What is this metric and why is it important?
The destructive result of a poor income distribution is poverty. Households in poverty have benefited less from the contributions that innovation makes to prosperity and face barriers to full participation. Here we measure poverty as the portion of households that could not afford a basket of goods required for a basic standard of living.
How is Canada doing?
- In 2018, 8.7% of Canadians could not afford the basic needs for a modest standard of living.
- This is down significantly from 15.6% of Canadians in 2006
- At the city level, while progress varies, the overall direction is the same and the gap between cities has been shrinking.
This measure comes from Statistics Canada and is known as the Market Basket Measure (MBM). The MBM is based on the cost of a specific basket of goods and services required for a basic standard of living. The basket includes “food, clothing and footwear, transportation, shelter and other expenses for a reference family.” A family falls below the poverty line if their disposable income falls below the cost for this basket. Disposable income is total income (including government transfers) after all standard expenses such as taxes, pension plan contributions, child care expenses, direct medical expenses, and so on have been paid.
This measure is quite useful for tracking Canadian progress on poverty, but it is hard to compare to other countries to benchmark that progress.