Low income after tax (LICO-IAT 1992 base and LIM-IAT)

Abstract

This publication presents detailed low income statistics, on the basis of income after tax, for families, unattached individuals and all persons. The source of the data is the Survey of Consumer Finances (SCF), an annual supplement to the monthly Labour Force Survey. This report, one in a series of annual publications from the SCF, focuses on two alternative measures of low income to the one traditionally highlighted in Statistics Canada releases. The traditional set of low income lines, the low income cut-offs (LICO), are based on the concept of total income before taxes. Two annual reports derived from SCF data highlight low income statistics using the traditional LICOs: Income distributions by size in Canada (catalogue no. 13-207) and Low income persons (catalogue no. 13-569-XPB).

After-tax income is defined as total income minus federal and provincial income taxes. The first measure in this report, low income after tax cut-offs (LICO- IAT), employs the same methodology for deriving the cut-offs as used for the traditional LICOs, except that it is based on after-tax rather than before-tax income. The LICOs and LICOs-IAT are derived from Family Expenditure Survey data, with lines set at income levels where families typically spend twenty percentage points more of their incomes on the basics (food, shelter and clothing) than the average Canadian percentage expenditure. These lines are differentiated by the size of the family and size of urban area. The second measure, low income measures after tax (LIM-IAT) is based on one-half median adjusted family income after tax, where "adjusted" indicates a consideration of varying family needs according to family size. This measure is calculated using the same methodology as that employed for deriving another alternative measure, the before-tax low income measures (LIM). SCF-based statistics using the LIMs are presented in the report Low income measures (catalogue no. 13-582-XPB).

Both current year and historical tables are included in the report. Current year statistics present, for families and unattached individuals, rates of low income and percentage distribution of low income and non-low income families/unattached individuals by a wide variety of characteristics. These include province, size of area of residence, dwelling owner/renter status, unemployment experience of family members, size of family, number of children, and characteristics of reference person such as age, sex, marital status, employment status, weeks worked in reference year, work activity, occupation, education and year of immigration. Other current year tables present distributions of families by type (eg., elderly couples, two-parent families, lone-parent families), of unattached individuals, and of all persons, according to the ratio of family income after tax to the LICO-IAT and LIM-IAT; and according to the size (in dollars) of family income after tax deficiency/surplus for low income and non-low income families respectfully. This last table includes estimates of the average amount by which low income families fall short of the LICO-IAT and LIM-IAT by family type. Analysts can use the deficiency/surplus tables to profile the low income population and to evaluate the so-called depth of low income for various family types.

Historical data for the years 1980 to current reference year are presented in the report for persons (all persons, children less than 18 years, persons 65 and over, and persons 18 to 64) and for families by type of family. The person tables contain estimates of low income rates, number of low income persons and percentage distribution of low income persons; family tables contain estimates of low income rates.

Recently, there has been extensive and recurring media coverage of Statistics Canada's low income cut-offs (LICOs) and their relationship to the measurement of poverty. At the heart of the debate is the use of the LICOs as poverty lines. Statistics Canada has clearly and consistently emphasized, since their publication began over 25 years ago, that the LICOs are quite different from measures of poverty. They reflect a consistent and well-defined methodology that identifies those who are substantially worse off than the average. In the absence of an accepted definition of poverty, these statistics have been used by many analysts who wanted to study the characteristics of the relatively worse off families in Canada. These measures have enabled Statistics Canada to report important trends such as the changing composition of this group over time.

For further information, please refer to On Poverty and Low Income on Statistics Canada's web site (www.statcan.ca). The menu path is Concepts, definitions and methods, then Discussion papers or new surveys.

Commencing with 1998 income statistics, the Survey of Labour and Income Dynamics (SLID) will produce the annual cross-sectional income estimates, in addition to producing longitudinal labour and income data. Integration of the cross-sectional and longitudinal income statistics programs will promote consistency amoung income estimates.

Click the title to download	File type and size
1997	(PDF - 1392K)