Measures of Poverty


  1. Introduction
  2. Low Income Measure
  3. Low Income Cut-off
  4. Market Basket Measure
  5. Shelter Cost Index


There are several accepted measures used to express the level of poverty. Statistics Canada has two very good papers that assess and compare the three measures described below. Released in 2010, Low Income Measurement in Canada: What Do Different Lines and Indexes Tell Us?   concludes that over the long term all three measures moved in the same direction and tracked economic indicators. Variable LIM, i.e. the base is reset every year, provides additional information on well-being for individuals at the lower end of the income scale. The paper suggests that a fixed LIM, i.e. fixed in a given year and then rebased periodically, would be better. This approach is not yet in use.

Low Income Lines: What they are and how they are created , released in 2016,provides a description of the methods used to arrive at each of these thresholds. It also explains how low-income status and various low-income statistics are determined. Tables presenting thresholds and low-income statistics are available on CANSIM.

On March 9, 2018, The Progressive Economics Forum posted  an article on measuring and monitoring poverty. This is an excellent discussion of three measures, described below, showing their relative strengths and weaknesses.  More importantly it raises key issues around the issue of poverty and the Canadian Poverty Reduction Strategy. Comments from well-qualified readers add to the richness of this resource.

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Low Income Measure (after tax) – LIM (AT)

LIM (AT) is widely used and internationally accepted as a relative measure of poverty. For Canada, it is set at 50% of the median Canadian income adjusted for family size and composition. 2016 Census income data is based on 2015 income.

LIM AT 2016 chartsm
LIM-AT Percentage of  Population by Age Group

The LIM (AT) for 2015 was $31,611 for a two-person household and 44,704 for a four-person household. The percentages presented here are for the percentage of people living in households with income less than these amounts. Based on this measure, 14.8% of the HRM population lived in low income households compared to 17.2% for Nova Scotia and 14.2% for Canada. Twenty-two percent of Nova Scotia youth lived in households with low income compared to 17% for Canada and 19% for HRM. HRM had a lower percentage of seniors living in low income households  compared to both other Nova Scotians and Canadians. The following provide more detail statistics for HRM on this indicator:

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Low Income Cut-off (after tax) – LICO (AT)

The After Tax Low Income Cut-Off is another widely used indicator for measuring poverty, despite Statistics Canada’s statement that LICO is not a poverty measure. LICO (AT) is available for seven household sizes by five different community sizes. The LICO (AT) for a community the size of Halifax for 2015 was $20,982 for a two-person household and $32,596 for a four-person household. Based on this measure, 9.6% of the HRM population lived in low income households compared to 7.9% for Nova Scotia and 9.2% for Canada. This measure is not a good indicator for assessing poverty. It is considerably lower than the other two measures. The lower number may be a factor in some government departments preferring this measure.

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Market Basket Measure – MBM

The Market Basket Measure (MBM), developed by Employment and Social Development Canada, attempts to measure a standard of living that is a compromise between subsistence and social inclusion. It also reflects differences in living costs across regions. The MBM represents the cost of a basket that includes: a nutritious diet, clothing and footwear, shelter, transportation, and other necessary goods and services (such as personal care items or household supplies). The cost of the basket is compared to disposable income for each family to determine low income rates.

The MBM recognizes differences by region adjusted by family size. In 2015, the Halifax MBM was $37,778 for a reference family of four. Based on this measure, 14.7% of the HRM population lived in low income households.

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Shelter Cost Index

This index is not a recognized measure of poverty. The rationale for developing it is shown below

The DA and CT thematic maps for LIM (AT) were used to determine which of two rural areas would be highlighted in the analytical planning for United Way’s Poverty Solutions. In doing this work the much lower cost of housing (shelter cost) in these areas was noted. As a result, a shelter cost index was developed, and thematic maps produced to compare with the LIM (AT) maps. Adequate and safe housing is a major and vital part of well-being.

Annual shelter cost as a percentage of household income – after tax (shelter cost index) was thought to have good potential as an indicator to identify neighbourhoods that were more challenged than others.

The preliminary results show this approach has promise and needs to be explored and discussed. The thematic maps demonstrate it in a way that raw statistical tables do not. They also provide a much different perspective on relative economic circumstances compared to the other poverty measures, especially for the rural areas.  Access to services and transportation costs, of course, are among other factors in assessing relative well-being.

Preston Area and Halifax Rural East were selected as two rural areas in HRM to be highlighted for United Way’s analysis based on a higher than average LIM (AT).  HRM’s LIM (AT) was 14.8% in 2015 compared to 22.0 % for Preston Area and 19.2% for HRM Rural East. HRM’s Shelter Cost Index is 20.1% compared to 18.9% for Preston Area and 16.0% for HRM Rural East.  Dartmouth North, Fairview and Spryfield were the other three neighbourhoods highlighted by United Way and the Shelter Cost Index for these three neighbourhoods were 25.1, 24.9 and 22.7 respectively. The LIM (AT) for these three neighbourhoods is 33.6%, 30.3% and 28.7%.  This narrowing of the “poverty” gap is the result of relatively lower rent and cost of homes in these neighbourhoods compared to HRM overall.

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