Executive Summary
This Policy Series paper answers the question: What is poverty and how is it measured? To start, it is necessary to distinguish between relative poverty, where poverty is defined as having less than others in the same community, as distinct from absolute poverty, where poverty is defined as lacking access to some basic bundle of goods. Both measures have their flaws, but it is important to recognize the characteristics of any given measurement in question.
A survey of major Statistics Canada methodologies that are often used as proxies for poverty levels finds that both the Low Income Cut-off (LICO) and Low Income Measure (LIM) are relative
measures, replete with the characteristics we would expect of them.
Economist Chris Sarlo’s solution is presented as the best attempt to date to navigate between the transience of relative measures and the elusiveness of a universal absolute definition. His model is notable because by focusing on ‘the means required for physical survival, ’it takes into account the question of adequacy in a constantly updated context.
There are considerable questions raised over the use of income as a proxy for consumption. An extreme example wherein some people registered as being in the bottom decile for income were found to be in the top decile for expenditure brings this question into sharp relief. With
additional data from statistics Canada, the case is made that income based poverty measures are highly unreliable.
Finally it is worth pausing for thought at the possibility that poverty is not something measurable but a question of being able to achieve aspirations. Overall, this paper is not designed
to defi ne poverty out of existence or dismiss attempts to understand it. On the contrary, it is an examination of our understanding of poverty that finds serious flaws in the way it is currently measured and concludes that we need to do better.