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Tuesday, April 18, 2006

SPOTLIGHT: Low wage and low income

Fewer slide into low income

FEWER CANADIANS slipped into low income in 2004, while more were able to climb out, according to the study Low Wage and Low Income.

Using income data for 2004 to analyze the economic well-being of Canadians exposed to low income and low wages, the study showed that only 3.3% of Canadians who were not living below Statistics Canada's low-income cut-off (LICO) in 2003 had slipped into low income in 2004.

This was a much lower rate than a decade earlier. In 1994 the rate was 5.5%. By 1998, the proportion of those entering low income dropped below 4%.

Exiting low income

At the same time, one-third (34%) of individuals living below the LICO threshold in 2003 had climbed out of low income by 2004. A decade earlier in 1994, the proportion of individuals who had exited low income was only about 28%.

Previous Statistics Canada research has shown that individuals and families can fall into low income with the loss of a job, birth of a child, a family breakdown or many other factors. They exit low income for many reasons as well. One factor may be the substantial increase in earnings from employment during the past decade.

In 2004, about 3.5 million people were living in low income, down by about 1.1 million from the peak in 1996.

The study reinforced previous research showing that low income is not a permanent state of existence. About 20% of the population experienced low income for at least one year between 1999 and 2004.

What is LICO?

The LICO is a statistical measure of the income thresholds below which Canadians likely devote a larger share of income than average to the necessities of food, shelter and clothing.

These measures are quite different from poverty, however, as stated by Ivan P. Fellegi, the Chief Statistician of Canada, in a statement on the agency's position on these issues (On poverty and low income).

According to Dr. Fellegi, the LICO reflect a well-defined methodology that identifies those who are substantially worse off than the average. Of course, being significantly worse off than the average does not necessarily mean that one is poor.

Nevertheless, in the absence of an accepted definition of poverty, these statistics have been used by many analysts to study the characteristics of the relatively worst off families in Canada.

In the absence of politically-sanctioned social consensus on who should be regarded as "poor", some people and groups have been using the Statistics Canada low-income lines as a de facto definition of poverty.

As long as this represents these groups' and individuals' considered opinion of how poverty should be defined in Canada, Statistics Canada respects their position. However, using LICO to represent poverty certainly does not reflect Statistics Canada's views about how poverty should be defined.

For more information, contact Client Services (1-888-297-7355; 613‑951‑7355), Income Statistics Division.

See also
Low wage jobs THE DAILY – Study: Low wage and low income