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Policy backgrounder

How do we measure poverty?

Published on 30/05/2017

Measuring poverty helps us to tackle it. It helps us understand trends and causes, and develop informed responses. Good measurement also allows us to monitor how effective those responses are, and how poverty is changing.

Yet, we have no standard measure of poverty in Canada. Three measures of poverty are routinely published by Statistics Canada, which refers to them as “low income” measures (as the term “poverty” means different things to different people).

The main difference between the measures is how each sets the threshold at which someone is defined as having low income:

  • Low income cut-off (LICO) – An income threshold below which a family will devote a much larger share of its income than the average family on the necessities of food, shelter, and clothing.
  • Low income measure (LIM) – An income threshold substantially below what is typical in society.
  • Market Basket Measure (MBM) – An income threshold tied to the cost of a specific “basket” of goods and services representing a modest, basic standard of living.

Each measure has strengths and weaknesses. Having three measures provides us with a rich picture of the nature of income poverty and how it is changing, which allows policy responses to be more informed.

This backgrounder outlines these three main measures of low income currently used in Canada, alternative measures of poverty, and how we might improve on measurement and monitoring.

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Summary

Explains the differences between the low income cut-off (LICO), low income measure (LIM), Market Basket Measure (MBM), and material deprivation, and how we can improve how we measure poverty.

Topic(s)

Evidence-based policy, Poverty