Ways to Measure Poverty – Low Income Cut-off

By Greg Hluska

When the Canadian Center for Policy Alternatives (C.C.P.A) announced that the University of Regina’s Social Policy Research Unit released its report card on child and family poverty in Saskatchewan, they wrote:

In 2007, there were 35,000 (16.7%) children under age 18 living beneath the poverty line (before-tax Low Income Cut-off) in Saskatchewan.

Ignore the concept of a poverty line for a moment – that statement says that 16.7% of children live below the ‘before-tax Low Income Cut-off’. That statement also says that the ‘before-tax Low Income Cut-off is the poverty line.

If you want to beat back poverty, I think you have to define it and measure it.  And, I also think that Low Income Cut-off is the best way I can think of to measure poverty.  The only problem is that a lot of us don’t know what it means.  That is where this article comes in…

The Low Income Cut-off is, ultimately, an exercise in statistics.  And, to understand the definition of Low Income Cut-of, you have to understand one other concept – the Family Expenditure Survey (F.A.M.E.X.).  Statistics Canada periodically collects data on the spending habits of Canadian families.  This data primarily deals with how much money Canadian families spend on consumer goods (basic needs like food, shelter, transportation, and clothing) and with what consumer goods Canadian families own.

Once you are armed with how much the average Canadian family spends in a year, you take that number and express it as a percentage of before tax income.  Any family that spends over 20 percentage points more than the average on food, shelter, and clothing is said to be a ‘low income family’.

It will be easier to understand this if I use an example.

In 1998, a family of 4 that lived in Regina that earned less than $28,359 would be considered to live ‘below the poverty line’.  In 1998, $28,359 was the Low Income Cut-off for families of four that lived in cities with a population of between 100,000 and 499,999.

What do you think?  Is Low Income Cut-off a good measure of poverty?