine the low-income cut-off. However, the European Union uses a cut-off of 60 % of the said income in its list of indicators retained for combating poverty and social exclusion (also known as “Laeken indicators”).

Market Basket Measure (MBM)

The MBM, by Employment and Social Development Canada (ESDC) is a measure based on the cost of a specific basket of goods and services. According to this measure, a person with a low income has a disposable family income that is less than the cost of this basket of his community or of a community of the same size as his community. This basket includes the goods and services in precise quantity and quality with respect to food, clothing and footwear, and dwelling and transportation. Other goods and services are also considered: personnel care, household needs, furniture, telephone service, reading material, recreation and entertainment.

The cost of the goods and services included in the MBM is calculated for a reference family composed of an adult man and woman between 25 and 49 years of age and two children, a girl aged 9 and a boy aged 13. The family with two parents and two children is the type of household that represents the largest portion of the Canadian population. The cost of the basket is then calculated for the other types of families using the equivalence scale for the low income measure (LIM).  In this scale, the oldest person is given a factor of 1, the second oldest person and all other family members aged 16 and over receive a factor of 0.4 and all other family members a factor of 0.3.

Generally, except for the category “Other,” the MBM attempts to represent  a consumption level close to the median level of expenses and is based on the real prices of the goods and services in question; for other expenses, they are estimated based on the consumption profile of the reference family in the second decile:

  • The content of the “food” component is that of the Nutritious Food Basket of Health Canada (1998). It represents the typical food expenditures of the various communities in 1996 and adjusted to be consistent with the recommendations of Health Canada . It is neither “an ideal diet” nor the cheapest diet which meets nutritional requirements. According to the  quantities bought  and the recommended units, the cost of the food basket is determined based on prices observed in 40 urban centres.
  • The “clothing and footwear” component is based on the standard budget for families in the Winnipeg Census Metropolitan Area in 1997, which is the measure of the Acceptable Level of Living (ALL) of the Winnipeg Harvest and the Winnipeg Social Planning Council. Developed relatively recently, this standard attempts to represent the most current situations at work, school and social occasions. Using the cost of goods in Winnipeg, the approximate cost in other urban centres in Canada for these goods was established with the aid of the relative spatial indices for clothing and footwear in the October 1999 Consumer Price Index of Statistics Canada.
  • The “shelter” component of the MBM represents the average of the median rents for two and three-bedroom rental units in several communities and sizes of communities in each province, since about half of two-adult, two-children families live in each of these two types of units. The median rent was chosen to ensure a decent quality of housing even in areas where there is a limited supply of available low-cost housing. The rent includes public services (water, heat and electricity) plus the following amenities: stove, refrigerator, and the possibility of the use of a washer and dryer. Once these costs were calculated in 2000 for each community and community size in each province, they were then indexed for the subsequent years based on the provincial Consumer Price Index for rental accommodation.
  • The “transportation” component of the MBM is in follow-up to the recommendations of the National Council of Welfare (NCW). These recommendations are based on the insight that to have access to the possibilities offered to inhabitants of large urban centres by public transport (stores, professional services, work, schools), the inhabitants of regions not served by such a system must buy and maintain a vehicle. For urban centres with more than 30 000 population,  the cost of public transportation and of one return taxi trip a month was considered. For other regions, the component consisted of the cost of paying for and operating a five-year-old four-door, four-cylinder Chevrolet Cavalier (estimates for each province).
  • The category “other goods and services” includes the following expenses: personal care, household needs and furniture, basic telephone service, postal stamps, religious and charitable donations and school supplies. It also includes, according to HRSDC, modest levels of reading materials, video rentals, YM/YWCA membership, magazines, books, tickets for movies and sports events. The approximate cost of these items is estimated using a multiplier applied to the total value of the food and clothing and footwear components of the market basket. This multiplier is obtained by calculating the ratio between the expenditures for the other goods and services on the one hand, and the expenditures for food, clothing and footwear on the other hand, paid by families in the second decile (65,5 % for instance).

The MBM varies depending on the cost of living differentiated according to province and within each province based on certain communities (census agglomerations of large Canadian cities) and the demographic size of other communities (rural regions and regions that are more or less urban). For example, in Québec, 6 categories of communities are considered: rural regions, less than a population of 30 000, between 30 000 and 99 999 population, between 100 000 and 499 999 population, as well as the metropolitan census regions of Québec and Montréal.

Disposable family income according to the MBM represents the total income of the family after certain deductions: income tax to be paid, social costs assumed by individuals, other obligatory wage deductions (contributions to an employer pension plan, to a complementary health insurance plan or to a union), support payments, child support payments to another family, non-refundable expenditures for child care, uninsured health care recommended by a health professional (dental care, eye care, prescription medications, assistance for handicapped persons). This means that real disposable income is taken into account for the purchase of goods and services in the market basket (MBM) after deduction of the expenditures not included in the basket but deemed to be necessary, which is a different concept of disposable income from that used for other Canadian low income measures that do take into consideration only income tax and transfers.

Market income (or private income)

Market income is the total of employment income or gains (from work as an employee or self-employment income – net amount), investment income, retirement income (private pension plan) and  other income (support payments, student bursaries, retirement allowances, etc.). It corresponds to total income less government transfers. Private income (or market income) is also called “before-tax income and transfers.”

Person outside the census family

A person outside the census family is a member of a household not part of a census family. The person may be related to person 1 (for example the person’s sister, brother-in-law, cousin or grandfather), or not related (for example, a roomer, a co-tenant or an employee). Persons who live alone are always considered as persons outside the census family.

“Personalized” low income cut-offs (LICOs)

The personalized LICOs take into account three measurement biases associated to the official data of Statistics Canada for provincial results. The expenditure ratio for goods determined as essential to incomes is that of each of the provinces, rather than that of Canada as a whole. The provincial Consumer Price Index (CPI) is selected rather than the Canadian CPI.  Provincial urban agglomerates are preferred rather than those of the entire country, as the pan-Canadian approach merges certain agglomerations and, as a result, they are included in agglomeration sizes more or less large compared to the provincial classification. To summarize, the indicator has to be calculated on a provincial basis rather than a Canadian basis, as this allows for interprovincial comparisons adapted to the different regional contexts. These personalized cut-offs, resulting from a point method, will not systematically be published, due to the fact that Statistics Canada is unable to calculate them for the smaller provinces, given the sample sizes.

Population and household

According to the census (Statistics Canada), a household is composed of a person or a group of persons (other than foreign residents) occupying a same dwelling and not having another usual domicile elsewhere in Canada. The household may be composed of a family group (census family), with or without other persons outside the census family, two families or more sharing the same dwelling, a group of unrelated persons or an unattached person. Members of a household who are temporarily absent on census day (for example, those residing temporarily elsewhere) are considered as being part of their usual household. For census purposes, each person is a member of  one household only.

Population distribution based on income bracket

Proportion of the population (households, families or individuals) whose income is situated within determined income groups (for example, by levels of $10,000).

Principal income earner

In each household and in each family, the person qualified as the principal income earner is the person whose before-tax income is the highest, except in one case: a child who lives in the same census family as his parent or parents cannot be designated as the principal income earner of the census family (this exception does not apply to economic families). In the case of families whose total before-tax income is a negative value, the absolute value of the income applies in order to reflect the fact that the negative value usually arises from market losses that are not likely to reoccur. In the rare cases where two persons earn exactly the same income, the older of the two becomes the principal income earner.

Ratio and economic dependency index with respect to transfers

In a given region, economic dependency ratio (EDR) represents the relationship between transfer payments and each $100 of the total employment income of the region. The provincial economic dependency index corresponds to the EDR of a region expressed as a percentage of EDR for the province. This index may be higher than 100; it then signifies that the EDR of the region is higher than the EDR for all of Québec.

Share of income held by the different quintiles

The quintiles allow for the categorizing of the given units of a population from low to high income levels, in order to arrive at the relative situation of persons who are at the bottom, middle and upper levels of the scale. Instead of using fixed income levels, as is the case in a typical distribution of income, it is the size of each group of population that remains fixed. First, all population units, whether these are persons or families, are classed from the lowest to the highest, depending on the value of their income of a specific type, i.e., disposable income (after income tax). Next, the population is divided into five groups composed of an equal number of units, called “quintiles.” The first  quintile thus equals 20 % of the population whose income is the lowest.

Transfers

The main government transfers are the following: child tax credits, old age security benefits and Guaranteed Income Supplement Income or Spousal Allowance, Canada Pension Plan benefits or Québec Pension Plan benefits, employment insurance benefits, social assistance benefits, work accident compensation, tax credit on goods and services (GST) or the Harmonized Sales Tax (HST), provincial or territorial tax credits or other government transfers.

Unattached person

An unattached person is a person who lives alone or with others with whom he has no family relationship, according to the concept of the economic family.

Last update: 2019-12-12 Top of Page

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