POVERTY IS NOT A MAJOR PROBLEM in Canada. In 1988, there were only about one million Canadians with reported incomes too low to afford all of the basic requirements of living. Of those, at least 75,000 are college and university students who have sources of funds (such as student loans and loans or gifts from parents and relatives) not counted as income; about 70,000 were elderly yet we know that benefits to persons (and their families) 65 and over are, in all cases, above the poverty line; and 300,000 were in single parent families and again last resort benefits for these families is, in virtually all cases, above the poverty line. In addition, there are an undetermined number of individuals and families who, because they lived in subsidized housing, under-reported their income, were self employed and reported negative net income from self employment, were in transition during 1988 (i.e., immigrants, marriage breakdown, etc.), or were members of religious orders or ascetic sects had reported income below the poverty line but may not have been poor at all. It is almost certain that less than 2 percent of Canada's population lives in poverty. Of those all but employable persons or those with substantial assets qualify for programs that would lift them above the poverty line. So, while poverty has not been entirely eradicated, there is no reason for anyone in Canada to be permanently poor. Everyone is able to acquire all of the basic necessities of life.
This result flies in the face of numerous media stories about the growing numbers of poor who must do without food or resort to food banks to prevent starvation; about the dreadful inadequacy of welfare benefits to cover even basic necessities; about the crisis of child poverty. These stories, frequently written by self styled social reformers, would have us believe that poverty is Canada's major problem. The good common sense of Canadians prevents them from being taken in by blatant exaggeration, emotional appeals and, at best, anecdotal evidence. We find it hard to believe that 3 to 5 million Canadians are poor. It is difficult for us to understand how a senior couple who own their own home can be impoverished if their 1990 income is $14,000. And we simply cannot believe that a great many college and university students, our future income elite, are among Canada's poor.
Perhaps most skeptical are those currently over 60 years of age. Many of their generation raised entire families on incomes less, in real terms, than today's welfare rates. They recall that shelter was somewhat cramped by our standards and contained fewer facilities but was generally adequate. Food was typically plentiful and nutritious. More clothing was home made, repaired or used than is the case today. Many readers will remember the sacrifices and difficulties of their day-to-day lives in the 1950s and 1960s, but they could not in fairness characterize their situation as "poverty." They never lacked any of life's basic necessities. Yet, they are expected to believe that people materially much better off than they were are poor. [For example, according to the 1951 Census, average family income in 1951 was $3,535 or about $20,000 in 1988 dollars. The average family size in 1951 was just over four persons. That "average" family of four would have been declared "impoverished" in 1988 using LICO and CCSD measures. While the income distribution for families is not available, it is likely that one-quarter to one-third of all families in 1951 lived on incomes of less than $15,000 (in 1988 dollars).]
To a large extent the rapid growth in average living standards over the past twenty five years has obscured our understanding of essential living costs. Many fewer people are forced to make sacrifices, to economize. In our pursuit of material affluence we are less able to appreciate the standard of living of those who are compelled to practice thrift. We have lost sight of the costs of basic necessities because so many of us are so far removed from them. There is a natural tendency to exaggerate those costs.
The fact is that necessities have never been a better bargain. They have never been easier to acquire. Indeed, there is more opportunity now than ever before for individuals and families to achieve a middle class living standard. Higher real wages, more leisure time, fewer children to support and more dual income households means that enjoyment of amenities, available only to the wealthy twenty five years ago, is a realistic goal for everyone. However, we live in an imperfect world and some people encounter difficulties on the way to improved living standards. It is important for us to know how many fall below a level such that all necessities cannot be acquired. It is likewise important for us to know to what extent real growth in our economy is lifting people out of poverty.
This study has examined the issue of the appropriate definition and measurement of poverty. It has almost entirely ignored questions about causes and cures. Similarly, policy issues such as the proper mechanisms for delivering assistance to the poor have not been covered. These fascinating and important problems are clearly beyond the scope and intent of this book. However, the sad fact is that we know very little about why people end up below the poverty threshold and best how to help them. Future research should include detailed case studies of poor households involving complete histories rather than just current circumstances. This will help us to understand what causes poverty which in turn will assist in the selection of the appropriate policy.
Critique of this study
It seems to me that this research is subject to three distinct lines of attack: (A) you completely reject the necessities approach to the definition and measurement of poverty; (B) you accept the necessities approach but find my list of necessities inadequate; and (C) you accept both the approach and the list but you have some problems with methodologies or data. I wish to examine each of these possible criticisms in turn.
Poverty is more than just the absence of basic necessities
Poverty must be understood within a social context. We are poor if we lack amenities that most people in the community enjoy. Poverty really means being less well off than most other people. While no one would argue that people are poor if they lack any basic necessity, poverty is more than just the absence of basic physical needs.
The notion of a social adequacy line does have some merit. However, connecting it to "poverty" is entirely inappropriate. Once people have acquired all their basic needs, it is not obvious how they would rank in terms of "poverty." For example, compare the well-being of a lonely, elderly widow with failing health but income substantially above the poverty line to that of the healthy, popular 19 year old, unemployed, high school drop out. Who is poorer? Rose Friedman asks, "What of the poverty of the blind, who, however rich in material goods, are deprived of the richness of experience obtained through vision. What of the poverty of the bereaved who, through the death of loved ones, become poor regardless of material goods." [Friedman (1965), p. 14.] What about the two- income family of five in Toronto earning $60,000 a year but who have little leisure time, high stress levels and expenses (two cars, mortgage, daycare, taxes, food, and clothing) about $5,000 less than income? Are they better off than the one income family in a small Ontario town with income of $25,000 but with much more leisure time, a cleaner and healthier environment, and with an annual surplus of $3,000 after all basic needs have been covered? It is fair to say that income is a poorer indicator of quality of life at high incomes than at low incomes. The social amenities or relative approach is just not capable of credibly distinguishing between "poor and non-poor" in their sense of the word.
In contrast, the necessities approach utilizes a rather natural threshold as a cut-off point. People are poor if they cannot afford all basic physical necessities—items the absence of which is likely to compromise long term physical well-being. If we believe that basic necessities—food, shelter, clothing, health and hygiene—are more important than or take priority over other needs then this level will be a useful cut-off. Above this threshold, well-being is improved in rather mysterious ways, with qualitative factors such as leisure time, appearance, popularity, health, attitude and support systems at least as important as income.
Poverty is a strong word. It doesn't mean "relatively less well off." The traditional meaning of the word conveys a sense of real deprivation, of lacking basic needs, of compromising long term physical health. I have argued that this is the sense in which most people understand poverty and that this sense must be preserved.
There may well be merit in developing other kinds of lines or cut-offs. We need to find out more about ourselves and our standards of living. It may be possible, for example, to construct a widely accepted "social adequacy line." Current relative poverty lines, such as the CCSD line, do not qualify. What is socially adequate about an income half the community average? Advocates of the measurement of "social deprivation" will have to do much better than that. However, even if you support the use of social adequacy lines (however constructed), it is hard to imagine simultaneously rejecting the poverty line. Why would any student of poverty not be interested in determining how many in our society cannot afford all the basic necessities of life?
Social activists undoubtedly are concerned about the possible policy implications of accepting the validity of the necessities approach. Will these poverty lines be used to justify low rates of social assistance? As I have argued earlier, the appropriate definition and measurement of poverty should be quite distinct from the issue of poverty policy. Those who feel that the best interests of the poor are served by higher rates of social assistance must be prepared to make their case on grounds other than adequacy in meeting basic needs. For example, arguments for greater generosity have been made on the basis of fairness and social justice. The point is that determination of the conditions in which the poor live should be done quite independently of the determination of what action should be taken.
It is important for me to stress that the necessities definition of poverty used here as well as the resulting estimation of the extent of poverty in Canada is solely intended to provide interesting and important information about the poor. There are no intended policy implications. While the existing social welfare system is flawed and may not be best serving the long run interests of those in need, there is no suggestion in this study that social assistance rates are either too high or too low. The poverty lines developed here should not be regarded as either policy "floors" or "ceilings." The moral and economic questions involved with the issue of public assistance to those in need are best ignored for the purpose of this study. I do see, however, three very important and practical uses to which the poverty line, constructed using the necessities approach, could be put.
First, it permits us to know something significant about ourselves at the present time. Just as we know current birth rates, death rates, unemployment rates, crime rates and tax rates, so we should also know the number in our society who cannot afford all basic necessities, i.e., the poverty rate. Second, it permits us to make inter-temporal comparisons regarding poverty. I think it is interesting and important for us to know whether the poverty rate in Canada is increasing or decreasing over time. To what extent is our growing economy systematically lifting some people out of poverty? This information can be determined only if we use a reliable, fixed standard. Finally, it permits us to make international comparisons. As long as other countries employ essentially the same methodology in measuring their poor, we can make legitimate comparisons between poverty rates in various countries. Using the necessities approach we have a tool capable of universal application. These comparisons may help us determine which political and economic systems contribute most to the alleviation of poverty.
The list of necessities is inadequate
You might very well agree with the necessities approach to the measurement of poverty but disagree with my list of necessities. Fair enough! The guiding principles used in developing the list were: (1) include any item the absence of which is likely to compromise long term health and physical well-being and (2) the quality and type of each of the included items should be at a standard considered no less than the minimum acceptable in the community in which the person resides. Thus the list of necessities consists of food, shelter, clothing, transportation, personal hygiene, household items including telephone, home furnishings and health care. Are all the included items justifiable? Are there additional items which should be included?
I had no difficulty in excluding products such as radios, televisions, VCRs, newspapers, magazines, etc. from the list. These cannot in any way be described as physical necessities. In addition, the inclusion of alcohol, tobacco, and other drugs could not be justified even for those who have developed some addiction to these substances. The medical evidence is clear that continuing use of these drugs compromises physical health and that stopping consumption, at any stage, will improve health. On these grounds, it would be inconsistent to include them in a list of basic physical necessities even though, for some, there is a strong physical need for them. Similarly, such items as children's toys, books, and writing materials would not qualify as physical necessities even though they are common everyday products. Fortunately, each of these items is accessible to all who want them at little or no cost.
To exclude such items from a list of basic necessities in no way means that the poor will or should be without them. It merely means that we wish to strictly confine our list to physical necessities. We do this because we believe it is both interesting and important to distinguish between those who are able to acquire them and those who are not. To do it any differently would be to abandon our definition of poverty. It is clear that human beings have other needs—social, psychological, intellectual—over and above basic physical needs. However, our interest here has been to determine what basic needs cost and how many in our society have incomes too low to purchase all of them. Nothing more.
Problems with the methodology
There will be those who agree that poverty means the inability to afford all of the basic necessities and will agree that my list of basic necessities is complete. They may, however, have some difficulties with either the data or some methodologies used in manipulating the data. I am considerably more sympathetic to this line of criticism. Indeed, I wish to draw the reader's attention to several areas where such limitations exist.
1.Essential Food Costs
The construction of essential food costs involved a multi-stage process. Using a list of 32 common, nutritious foods covering all four food groups and prevailing grocery store prices, a linear program enabled us to determine the minimum cost of a diet fulfilling both nutrition and energy needs for families of various sizes. While Statistics Canada collects city-wide average prices for a variety of foods in 25 of Canada's main cities, regrettably, this data includes only 13 of the foods on our list. [In fact, the overlap is considerably greater but package sizes for such items as milk, macaroni, cheese, peanut butter and carrots are not compatible.] Using the prices of the common 13 foods as an unweighted index of costs in a given city, essential food costs were calculated for Canada's major cities by comparison with the Ontario reference base. While I regard the 13 food index as quite representative of overall city prices, it would have been much better to have had complete food price information for each city.
2.Essential Shelter Costs
To determine necessary shelter costs we began by assuming that low income people were tenants and paid market rents. CMHC provides twice yearly average rents for apartments of various sizes (i.e., number of bedrooms) in 56 major Canadian urban areas. It was assumed that low income people would, for apartments of given size, generally select from the least expensive half of rented accommodations, the average of which turns out to be about 10 percent below the overall average. Apartment sizes were matched with family sizes and essential shelter costs were determined to be 10 percent below city average rent in each case. The major data limitation here is that published rents sometimes include all utilities and sometimes do not. CMHC simply pass along whatever stated rent is given them by owners. Since the rent survey only includes apartments in structures with six or more units, one is inclined to believe that most stated rents do include heat and hydro. However, we just do not know. It has also been assumed that, even in tight rental markets like Toronto and Vancouver, apartment seekers are able, eventually, to find something in their price range (i.e., roughly 10 percent below market average). This assumption is justified in part by the high turn over in apartments in our dynamic, mobile society, and by the fact that apartment structures with fewer than six units, excluded from the CMHC survey, generally have lower rents and higher vacancy rates. However, the major limitation is clearly the question mark regarding utilities. For those low income persons whose stated rent excludes utilities, essential shelter costs could be $500 to $1,000 higher annually. [Source: CMHC, unpublished data.]
3.Other Costs
In the case of other necessities, it would be preferable to have an "expert panel" making judgements as to the selection and appropriate quantity and quality of items. In the absence of such a panel some personal judgments were necessary, as for example, the lists of hygiene items, household items and home furnishings. The expected useful life of home furnishings is based solely on the author's own experience and judgment. In addition, assigning a cost to transportation based on public transit fees and estimated average usage was purely a judgement call. While I feel quite comfortable with these decisions and regard the judgements as eminently reasonable, they will always lack some credibility because they are based on the experience of just one individual. In all cases, the costs of these items were obtained from published sources, chiefly FAMEX (1986), updated to 1988. In the case of clothing, I used the Montreal Diet Dispensary estimates for 1988. I had some serious reservations about certain items they included and would have preferred to modify their list for the purposes of this study. However, in the interests of minimizing personal judgement and using independent sources (even if they are not entirely satisfactory) I decided to use the MDD clothing estimates unaltered.
4.Determination of Provincial Average Poverty Lines
Initially, poverty lines have been calculated for Canada's main metropolitan areas for which both food cost and shelter cost information is available. The problem however, is that there exists no information on the distribution of income by family size in major metropolitan areas. [In fact, one could extract income distribution data for some (but not all) of Canada's major cities from the microdata file.] This information is available only by province. Therefore, in order to estimate the incidence of poverty in Canada, it was necessary to construct provincial poverty lines. The very idea of an average poverty line for a province is problematic because costs can and do vary widely within a province. Indeed, we have very little cost information on smaller communities (comprising about one-third of Canada's population) and their omission from such provincial averages could be a source of error. On the other hand, if our interest is to reasonably approximate the incidence of poverty and to ensure that poverty not be underestimated, then a provincial poverty line constructed from a weighted average of essential costs among the major metropolitan areas within the province should serve our purpose.
Several assumptions were required in calculating these weighted averages. First, it was assumed that food costs in smaller communities within a province were equal to the provincial average. Econometric evidence that city size is not a factor in explaining food costs was presented in support of this assumption. Rents, on the other hand, are explained by size of city and this evidence favoured a second assumption, i.e., that rents in smaller communities (for which no published information is available) are no higher on average than the least expensive rents in that province. Thus, for the purpose of the weighted average, persons in smaller communities are assumed to face rents equal to those in the least expensive metropolitan area in the province. In the cases of Newfoundland, P.E.I., and Manitoba, there is only one metropolitan area, so rents in the whole province are equal to rents in its major city. This is certainly a limitation leading to an overestimate of shelter costs facing many people. Indeed in all provinces, due to omitted smaller communities, weighted average shelter costs are higher than they would be if better information were available.
The third assumption employed in the construction of provincial poverty lines was that other costs are the same for all Canadians. This was justified because most of the estimates are based on published average expenditures by Canadians (hygiene items, household items), use prices at Canada-wide retail firms (Sears, Shoppers Drug Mart) or are based on estimates done for Canada by the Montreal Diet Dispensary (clothing, telephone service). However, it would be ideal to have had regional price information on all items. Currently no published source for this information exists. As it stands, I am confident that the estimated cost of other necessities is a broadly representative average appropriate to most Canadian households.
5.Limitations of the Data
The source of income data used for this study is Statistics Canada's income survey. This survey, held in April each year, asks respondents to provide a detailed breakdown of their income from various sources during the previous year as well as demographic information (number of persons, ages, gender, marital status, etc.) and labour force status. Questionnaire responses are edited and in cases where the answers are clearly inaccurate and the editor knows what the true value should be (i.e., family allowance, tax credits, OAS/GIS, etc.) appropriate changes are made. It is fair to say that Statistics Canada does as good a job as can be done, given the resources available to it, to provide users with timely information on incomes in Canada. Nevertheless, we must realize that the data, especially for low income households, is seriously deficient. It has already been mentioned that, after editing, reconciliation checks reveal that income from unemployment insurance and social assistance are low by 20 percent and 40 percent respectively. Since almost 50 percent of the households this study identified as poor receive either unemployment insurance or social assistance benefits (or both), this is a major concern. Indeed, if unreported income from these two sources is just $1,000, on average, then the incidence of poverty will have been overestimated by about 15 percent. Other types of income that we might suspect would also be unreported or underreported are: income from rents by small landlords, income from moonlighting and gratuity income to some service workers. It is not at all clear that these omissions, relatively small in absolute terms but significant as a proportion of a poor households income, will be picked up in the edit or reconciliation process. Finally, there is a concern regarding the 20 percent of surveyed households that are classified as non response. While Statistics Canada uses techniques to impute information to these households, it is a large gap to fill. The accuracy of the imputation is considerably reduced if non response households are not themselves randomly distributed.
Therefore, it is best to use the data, especially at the lower end of the income distribution, with considerable caution. Fancy statistical analysis of poor households may well be wasted on this data. For this reason I have tried to keep the statistical presentations simple and stress that calculations should be thought of as approximate rather than precise. The best hope for a greater understanding of the dynamics of poverty in Canada lies in the development of a accurate, representative longitudinal database.
6.The Disabled
There remains uncertainty regarding the material well-being of some of the disabled. In spite of a variety of government programs, tax deductions and private charitable efforts, we cannot be sure that disabled persons with special needs but few resources are living above the poverty line. It was suggested in the previous chapter that it was likely that the unemployable disabled would have, at the very least, all of their needs covered because of the high priority governments and the general public give them. Nevertheless, there is simply no solid evidence to support this view. The issue of the adequacy of the incomes of the disabled clearly needs to be studied.
I am convinced that these and other possible criticisms do not detract substantially from the major findings of this research. The data presented here overwhelmingly support the view that poverty, as it is generally understood, has been largely eliminated in Canada. The sacred maxim of social reformers that poverty is a widespread and growing problem in Canada is a myth. The claim that government assistance to those who cannot be expected to work is inadequate to enable recipients to buy all of life's basic necessities is wrong.
This is not to say that life at the bottom of the income scale is wonderful. For many it is a struggle. There is little or no margin for error. It is sometimes a real challenge to remain hopeful about the future. However, our generally robust economy and "last resort" support systems ensure that no Canadian need live in poverty.