The NCB Progress Report: 2006

• Previous
• Table of Contents
• Next

Chapter 4
Monitoring Progress - Societal Level Indicators

Federal, provincial and territorial governments are committed to monitoring and reporting on the National Child Benefit (NCB) initiative in accordance with the NCB Governance and Accountability Framework.¹³ This commitment is essential so that Canadians can be informed on the NCB's progress toward meeting its goals.

This chapter focuses on societal level indicators. These indicators of socio-economic trends are affected by the NCB as well as by many factors unrelated to the NCB, such as the general level of economic activity, government investments in income transfers, changes in tax policy, and changes in demographics. While the NCB initiative has some influence on the trend of these societal level indicators, no attempt is made to isolate the impact of the NCB alone on these trends. Instead, the indicators reported in this chapter paint a broad picture of the condition of low-income families with children in Canada , and provide a basis for comparison on the progress made over time. Chapter 5 reports on direct outcome indicators, which identify the direct impact of the NCB on families with children.

Table 7 describes the set of societal level and direct outcome indicators developed at the inception of the NCB initiative to track the degree to which each of its three goals is being achieved. This report provides information on many of these societal level indicators, including analysis of the incidence, depth, and persistence of low income among families with children in Canada over time. Information on other societal level indicators is included in the Evaluation of the National Child Benefit Initiative: Synthesis Report.¹⁴

It should be noted that the measures used in this chapter only indicate trends among Canadian families with children in terms of income. Many other investments in benefits and services introduced under the NCB initiative contribute to improving the well-being of children and their families. Many provincial and territorial NCB programs, benefits and services, such as supplementary health benefits, child/day care, early childhood and children-at-risk services, do not directly affect income trends but are still an important part of governments' strategies to support Canadian families.

The analysis in Chapters 4 and 5 is based on data from Statistics Canada's Survey of Labour and Income Dynamics (SLID). For a discussion of the SLID, its strengths, and its limitations, please see Chapter 5 of The National Child Benefit Progress Report: 2005, which is available on the NCB website.

Table 7
Outcome Indicators for the NCB

Measuring Low Income

Canada does not have an official poverty line. Several different measures of low income are used in Canada. This report uses primarily post-tax Low-Income Cut-Offs (LICOs). LICOs are set according to the proportion of annual income spent on basic needs, including food, shelter and clothing. The LICOline is the income level at which a family spends 20 percentage points more of its income on these items relative to the average family. The size of the family and community is taken into account, but geographic differences in the cost of living are not.

The LICOs can be calculated either before- or after-tax. Post-tax income is generally considered to be a better measure of low-income in Canada¹⁵ for two reasons. First, post-tax income more fully accounts for the re-distributive impact of Canada's tax system. Pre-tax income includes government transfers but not taxes. Post-tax income refers to the income available to a family after both government transfers and taxes. Secondly, since the purchase of necessities is made with after-tax dollars, this approach more fairly and consistently measures the economic well-being of individuals and families. The numbers of families living in low income differ from measure to measure, but the trends illustrated are generally similar.¹⁶

Other widely-used measures of low income are the Low Income Measure (LIM) and the Market Basket Measure (MBM). The LIM was developed as an alternative to the LICOs. It considers a family to be living in low income if its income, adjusted for family size, is less than half the median income (the income level at which the incomes of half of all families are higher and half are lower). The post-tax-and-transfer LIM is similar to measures used in international comparisons, but it does not reflect geographic differences in living costs across Canada.

The MBM is an additional tool that provides a different way of understanding low income. The MBM is based on the actual cost of food, clothing, shelter, transportation and other necessary goods and services, such as household supplies and telephone services. Households are considered to be living in low income if they are unable to purchase this basket of goods and services after accounting for income and payroll taxes and other non-discretionary out-of-pocket spending such as child care necessary to earn income, medically prescribed health expenses and aids for persons with disabilities. Compared with the LICOs and the LIM, the MBM more precisely reflects differing living costs by geographic location because the thresholds are estimated by region, as well as urban size. Further information about low income measurement is available on the National Child Benefit website, at: www.nationalchildbenefit.ca.

For 2004, using the MBM, the incidence of low income among Canadian families with children was 14.6 percent. This translates into 529,747 families with 1,093,294 children. Using the MBM, the incidence of low income among families with children has declined. In 2000, the first year MBM data was available, the incidence of low income among families with children was 16.5 percent. In 2001 and 2002, the incidence was 15.2 percent and 15.1 percent respectively. The depth of low income measures how far family income falls below a given low-income threshold. With the MBM, the depth of low income for families with children was 27.2 percent in 2004, up very slightly from 27.1 percent in 2003.

Key Trends

The societal level indicators discussed in this chapter measure the incidence, duration, and depth of low income among families with children in Canada over time. They also illustrate trends in labour force attachment and social assistance caseloads. Using the societal level indicators (according to post-tax LICOs) for low-income families with children, this report identifies the following key trends:

• In 2004, the incidence of low income among families with children fell slightly to 11.6 percent from 11.7 percent in 2003. This is well below the peak of 17.6 percent in 1996. The number of families with children living below the post-tax LICOhas fallen from 687,100 in 1996 to 434,800 in 2004, or a decline of 252,300 families.
• The number of children living in low-income families has declined from a peak of 1,304,000 in 1996 to 877,400 in 2004, or a decrease of 426,600 children.
• The number of children living in low income four years in a row declined from 6.3 percent between 1996 and 1999 to 4.5 percent between 2001 and 2004.
• The depth of low income (which is the additional amount of income needed by low-income families to reach the low-income line) declined slightly between 1996 and 2004. Expressed in 2004 dollars, the average depth of low income was $7,554 in 2004 compared to $7,654 in 1996.
• The proportion of low-income families in which at least one parent was employed for pay during the year increased from 55.7 percent in 1996 to 72.7 percent in 2004.
• There was a reduction in social assistance use by families with children, and corresponding evidence of increasing attachment to the labour force. Between 1996 and 2005, the total social assistance caseload for families with children declined by 56.2 percent, from 631,900 to 480,700 families.

Incidence of Low Income among Families with Children:

A significant decline over time

The incidence of low income refers to the number of families with children who fall below a pre-determined low-income line expressed as a percentage of all families with children. The trend in the incidence of low income among Canadian families with children since 1984 is shown in Figure 6, using post and pre-tax LICOs, and post-tax LIMs.

D

The proportion of families with children living in low income has closely followed the business and employment cycles over these years. Using the post-tax LICOs measure, Figure 6 shows that the incidence of low income among families with children dropped from 17.6 percent in 1996 to 11.0 percent in 2001. The incidence rose to 11.7 percent in 2003 and then declined slightly to 11.6 percent in 2004.

D

In 2004, there were 434,800 families with 877,300 children living below the post-tax LICOs compared to 442,600 families with 850,500 children in 2003. While the number of families in low income declined, the number of children increased due to a change in the composition of families remaining below the LICO.¹⁷

Compared to the peak in 1996, the incidence of low income among families with children in 2004 has decreased by about 37 percent. This reduction translates into a net movement of more than 252,300 families with about 480,300 children above the post-tax LICOs between 1996 and 2004.

The reduction in the proportion of single-parent families living in low income since 1996 has been particularly significant. As Figure 8 shows, the proportion of one-parent families living below the post-tax LICOs declined from 46.0 percent in 1996 to 30.5 percent in 2004. The proportion of two-parent families living below the post-tax LICOalso showed a decline, from 10.9 percent to 7.0 percent over the same period.

D

Duration of Low Income:

Low Income is Temporary for Most

Low income is usually not a permanent situation for most families with children. Most families who experience low income move in and out of it over time.

From 1984 to 2004, on average, 13.6 percent of families with children lived in low income (post-tax LICO) in any given year. As shown in Figure 9, between 1996 and 1999, about a quarter of all children aged 13 and under lived in a family which experienced low income for at least one of those four years (1,403,600 children in total). However, of those 1,403,600 children, less than one-half lived in low income for more than two of these four years (638,700 children in total, or 12.1 percent of all children age 13 and under). Only about a quarter of these children lived in a low-income situation for all four years (332,700 children in total, or 6.3 percent of all children age 13 and under).

D

Comparing the 1996-1999 period to the next four-year period, 1997-2000, the proportion of children experiencing low income in at least one of the four years declined from 26.5 percent to 24.3 percent. This proportion declined further in the 1998-2001 period to 22.6 percent, to 19.6 percent in the 1999-2002 period, to 19.1 percent in the 2000-2003 period and then to 17.6 percent in the 2001-2004 period.

Of the 765,600 children aged 13 and under who lived in a family which experienced low income for at least one year between 2001 and 2004, less than one-half lived in low income for more than two of these four years (321,500 children in total, or 7.4 percent of all children age 13 and under). Only about a quarter of these children lived in a low-income situation for all four years (196,400 children in total, or 4.5 percent of all children age 13 and under).

With respect to those children 13 and under experiencing low income for four consecutive years, there was an overall decline from 6.3 percent in the 1996-1999 period to 4.5 percent in the 2001-2004 period. However, there as been a slight increase in this proportion from 4.1 percent in the 2000-2003 period.

Depth of Low Income:

The Depth of Low Income is Lessening Gradually

The depth of low income measures how far family income falls below a given low-income line. It measures the additional amount of income a low-income family would need to reach a pre-determined low-income line, such as Statistics Canada's LICOs or the LIM.

An example is given below in Table 8. It shows that the 2004 low-income line (post-tax LICO) of a two-parent, two-child family living in a city of more than 500,000 people is $31,865. If such a family had post-tax income of $23,899 in that year, its depth of low income would be $7,966 (i.e., $31,865 - $23,899). Expressed as a percentage, the depth of low income of this family is equal to 25 percent of the low-income line (i.e., [$7,966/$31,865] x 100).

Table 8
Depth of Low Income for a Two-Parent, Two-Child Family Living in a City of more than 500,000 People in 2004

Source: Statistics Canada, Survey of Labour and Income Dynamics (SLID) 2004.

As illustrated in Figure 10, the depth of low income for families with children has generally improved since 1984. Between 1996 and 2004, the depth of low income for families with children improved slightly from 29.8 percent to 29.0 percent. This is a slight increase from 28.0 percent in 2003. However, over that period, the depth fluctuated somewhat from a high of 32.2 percent immediately before the launch of the NCB in 1997 to a low of 28.0 percent in 2000 and 2003.

D

In dollar terms, the average depth of low income has similarly shown a slight improvement between 1996 and 2004. In 1996, low-income families with children had an average after-tax income of $18,030. These low-income families would have needed, on average, $7,654 to reach the low-income line (post-tax LICOs). Comparatively, low-income families had an average after-tax income of $18,494 in 2004 and needed, on average, $7,554 to reach the low-income line (post-tax LICOs).¹⁸

Complex factors make it difficult to interpret changes in the depth of low income. As described above, movements in and out of low income are significant and have an impact on the depth of low-income indicator. For example, if families that are closer to the low-income line increase their incomes enough to no longer be considered living in low-income, the average depth of low income for those who remain below the low-income line may actually increase. This result would give the impression that the situation has worsened for all, when it has really improved for many. Despite these limitations, the depth of low income is an important indicator of how low-income families are faring.

Labour Market Attachment Among Low-Income Families:

More Low-Income Parents are Employed

Promoting attachment to the labour force among low-income families with children is the second goal of the NCB initiative. Figure 11 indicates that from 1984 to the economic downturn in the early 1990s, the percentage of low-income families in which the parents had paid employment was quite stable. The percentage declined during the early 1990s, but continued to increase during the economic recovery of the late 1990s.

As illustrated in Figure 11, the proportion of low-income families with children in which at least one parent was employed for pay during the year increased from 55.7 percent in 1996 to 72.7 percent in 2004. The proportion of one-parent families employed for pay rose from 37.5 percent in 1996 to 63.2 percent in 2004.

D

Additional information on labour force attachment can be gained by examining the sources of income of low-income families with children. For example, Figure 12 shows the average level of government transfers received and average earnings of low-income families with children between 1984 and 2004 (expressed in 2004 dollars).

D

While there has been variation from year to year, since the early 1990s, there has been a moderate upward trend in the level of earnings of low-income families with children and in the proportion of after-tax income that comes from employment earnings. In 1992, low-income families earned, on average, $4,789. This amount represented approximately 30.7 percent of the after-tax income of low-income families. In 2004, low-income families earned, on average, $6,538, which was 35.4 percent of their total after-tax income. During this same period, the trend in government transfers was slightly upward, and transfers continued to play an important role as a source of family income for low-income families.

Fewer Canadian Children are Living on Social Assistance

While it is not a direct indication of increased labour force attachment, there was a significant decline in the number of families receiving social assistance during the late 1990s.

Figure 13 shows that between 1996 and 2004, the number of one-parent families relying on social assistance decreased by 52.8 percent (from 454,500 to 214,700 households). By 2005, the decline reached 54.6 percent (down to 206,200 households). Between 1996 and 2004, the number of two-parent families with children relying on social assistance decreased by 60.3 percent (from 177,400 to 70,450 households). By 2005, the decline reached 61.9 percent (down to 67,600 households). As a result, between 1996 and 2004, the overall number of children living in families relying on social assistance decreased by 54.5 percent (from 1,096,900 to 498,800 children). By 2005, the decline reached 56.2 percent (down to 480,700 children).

D

It is interesting to compare the reduction in social assistance caseloads for families with children with the situation of childless families. Figure 14 shows that between 1996 and 2005, the two-parent family social assistance caseload numbers decreased by 61.9 percent. By comparison, between 1996 and 2005, the caseload numbers for couples without children decreased by only 25.2 percent. Similarly, between 1996 and 2005, the caseload for one-parent families declined by 54.6 percent while the caseload numbers for singles without children declined by only 18.5 percent.

Economic growth in the late 1990s was one of the main reasons for the overall reduction in social assistance caseloads. In addition, welfare reform measures, including the restructuring of social assistance systems in several provinces as part of the NCB initiative, were a contributing factor in the decline in the caseload of families with children. Finally, evidence from the federal/provincial/territorial evaluation of the NCB initiative suggests that the NCB was associated with social assistance caseload reductions.¹⁹

D

Summary

This chapter has shown that the incidence of low income among families with children has declined significantly since the mid-1990s. From a peak of 17.6 percent in 1996, the incidence of low income among families with children fell to 11.6 percent in 2004. This represents a decrease of 37.0 percent from 1996 levels. The depth of low income for families with children improved from $7,654 in 1996 (expressed in 2004 dollars) to $7,554 in 2004. There was also a decline in the proportion of children experiencing low income for four consecutive years, which fell from 6.3 percent in the 1996-1999 period to 4.5 percent in the 2001-2004 period.

In terms of attachment to the labour market, the proportion of earnings from employment and the percentage of low-income families employed for pay are higher in 2004 than in 1996. Finally, the social assistance caseload for families with children continues to decline.

These indicators are important in monitoring the overall economic well-being of low-income families with children. However, the extent to which the NCB has contributed to these changes cannot be directly determined from the societal level indicators reported on in this chapter. They do not tell us the extent to which the NCB is responsible for changes in these trends. Chapter 5 will describe the direct contribution of the NCB in preventing and reducing the incidence and depth of low income among families with children.