By Charles Lammam
and Hugh MacIntyre
The Fraser Institute
Poverty is a complex issue that concerns us all but it’s important to have clear understanding of the extent and nature of the problem before discussing ways to alleviate it. So it’s unhelpful when researchers present statistics that misrepresent the state of problem.
The latest misleading analysis is contained in a recent report from the Canadian Centre for Policy Alternatives, which claims that Metro Vancouver has experienced an increase in poverty among working people. The report is deeply flawed and does not actually establish that there’s a growing problem of working poverty in Metro Vancouver. Most significantly, the report does not even measure poverty.
Poverty is most accurately defined as the deprivation of basic necessities such as a nutritious diet, adequate housing, clothing, health care, and a number of other basic goods and services. Someone who is poor is in a truly unfortunate situation, lacking the resources to ensure their long-term health and wellbeing.
The statistical measure used in the report purporting to show an increase in “working poverty” is called the Low Income Measure. It does not actually tell us whether someone has access to basic necessities. Instead, it measures how much income a person has relative to others. Specifically, it measures the percentage of the population that lives in households with incomes less than half of the median (the median is the midpoint of the income distribution).
The Low Income Measure is an arbitrary line that bares no direct relationship with the absolute wellbeing of individuals. Consider this: it’s theoretically possible for a significant percentage of the population to live below the Low Income Measure even though everyone in the society has access to basic necessities and whereby genuine poverty does not exist.
In fact, Statistics Canada, the source for much of the data in the report, explicitly warns against using the Low Income Measure as a measure of poverty. Doing so is misleading and exaggerates the extent of true poverty.
Putting aside the flawed approach to measuring poverty, there’s another major problem with the report’s analysis. It ignores a crucial distinction between temporary (or transitory) poverty and persistent poverty, where a person is stuck in poverty year after year and unable to escape that unfortunate circumstance.
This distinction is critical because the policy responses for helping those in persistent poverty are markedly different and more nuanced than those related to temporary poverty. The good news is that for the vast majority of Canadians exposed to living in low income, their experience is temporary as they are able to transition out quickly.
And Metro Vancouver is no different. According toStatistics Canada, from 2006 to 2013, Metro Vancouverites who fell below the Low Income Measure (the same flawed threshold used in the report in question) were in that situation for an average of two years. Moreover, 43 per cent of the spells under that income threshold lasted less than a year. Over the same period, 5.2 per cent of Metro Vancouverites were persistently below the Low Income Measure in all eight years.
There are two critical points about the data we cite from Statistics Canada. First, the data include both people who work and those without jobs so the average time spent in low income is almost certainly lower for working people as is the percentage of working people exposed to persistent low income. Second, the threshold used does not actually measure poverty so the statistics look worse compared to what would have been the case had the threshold measured genuine poverty.
Reducing poverty is no doubt a laudable goal. However, misleading reports about the extent and nature of poverty are not helpful for achieving that end.
Charles Lammam is director of fiscal studies and Hugh MacIntyre is policy analyst at the Fraser Institute.