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Important changes to how poverty is measured

Statistics Canada’s Low Income Measure (LIM) is used in the calculation of a number of Ontario’s poverty indicators, including the Low Income Measure, Depth of Poverty and the Ontario Housing Measure. It is also a foundation for reporting progress toward the goal of reducing the number of children living in poverty by 25 per cent over five years.

The LIM measures the number and per cent of children under the age of 18 living in households earning less than 50 per cent of the median adjusted household income. It is a relative measure of poverty and tends to change with the economy, falling in growth periods and rising in recessions.

Progress measured on poverty reduction indicators uses 2008 as a baseline year. Statistics Canada data for income indicators lags by 18 months. In 2008, Statistics Canada’s LIM was 15.2 per cent. Because of the data lag, progress on initiatives under way since the release of Ontario’s Poverty Reduction Strategy in 2008 is not reflected in the 2010 indicators.

In 2010, Statistics Canada made changes to how the LIM is calculated and has applied these changes to the 2008 data. Changes relate to how a household is defined and the ranking used to calculate average income. (For more information see Revising Statistics Canada’s Low Income Measure, Statistics Canada, 2010 at www.statcan.gc.ca).

For example, the first Annual Report released in December 2009 reported that the Low Income Measure (LIM) for children in 2007 was 11.7 per cent (or 318,000 children). With the new calculation, this number has increased to 14.1 per cent (or 384,000 children).

Ontario is using the revised LIM to be consistent with the latest methods of measuring poverty levels internationally. While the general trend in poverty is similar across the old and new measures, the new Low Income Measure shows a higher number of children in low income.

This does not mean that there has been a change in the socio-economic well-being of these children. The higher number is solely the result of changes to how the LIM is calculated. However, with more children below the new Low Income Measure (LIM50), the Poverty Reduction Strategy target of reducing the number of children in poverty by 25 per cent over 5 years has changed. Meeting the target of 25 per cent now means lifting 103,000 children, rather than 90,000, out of poverty over five years.