Spinning the Poverty Numbers — Again and Again

Worth A Look, Poverty, Frontier Centre

You’ve probably already forgotten about the two new year-end poverty reports issued this week by the United Way of Toronto and Campaign 2000. The annual announcements of social welfare agencies always present the same tale of stasis and frustration, no matter what the overall economy has been like lately, where the measurements are being taken or what governments are in power. If social agencies had set out decades ago to consciously make the public more apathetic to genuine poverty, or to convince it that poverty is inherently intractable, they could not possibly have gone about it more effectively.

Readers of this newspaper must be almost as bored with the usual dissections of the “poverty” numbers in these reports as they are with the reports themselves, but to paraphrase E.B. White, babies are being born every day who have never heard the old story, so it must be told over and over again. Campaign 2000’s report uses Statistics Canada’s Low Income CutOff (LICO) to measure child and family poverty. Here is what Statistics Canada says, every year, about using the LICO to measure poverty: The LICO is not a poverty measure, and we wish everyone would please stop using it as one. Their pleas go unheard.

The LICO is defined as the estimated income level at which a typical household would spend 20 percentage points more than the average family on the basic necessities of life — food, shelter and clothing. In other words, it is solely a measure of relative affluence: If everyone’s income and standard of living is improving, but the “average family” is gaining faster, more “poverty” will be created — even though everyone is actually getting richer. This helps explain why, as of 2004, 62% of sub-LICO households had cable TV and 43% owned DVD players.

The current LICOs use an observed base of consumer spending patterns that is now quite antiquated, dating back to 1992. Because LICO cutoffs are adjusted for inflation according to the Consumer Price Index (CPI), they miss the same things that the CPI is not good at capturing — improvements, for instance, in the quality of and consumer choice in food and clothing. And they do little or nothing to reflect the growing participation of the poor in the underground economy.

Campaign 2000 mangles this inappropriate poverty measure still further in the handling.
Throughout most of the report, it uses pre-tax LICO figures — again going directly counter to StatsCan advice (“Since the purchase of necessities is made with after-tax dollars, it is logical to use people’s after-tax income to draw conclusions about their overall economic well-being”). The effect is to add about five percentage points to the national totals of children living under the LICO, estimated in 2005 as 11.7% after taxes and transfers and 16.8% before. Is it really fair to call for governments to do more to cut poverty when your report has mostly factored out the effects of government wealth redistribution?

The United Way’s Losing Ground report uses an even more informal and loose definition of overall “poverty,” namely, the Low Income Measure (LIM), which kicks in at 50% of the median family income adjusted for family size and geographic location. Again, any relative improvement for the median family by this measure will create more “poor” even if everybody on the scale is doing better every year. And it should be noted — especially with regard to Toronto — that a country or a region welcoming in many poor immigrants will pull its LICO and LIM lines downward, even if no existing household’s welfare has changed and the immigrants are vastly better off for their arrival. It’s a funny sort of measurement, one would think, that punishes Canada’s supreme city for what might be its single most important contribution to human contentment.

Despite its use or abuse of the LIM, the United Way report may be the more useful of the two because of the detail it offers about other, more objective social indicators. Median household incomes themselves, after all, are noteworthy, and over the past five years they have appeared to stagnate in Toronto while enjoying marked growth in Canada as a whole and the rest of Ontario.
Meanwhile, Losing Ground highlights alarming, nationally uniform growth in the fraction of families with minor children headed by a single parent — a social indicator that welfare reforms in the United States have succeeded in changing for the better in recent years. From 1990 to 2005, single-parent families increased from 21.4% of all families in Canada to 25.5%. In Toronto, the figure jumped from 24% to 30.4%. On neither scale does it shows any recent signs of slowing. Anything our policymakers do to “fight child poverty” while such a major cause of it spreads unchecked is likely to represent wasted energy in the long run.