Canada does not know how many seniors live in poverty
Originally published on Policy Options
December 18, 2023
Seniors have some of the lowest poverty rates in the country relative to Canada’s official poverty line. Seniors’ poverty rates are consistently lower than the national poverty rate. Yet, many seniors across the country are struggling. Reality doesn’t match the statistics.
The problem lies in the choice of measure. The market basket measure (MBM) was established as Canada’s official poverty line. But the MBM is not designed to measure seniors’ poverty, and it should not be relied on solely to assess seniors’ poverty or retirement-income supports.
A comprehensive review of the MBM started this summer, and Canada should use the opportunity to adopt an urgently needed seniors-specific measure of poverty that reflects the distinct circumstances seniors in Canada face.
Without the right measure, governments cannot determine how many seniors need support. Consequently they cannot find the policy solutions needed to ensure their right to an adequate standard of living, according to Maytree’s recent report A fine line: Finding the right seniors’ poverty measure in Canada.
Two measures, one contradiction
Canada employs two main adequacy measures, the market basket measure and the low income measure (LIM), each presenting a different perspective on income adequacy in Canada.
The MBM was established as Canada’s official poverty line in the federal government’s 2018 poverty reduction strategy. The MBM measures the cost of a basket of essential goods and services for a modest, basic standard of living, with thresholds defined based on the needs of a reference family of four. Canada is divided into 62 MBM regions across all provinces and territories except Nunavut, each with their distinct thresholds.
The low income measure is a relative measure. Its thresholds are based on the quality of life of the general population. It is calculated using the median household income and is applied across all provinces. It is not used in the territories.
Looking at seniors’ incomes relative to these two measures, we get two very different perspectives.
The MBM shows that seniors are doing well, and that they are less likely to live in poverty than the general population. However, the LIM shows the opposite, that seniors are more likely to have lower incomes than the general population.
The general population’s MBM poverty rates and LIM low-income rates have gradually diverged (figure 1) but they are still relatively close together. The gap between them reached about three per cent in 2021. On the other hand, the gap for seniors is much more significant. Since 2015, the LIM low-income rate has at minimum been double the MBM poverty rate, reaching a gap of 11.5 per cent in 2021.
The large difference in rates is likely explained by many seniors having incomes above the MBM threshold but below the LIM threshold, meaning they are captured in the low-income rate but not in the poverty rate.
If the LIM had been chosen as the official poverty line in Canada, seniors would be considered one of the worst-off groups in Canada. Instead, the federal government chose the MBM as the official poverty line, and it has become the primary poverty measure for all groups in Canada. Thus, more seniors are seen as living adequately.
However, neither the MBM nor the LIM is well-suited to measure seniors’ poverty. We will focus on issues with the market based measure given its official status in Canada.
Problems with the market basket measure
We have identified three main issues with the MBM that contribute to a likely underestimation of seniors’ poverty.
The MBM is tailored to a “traditional” family of four
That family consists of two working-age adults and two children. Its needs are quite different from the needs of seniors. Seniors’ costs are often perceived to be lower in retirement since it is assumed that they no longer work and can save on costs associated with going to work.
However, it’s seniors in good health who tend to benefit from these cost savings. Living costs rise with worsening health, which many seniors face as they age. As health worsens, they may have to pay others for meal services and private transportation, for example. The MBM doesn’t account for these costs.
The MBM is initially calculated for a reference family of four. That amount is then “equivalized” to determine the MBM of other family sizes using a multiplier. This method has been criticized as an oversimplification that especially underestimates the poverty of smaller families. Almost all senior families consist of one or two individuals, which means their poverty is more likely to be underestimated.
Health costs are not included
The MBM threshold is compared to a family’s disposable income, not its total income. Notably, the definition of disposable income excludes health-related expenses, which can be especially significant for seniors. Excluding health-related costs contributes to a misperception of the income seniors need. If health costs were included in the MBM, the thresholds would likely be much higher, especially for seniors.
A seniors-specific measure of poverty
A seniors-specific measure of poverty could be either a seniors-specific MBM or an entirely new measure that is tailored to the experiences of seniors in Canada. Alternative measures developed by Canadian researchers include the Canadian elder standard developed by the National Institute on Aging and the material deprivation index being developed by Food Banks Canada.
Also worth considering is a multi-dimensional measure as developed by the United Nations and the World Bank, which would assess poverty beyond income and include additional dimensions such as access to health services or access to consistent and stable housing.
As Statistics Canada undertakes its third comprehensive review of the MBM, there exists a crucial opportunity to redefine and enhance Canada’s official poverty line. It is imperative not to overlook this opportunity.