Low Income (Poverty) Dynamics in Canada: Entry, Exit, Spell Durations, and Total Time - June 2000

3. The Cross-Sectional Setting

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This section presents some cross-sectional results to act as introduction to the LAD database and put the dynamic analysis in context.

3.1 Low Income Rates, 1992-96

Average poverty rates for the tax-filing individuals included in the working samples for the 1992-96 period covered by this analysis shown in Table 1. (These represent the simple means of the annual rates which are given in the appendix, as is the case for the other cross-sectional results presented below.) These rates are roughly in line with those based on other data sources and other low income measures (e.g., Statistics Canada [1999]).⁵ Rates are, therefore, highest of all for individuals heading up lone parent families (52 percent for women and 31 percent for men), and also rather elevated for unattached individuals (23 and 25 percent for males and females respectively). Couples with children have much lower rates (10-13 percent), and childless couples are still better off (5-8 percent).⁶

The trends over time (see the appendix tables) are also interesting, with the period covered characterised by a lukewarm recovery from the early-90s recession and cut-backs in social assistance payments in many provinces, including Ontario (which has approximately 40 percent of the national population and thus affects the overall results to a commensurately large degree) after 1994. Thus, single individuals and childless couples, who are generally more dependent on labour market sources for their incomes, experienced steady (if moderate) declines in their low income rates from 1992 through 1995, while low income rates rose for lone parents and couples with children.

Table 1: Low Income Rates by Sex and Family Type, Average Rates, 1992-1996

	Percent
	% Poor	Share of All Poor %
Male
Single	25.2	16.1
Attached with Children	10.9	13.7
Attached no Children	8.2	10.4
Lone Parent	31.3	1.3
Filing Child	-	0.6
Female
Single	23.1	19.9
Attached with Children	12.8	16.4
Attached no Children	5.3	5.2
Lone Parent	52.4	15.4
Filing Child	-	1.2
Note: Dashes (-) indicate cells with too few observations to report.

The distribution of the poverty population (of the working samples) by these same age-family type categorisations (also Table 1) reflects the rates of low income and underlying sub-population sizes which characterise each group. Despite their low incidence of low income, the greater numbers of attached individuals (i.e., those in couples) in the population cause them to make up over half of the relevant low income population (46 percent for men and women combined). Singles make up another 36 percent, single parents (mostly females) comprise an additional 17 percent, and those in the "filing child" group make up the remaining 2 percent.⁷ Thus, while there would always be reason to focus policy on the groups with the highest poverty rates (single parents in particular), truly significant declines in the overall rates of low income would clearly require decreases for some of the groups with already relatively low rates.

Breaking the low income rates down by age as well as family type (Table 2) indicates some significant variation in the patterns along this dimension. For example, the younger (20-39) and older (65 plus) female lone parents (the latter being a very small group) have significantly higher poverty rates than do those in the prime age group (40-64), while elderly singles do significantly better than their younger counter-parts, reflecting the poverty-relieving effects of both public and private pension schemes.

The figures also reflect more clearly one bias of the tax filer basis of the LAD database: a significant under-representation of elderly (attached) women, indicated by the gender differences in the poverty rates for these females and their male counterparts ? a finding which has implications for some of the results which follow (as discussed where appropriate). The general notion is that i) the males are more representative of the situation faced by these older couples, and ii) the underlying population shares must be interpreted with this under-representation kept in mind.^{8, 9} The table also shows the distribution of the poor with the age dimension taken into account.

3.2 Mean Incomes and Income-to-Need Ratios

Table 2 also shows mean adjusted real incomes (constant 1996 dollars) by age and family status, but the average income-to-needs ratios shown in the last three columns are probably more pertinent to this paper with its focus on low income, since these represent family income divided by the low income cut-off, thus showing income levels relative to that threshold.¹⁰

Table 2: Low Income and Income-to-Needs Ratios by Family Type and Age, 1992-1996 Averages

	% Poor	Share of All Poor (%)	Mean Adjusted Income (1996$)	Mean Income-to-Needs Ratios
				All	Non-Poor	Poor
Male 20-39
Single	26.0	7.1	23,300	1.99	2.49	0.58
Attached with Children	12.3	7.6	24,500	2.09	2.29	0.70
Attached no Children	6.8	1.5	34,860	2.98	3.15	0.64
Lone Parent	38.5	0.6	15,980	1.36	1.84	0.62
Filing Child	6.2	1.0	33,420	2.86	3.00	0.66
40-64
Single	30.4	7.3	26,700	2.28	3.02	0.58
Attached with Children	9.5	6.0	30,680	2.62	2.83	0.66
Attached no Children	7.6	4.9	37,180	3.18	3.39	0.64
Lone Parent	26.6	0.6	21,960	1.88	2.34	0.60
65+
Single	13.3	1.6	23,140	1.98	2.15	0.84
Attached with Children	19.4	0.1	22,540	1.93	2.21	0.75
Attached no Children	9.9	4.0	27,360	2.34	2.51	0.76
Lone Parent	39.6	0.0	16,280	1.39	1.82	0.72
Female 20-39
Single	26.8	4.3	21,740	1.86	2.31	0.61
Attached with Children	14.4	11.5	24,080	2.06	2.30	0.64
Attached no Children	5.8	1.2	36,600	3.13	3.28	0.64
Lone Parent	60.1	11.4	11,900	1.02	1.55	0.67
Filing Child	5.8	0.5	34,300	2.93	3.07	0.66
40-64
Single	30.1	8.7	22,960	1.96	2.54	0.63
Attached with Children	10.0	4.8	31,080	2.66	2.88	0.60
Attached no Children	6.0	3.3	38,740	3.31	3.48	0.63
Lone Parent	38.0	3.9	16,800	1.44	1.93	0.64
65+
Single	16.7	6.8	19,720	1.69	1.85	0.86
Attached with Children	16.1	0.0	22,640	1.94	2.17	0.73
Attached no Children	3.2	0.7	31,880	2.72	2.79	0.65
Lone Parent	48.8	0.1	14,320	1.22	1.70	0.72

Perhaps most notable here are the very low overall average (adjusted) income levels of female lone parents. For the youngest group, for example, lone mothers have incomes which are on average right around the low income cut-off, and the situation is not much better for the other age groups (1.4 and 1.2 for the prime and older groups respectively). The next lowest levels are for male lone parents, although their rates are typically one-quarter to one-third higher than those of their female counter-parts. (They are also, of course, much fewer in number.)

The advantages of childless couples with respect to disposable income are seen in these groups having the uniformly highest INRs ? enjoying, on average, incomes approximately three times greater than the low income cut-off in the case of the two working age groups, and something less than this for the older groups (for which the males are the best indicator for the reasons explained above). Filing children also tend to be in families with high adjusted incomes. Couples with children come next, with total income levels roughly similar to the childless couples (figures not shown) but the extra needs associated with the additional family members (i.e., their children) driving their INRs down. Singles have, on average, adjusted incomes which are significantly above those of lone parents but substantially below those of the other groups, especially in the case of females, the male-female differences principally reflecting the gender earnings gap for these individuals.

The table also presents income-to-needs ratios by poverty status. Interestingly, the depth of poverty for those who are currently below the low income threshold is about the same for all groups (in relative terms) ? with adjusted incomes of these groups being mostly in the .6 to .7 range. The relative adjusted income levels of those not currently in low income show more variation, however, with the clearest departures indicating the generally low adjusted income levels of lone parents even when they are not actually below the poverty cut-off and suggesting that they are likely to be most at risk for entering poverty from one year to the next.

• ⁵There are a number of reasons for these rates to differ from those reported elsewhere. First, the "square root" equivalence scale and the 50 percent of median low income cut-off used here correspond to international conventions more than to the typical Canadian approach, while the "close-to-census-family" family definitions used in the LAD also differ from what is typically employed, as does the precise treatment adopted here for adult children and parents in families where there are only adult children (their incomes are considered pooled but they are classified as if they lived apart). Also, as discussed in the text, the tax-based income coverage represented in the LAD is probably more accurate than in most survey-based databases, perhaps especially with respect to social assistance income, which is such an important source for low income families. Finally, the tax filer orientation of the LAD's sample frame has an under-representation of certain classes of (non-filing) individuals relative to the population at large ? especially females with husbands who file, and particularly older ones, as discussed further below.
• ⁶The differences in the couple rates by sex are primarily due to the differential filing rates amongst older men and women mentioned above and discussed further below.
• ⁷Low income rates are not reported for the latter group because their numbers are generally small and such reporting would in some cases necessitate the suppression of results for other groups according to the confidentiality rules which govern the LAD.
• ⁸That is, the male-female differences in the low income rates of attached individuals are quite small for the younger age groups, reflecting the relatively high rates of filing by both members of such couples ( i.e., the similar rates for males and females reflect the same situation observed from each side), while for the older age group, the low income rates are significantly higher for men than women, indicating that women in low income families are less likely to file than are their partners (and also less likely to file than women in higher income families). This makes sense: higher income women are typically required to file by law (to pay the tax due), while those who are working also having incentives to file in order to recover over-payment of tax deductions and other payroll deductions.
• ⁹The low income rates would not in any case be expected to be exactly the same for males and females of a given age group because of the typically different ages of spouses. That is, women aged 20 to 39 will not always be the spouses of ? and thus in the same families as ? men aged 20-39, so that their incomes will differ, and so forth for the other age groups. The age cut-offs will also affect family representations to some degree for similar reasons, with more attached females than males likely to be lost from this restriction.
• ¹⁰All incomes were capped at the top 10^th of the top percentile so as to prevent extreme outlier values from distorting the estimates.