Transcript Youth unemployment in the 1990s

STATISTICS
CANADA
STATISTIQUE
CANADA
An update on the
development of Canada’s
Market Basket Measure
October 2001
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Background

Canada has no official measure of poverty

The Canadian Federal, Provincial and Territorial Ministers of
Social Services asked a working group to develop an alternative
to commonly used measures

Such a measure should be:
» credible in its approach to poverty measurement
» easy to understand
» sensitive to geographic cost differences
» reflect changes in costs rather than changes in income
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General Approach

The basket is composed of goods and services to allow a family to
» eat a nutritious diet
» buy clothing for work and social occasions
» house themselves in their community
» satisfy basic transportation needs for work, school, shopping
and participation in community activities
» pay for other necessary expenses

Prices are based on a reference family of 2 adults and 2 children,
and adjusted for other family sizes

The cost of the basket is compared to an MBM disposable income,
i.e. income after tax minus “non-discretionary” expenditures
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Food component
Construction of the food component

Items and quantities were taken from Health Canada’s Nutritious
Food Basket for a reference family of 2 adults and 2 children

Monthly pricing of food is already carried out for calculation of the
Consumer Price Index

Preliminary estimates have been developed for 40 cities
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Clothing component
Construction of the food component

Items and quantities from the Acceptable Living Level list of clothing
and footwear prepared by the Winnipeg Social Planning Council

Monthly pricing of clothing and footwear is already carried out for
calculation of the Consumer Price Index

Preliminary estimates have been developed for 16 cities
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Shelter component

Rent: average of median 2 bedroom unit and median 3 bedroom unit

utilities

other amenities
Sources of data

Census of Population gives rent, as well as heat, electricity and
water costs for very detailed geographic areas. Only units not in
need of major repairs will be used

Inclusion of fridge, stove, washer, dryer varies across the country
» LFS rent supplement provides provincial rates
» The cost of purchasing the appliance comes from 2nd income
decile spending, amoritized over the lifetime of the appliance
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Transportation component

This covers basic transportation needs for work, school, shopping,
and participation in community activities

There are two independent procedures for pricing transportation
component:
» Urban areas served by public transit - annual price of two adult
monthly passes
» All other areas - the amortized cost of a used vehicle, plus the
annual cost of operating the vehicle
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Other Expenses

A multiplier approach is used for other expenses

Actual expenditures by the 2nd income decile families
» Express expenditues on other expenses as a fraction of
expenditures on food, clothing and transportation
» Cost of other expenses is that fraction times the basket cost of
food, clothing and transportation
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MBM Disposable Income

Income that families actually have to purchase MBM commodities

Subtract from total income
» federal, provincial and territorial income taxes
» employee portion of payroll taxes
» union and professional dues
» child care costs to allow both parents (or a lone parent) to work
» child support payments made by non-custodial parents
» out-of-pocket costs of medically prescribed drugs, dental and
vision care

Total cost of MBM basket is compared with MBM disposable income
to determine MBM low income status
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Equivalence Scale

Components of the MBM are based on a reference family of 2
adults and 2 children

Baskets for other family sizes could be specified and priced,
but it is easier to use an equivalence scale

MBM uses the same scale as Statistics Canada uses for the
0.5 median measure of low income
» 1.0 for the first person
» 0.4 for the second person, regardless of age
» 0.4 for additonal adults (16+)
» 0.3 for additional children
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Updating the contents of the basket

Society’s idea of a reasonable standard of living evolves over time

Contents of the MBM should be reviewed on a five year cycle

MBM components and rates would be monitored
» unusual behaviour could trigger an earlier review
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Status of the MBM

Attempts have been made at estimating MBM components

Comparison with actual spending patterns

Food, shelter and transportation components look promising

Clothing basket specification needs more work

Some outstanding issues
» geographic coverage
» subsidized rent
» CPI sample is designed to measure change, not level

Ongoing contact to refine specifications

No firm date for publication of results
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