Magic Statistics

Liberal leader Stephane Dion has pledged that his party would reduce poverty in Canada by 30 percent within five years if elected to power.  Along with the usual overheated rhetoric, he quoted lots of numbers about the extent of poverty in our country, but they’re all unfounded: Canada has no official poverty statistics.  Nevertheless, CTV and other news outlets repeat the numbers uncritically.

Liberal Leader Stephane Dion says his party would cut the number of Canadians living in poverty by 30 per cent over five years if they form the next government.

A federal Liberal government would also cut the number of children living in poverty by half in that same period, he said Friday during a speech in Toronto.

Of the 3.4 million Canadians living below the poverty line, Dion said 788,000 of those are children, and 242,000 of them seniors.

Those numbers come from “Income in Canada, 2005”, a publication released by Statistics Canada last May.  According to Table 11-1, found on page 89 of the pdf document, titled “Persons in low income after tax (92 LICOs base)”, 3,409,000 Canadians lived in families with low income after tax in 2005, of whom 788,000 were aged under 18.  But notice: The table shows the number of persons below the after-tax LICO (Low Income Cut-Off), not the number of persons in poverty.

As Statistics Canada has said repeatedly over the years, the LICO is not a measure of poverty.  Dr Ivan Fellegi, Chief Statistician of Canada, issued a public statement in September 1997 repudiating that persistent and pernicious myth.

Recently the news media have provided increasing coverage of Statistics Canada's low income cut-offs and their relationship to the measurement of poverty. At the heart of the debate is the use of the low income cut-offs as poverty lines, even though Statistics Canada has clearly stated, since their publication began over 25 years ago, that they are not.

As it happens, my sole publication as a professional statistician discusses the confusion, often deliberately propagated by social "activists", between low income cut-offs and measures of poverty.  Published in Policy Options in 1997, it summarises the main reasons why the LICO cannot be considered a poverty measure.  Best of all, it’s only three pages long.

Briefly, the LICO is a measure not of poverty but of income inequality—and it’s not even the best available measure of that.  So, the fact that one lives in a family with an income less than the LICO says very little about one’s living conditions.

Given its methodology, the only way the number of Canadians with incomes below the LICO could be cut by 30% would be through much greater taxation and redistribution of income, with predictably disastrous effects on employment, inflation, and economic growth.  (But it would substantially reduce greenhouse gas emissions.)

Source:

Statistics Canada, 2007. “Income in Canada, 2005”, Statistics Canada catalogue number 75-202-XIE.
http://www.statcan.ca/english/freepub/75-202-XIE/75-202-XIE2005000.pdf  (accessed 9 November 2007.)

Previous related posts:

• People living alone more likely to experience persistent low income
• Has Bob Rae learned nothing?
• Saskatchewan income tax cuts, five years later
• Widening income gap in Canada?