Feb 17, 2012

How to Destroy a Good Poverty Line


[The following piece was authored by Michael Goldberg, Steve Kerstetter and Seth Klein]

More than a decade ago, the federal and provincial governments started work on a new poverty line – the Market Basket Measure (MBM). After decades of distracting and divisive debates about poverty lines, Human Resources and Skills Development Canada crafted a methodology for the MBM that passed the test of common sense.

These days, the federal government appears more intent on throwing all that work into the garbage heap.

Two years ago, the bean-counters in Ottawa changed the methodology. In particular, they started calculating housing costs in a way that produced figures that were patently absurd. Suddenly, the much-lauded MBM no longer passed the test of common sense.

In Vancouver, for example, the shelter portion of the MBM for a family of four dropped from $12,329 a year for two-bedroom or three-bedroom apartments to $7,455 a year, a drop of almost 40 percent. The new measure works out to $621 a month, including utilities, in one of the most expensive housing markets in Canada.

Anyone know of a nice two-bedroom or three-bedroom apartment in Greater Vancouver that rents for $621 a month?

While the biggest cuts in the shelter portion of the basket for a family of four occurred in BC, there were also major cuts elsewhere when the revisions went into effect:

  • Toronto went from $13,477 to $9,346 ($779/month), down 31 percent
  • Winnipeg dropped 29 percent, from $8,961 to $6,325 ($527/month).
  • Fredericton dropped from $9,729 to $7,034 ($586/month), down 28 percent.
  • Calgary went down 27 percent, from $12,002 to $8,758 ($730/month).
  • Ottawa went from $12,373 to $9,134 ($761/month), a cut of 26 percent.
  • Halifax fell almost 26 percent, from $10,034 to $7,476 ($623/month).

The MBM is worth getting right. Unlike other poverty measures, it is intuitive and easily understood because it is based on the actual cost of basic goods and services. The MBM is also grounded in real local expenses in cities and towns across Canada rather than using a single figure for all major cities regardless of actual variations in local costs. And it was designed to be reasonable.  People could look at the list of local costs and agree that the line made sense; that it reasonably came to a figure that most would agree was an appropriate poverty line.  In short, the MBMs were a simple and uncomplicated way to describe poverty, and they were so much simpler to understand than the Statistics Canada low income cut-offs (or LICOs) traditionally used by most poverty analysts.

The three of us (all long-time researchers of social policy and poverty issues) were early supporters of the MBM.  While recent revisions to the costs for food, clothing, transportation, and other items in urban and rural regions of each province met the test of common sense, the same could not be said for the revisions to the shelter costs.

The three of us raised our concerns with colleagues in the federal government in September 2010, shortly after the changes were made public.

We saw no corrections when the most recent poverty data was published in June 2011.  Human Resources and Skills Development Canada and Statistics Canada ignored our suggestions either to suspend the MBMs last year or include a warning about the housing changes.

Most recently, we’ve been told this coming year’s poverty data will again contain this ridiculous and unsupportable change, although we’ve been assured that the folks in Ottawa are mulling over our concerns. Surely the better part of two years is long enough to fix the problems we have identified.

The party line in government seems to be that the last revisions in the MBMs were done with great care and great transparency.  We don’t believe either of those descriptions is true.

Regrettably, we are forced to recommend – once again – that the MBMs not be used until they are fixed

Meanwhile, anyone have an address for that $621 apartment in Vancouver that could house a family of four and includes all utilities?


Michael Goldberg is a former director of research at the Social Planning and Research Council of BC, Steve Kerstetter is a former director of the National Council of Welfare in Ottawa, and Seth Klein is director of the BC office of the Canadian Centre for Policy Alternatives.

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