Moving In and Out of Low Income

Archived Topic Box from the 2003 Third Annual Benchmark Report

Canada currently has no official poverty line, a reflection of the lack of agreement over what poverty means, what value judgments are involved and how it should be measured. Indicators such as the "relative" Low Income Cut Off (LICO) and the Low Income Measure (LIM) and "absolute" measures such as the new Market Basket Measure and Basic Needs Lines are frequently used by analysts to study trends in low-income prevalence, and to inform the discussion of income inequity and adequacy issues. In addition to producing the LICO and LIM, Statistics Canada has produced research on the causes of, and moves in and out of, low income as well as why some people remain in low income for several years.

Studies illustrate that those in low-income circumstances consistently share a number of common characteristics. Low-income Canadians and British Columbians are often unattached or in female lone-parent families. Children also are often put at risk of low-income as a result of their family circumstances. In 2001, 35.8% of persons under 18 years of age living in female lone-parent families were considered to be in low- income after tax, versus 7.7% in two-parent families.

For the most part, Canadians enjoy a relatively high level of income mobility. This means that while aggregate numbers of people in low-income remain fairly stable from year to year, the number of individuals who remain in low-income from one period to the next is quite low. However, while income mobility for the population at large is high, members of certain groups show an incidence of persistent low-income that is much higher than average. According to Statistics Canada's Survey of Labour and Income Dynamics (SLID), these groups include unattached individuals (especially between the ages of 45 and 59); lone parents with children under 18; recent immigrants to Canada; persons with long-term physical or mental disabilities; and, persons of Aboriginal origin living off reserve (the SLID does not measure persons living on-reserve).

The ability to move out of low income, even among those groups mentioned above, is significantly influenced by a number of factors, the most important being whether there is a strong attachment to paid work. Children and the elderly in low income are considerably less mobile than the population as a whole. Workers under the age of 55 have a 16% chance of moving out of low-income while workers over the age of 55 have only a 6% chance of doing so. University educated workers and professionals similarly have a greater chance of "moving up" than do those with a high-school education or those working in sales and service sectors, due to the lack of transferability or marketability of their skills. Men are more likely to escape low-income than are women. However single women without dependents have a 17% chance of moving out of low-income while lone mothers have only an 8% chance of doing so.

Individual moves into or out of low-income are also commonly related to certain life events. Significant family events, such as marriage, divorce, leaving home or the death of a spouse are frequently associated with a change in low income status. One study reports that roughly 41% of those dropping below the low-income cutoff have experienced a change in family composition within the year. Change in employment status likewise has a profound effect on moves into and out of low-income. While the effect of such changes is not generally as profound, they are much more frequent than changes in family status and therefore have a similar overall effect on income mobility.

Sources: Persons in Low-Income After Tax, Statistics Canada, 2003; The Causes of Persistent Low Income: A Key Barrier to Social Inclusion, Michael Hatfield, HRDC, 2001; The Upward Mobility of Low Paid Canadians, Statistics Canada, 1998; Crossing the Low Income Line, Statistics Canada, 1997.