Market Basket Measure poverty thresholds and provisional poverty trends for 2021 and 2022

0
Market Basket Measure poverty thresholds and provisional poverty trends for 2021 and 2022

The Market Basket Measure (MBM) establishes poverty thresholds based on the cost of a basket of food, clothing, shelter, transportation, and other items for a family of four that reflects a modest, basic standard of living. A family with a disposable income below the appropriate MBM threshold for the size of the family and the region where they live is deemed to be living in poverty.

Starting with reference year 2021, Statistics Canada will be releasing MBM thresholds separately from the annual release of income estimates from the Canadian Income Survey (CIS), advancing their release by 3-4 months. In future reference years, the release of MBM thresholds for a particular year will be advanced by as much as one year. This will allow users to anticipate possible movements in poverty rates using information on changes in MBM thresholds. It will also allow users to have more up-to-date information on the change in the cost of living associated with a “modest, basic standard of living”, as captured by the MBM.Note  As in the past, MBM thresholds will continue to be published on Statistics Canada’s website for public consumption in Table 11-10-0066-01 Market Basket Measure (MBM) thresholds for the reference family by Market Basket Measure region, component and base.

The objective of this paper is to provide provisional estimates of MBM thresholds for the 2022 reference year using Consumer Price Index (CPI) adjustors available up to September 2022. While these provisional thresholds will be finalized and updated in a few months, they are being released now to help inform discussions of the potential impacts of recent inflation trends on poverty. Using official MBM thresholds for 2021, provisional thresholds for 2022 and what we currently know about income trends during those two years, predicted changes in the overall poverty rate for 2021 and 2022 are also presented and discussed.

New estimates for 2021 (official) and 2022 (provisional)

In accordance with the recommendations stemming from the latest comprehensive review update of the MBM, the MBM basket’s components are held constant in its base year and annual updates to the cost of basket components are made using the appropriate CPIs.Note  Therefore, the changes observed in the annual CPI will have a direct impact on the changes observed in the MBM thresholds.

The method for applying the CPI to the MBM thresholds is complex, with different CPI adjustors being used depending upon provinceNote  and MBM component. For example, the cost of the food component for Ontario is adjusted each year using the Ontario “food purchased from stores” CPI. Table 1 describes the CPI indexes used for each component.














Table 1

Market Basket Measure (MBM) component and its corresponding Consumer Price Index (CPI)

Table summary

This table displays the results of Market Basket Measure (MBM) component and its corresponding Consumer Price Index (CPI). The information is grouped by Market Basket Measure

component (appearing as row headers), Consumer Price Index

label and Consumer Price Index vector (appearing as column headers).
Market Basket Measure

component
Consumer Price Index

label
Consumer Price Index vector
Food Food purchased from stores v41693544, v41693679, v41693813, v41693948, v41694083,

v41694219, v41694355, v41694491, v41694627, v41694762
Clothing and footwear Clothing and footwear v41693602, v41693737, v41693871, v41694006, v41694142,

v41694278, v41694414, v41694550, v41694685, v41694821
Transportation Private transportation v41693611, v41693746, v41693880, v41694015, v41694151,

v41694287, v41694423, v41694559, v41694694, v41694830
Public transportation v41693621, v41693756, v41693890, v41694025, v41694161,

v41694297, v41694433, v41694569, v41694704, v41694840
Shelter All-items v41693542, v41693677, v41693811, v41693946, v41694081,

v41694217, v41694353, v41694489, v41694625, v41694760
Other necessities All-items v41693542, v41693677, v41693811, v41693946, v41694081,

v41694217, v41694353, v41694489, v41694625, v41694760

A couple of points should be made regarding the CPIs used for updating MBM thresholds. First, during the comprehensive review for the 2018-base MBM, it was decided that the shelter component would use the provincial all-items index, instead of the rented accommodation price index. Shortly after the publication of the 2018-base methodology, the CPI redesigned the methodology for the rented accommodation indexNote . In practice, the provincial all-items indexes have risen faster than the provincial rented accommodation indexes. This decision to use the all-items price indexes over the rented/owned accommodation indexes will be revisited during the next comprehensive review of the MBM (i.e., in 2023).

Second, while other components are adjusted using standard CPI estimates, for transportation, a weighted average of public transportation and private transportation indexes is used. Aside from the transportation component, the MBM components will track their corresponding indexes exactly.

Market Basket Measure poverty thresholds and provisional poverty trends for 2021 and 2022

Data table for Chart 1


















Data table for Chart 1

Table summary

This table displays the results of Data table for Chart 1. The information is grouped by Year (appearing as row headers), Consumer Price Index and Growth rate, calculated using percent units of measure (appearing as column headers).

Year Consumer Price Index Growth rate
percent
2015 126.6 Note : not applicable
2016 128.4 1.4
2017 130.4 1.6
2018 133.4 2.3
2019 136.0 1.9
2020 137.0 0.7
2021 141.6 3.4
2022 150.2 6.0Note *



Growth in MBM thresholds can be compared to growth in the CPI all-items index to gauge the appropriateness of the MBM methodology in capturing changes in the cost of living. The CPI rose 3.4% on an average annual basis in 2021, the fastest pace since 1991 (+5.6%).Note  The average CPI for the first nine months of 2022 indicated a 6.0% increase for 2022.

Nearly the same growth rates were observed with the MBM thresholds as, on average, they increased 3.4% in 2021 and 6.4% in 2022. Chart 2 shows the simple average of the 53 MBM regions using final data for 2015 to 2021 and provisional data for 2022. Estimates for each region are provided in tables on the Statistics Canada website for 2015 to 2021Note  and in Table A.1 in the Appendix for 2022.

Chart 2

Data table for Chart 2


















Data table for Chart 2

Table summary

This table displays the results of Data table for Chart 2. The information is grouped by Year (appearing as row headers), Average MBM threshold and Growth rate, calculated using current dollars and percent units of measure (appearing as column headers).

Year Average MBM threshold Growth rate
current dollars percent
2015 41,045 Note : not applicable
2016 41,581 1.3
2017 41,963 0.9
2018 42,790 2.0
2019 43,756 2.3
2020 44,141 0.9
2021 45,655 3.4
2022 48,583 6.4Note *



New MBM threshold estimates by component

Table 2 shows MBM threshold estimates by component for 2019 to 2022, where the 2022 estimates are provisional and based on an average of monthly CPI estimates only up to September.




















Table 2

Market Basket Measure (MBM) thresholds and components, 12-month change, average of the 53 MBM regions, 2019-2021 (Official) and 2022 (Provisional)

Table summary

This table displays the results of Market Basket Measure (MBM) thresholds and components. The information is grouped by Year (appearing as row headers), Total thresholds, Food component, Clothing and footwear component, Shelter component, Transportation component and Other necessities component, calculated using current dollars units of measure (appearing as column headers).
Year Total thresholds Food component Clothing and footwear component Shelter component Transportation component Other necessities component
current dollars
2019 43,756 12,126 2,182 13,275 4,479 11,695
2020 44,141 12,440 2,141 13,354 4,446 11,760
2021 45,655 12,744 2,130 13,814 4,793 12,174
2022Table 2 Note 1 48,583 13,862 2,154 14,699 4,911 12,958

Table 2

Market Basket Measure (MBM) thresholds and components, 12-month change, average of the 53 MBM regions, 2019-2021 (Official) and 2022 (Provisional) continued

Table summary

This table displays the results of Market Basket Measure (MBM) thresholds and components. The information is grouped by 12-month

change (appearing as row headers), Total thresholds, Food component, Clothing and footwear component, Shelter component, Transportation component and Other necessities component, calculated using percentage units of measure (appearing as column headers).
12-month

change
Total thresholds Food component Clothing and footwear component Shelter component Transportation component Other necessities component
percentage
2019 to 2020 0.9 2.6 -1.9 0.6 -0.7 0.6
2020 to 2021 3.4 2.4 -0.5 3.5 7.8 3.5
2021 to 2022Table 2 Note 1 6.4 8.8 1.1 6.4 2.5 6.4

The food component cost in the MBM basket makes up on average 28% of the MBM threshold, while the shelter component makes up about 30%. Accordingly, movements in the price of food and shelter have an important effect on the growth in MBM thresholds. In the MBM, the cost of the food basket rose 2.4% between 2020 and 2021 and 8.8% between 2021 and 2022. The shelter cost rose by 3.5% between 2020 and 2021 and 6.4% between 2021 and 2022.

The clothing and footwear component makes up the smallest proportion of the MBM basket and it was the only component to experience a decrease between 2020 and 2021, with cost decreasing on average by 0.5% from 2020 to 2021 but increasing by around 1.1% between 2021 and 2022.

Transportation experienced the highest average (7.8%) increase in cost between 2020 and 2021. This increase was mostly driven by the large increases in private transportation costs (including gasoline costs) and, therefore, impacted the MBM regions that rely mostly or entirely on private transportation options. For example, communities in New Brunswick with a population less than 100,000Note  saw their transportation costs increase by 10.8% from 2020 to 2021 (Table A.1 in the Appendix). In comparison, between 2021 and 2022, average transportation costs for all the MBM regions rose by 2.4%.

Finally, the other necessities component uses a different pricing methodology compared to the defined componentsNote  and contributes, on average, about another 25% to the total MBM threshold. It uses the annual provincial all-items indexes for annual cost adjustments. Therefore, its year over year increase was 3.5% in 2021 and 6.4% in 2022.

Looking forward – predicted changes the overall poverty rate

Overall, one could consider the MBM threshold growth rates of 3.4% in 2021 and 6.4% in 2022 as benchmarks to form expectations for changes in the poverty rate. These changes, in addition to information on growth in family income in 2021 and 2022, could be used to gauge the evolution of the overall poverty rate over those two years. If family income growth is predicted to be higher than the growth in the MBM thresholds, then the poverty rate is predicted to decrease. The greater this difference is, the greater the decrease is predicted to be. Conversely, if income growth rate is predicted to be less than the MBM threshold growth rate, then the poverty rate would be predicted to rise.

The CIS is the official data source used to estimate annual poverty rates in Canada. However, estimates from the CIS are available only 14-15 months following the end of the reference year, and the most recent data available (at time of writing in December 2022) is for 2020, preventing an analysis of up-to-date trends in inflation and poverty. An alternate source for estimating growth trends in family income is provided by the Distributed Household Economic Accounts (DHEA), a model that is able to output up-to-date estimates for the distribution of income using internationally accepted National Accounts concepts. DHEA income estimates are presently available through the second quarter of 2022. In this section we use up-to-date information from the DHEA to develop statistical predictions of the path of Canada’s overall poverty rate in 2021 and 2022.

Chart 3

Data table for Chart 3































Data table for Chart 3

Table summary

This table displays the results of Data table for Chart 3. The information is grouped by Year (appearing as row headers), Bottom quintile after-tax income (CIS) and Bottom quintile disposable income (DHEA), calculated using current dollars units of measure (appearing as column headers).

Year Bottom quintile after-tax income (CIS) Bottom quintile disposable income (DHEA)
current dollars
2002 11,642 16,110
2003 11,931 16,719
2004 12,037 16,792
2005 12,223 16,468
2006 12,503 18,060
2007 13,347 19,253
2008 14,367 19,564
2009 14,112 20,329
2010 14,201 21,011
2011 14,441 21,689
2012 14,791 23,097
2013 15,059 22,766
2014 15,536 23,215
2015 15,247 22,867
2016 15,886 23,637
2017 16,467 24,025
2018 16,505 24,888
2019 17,769 25,633
2020 20,800 33,024
2021 Note : not applicable 32,716
2022 Note : not applicable 29,360



Chart 3 shows recent trends in income levels and growth rates for families in the bottom income quintile, using data from the CIS and the DHEA. Both series show a large increase in income in 2020, explained by the income support delivered through pandemic relief programs, which led to a significant decline in the overall poverty rate in that year. According to the DHEA model, the annual growth rate for bottom quintile income is predicted to fall by 1% in 2021 compared to 2020, and by 10% further in 2022, as pandemic relief programs ended or where phased-out. These predicted declines in income, coupled with the estimated 3.4% increase in MBM thresholds for 2021 and 6.4% estimated increase for 2022, point to a predicted increase in the overall poverty rate for both years. It should be noted that income level differences between the DHEA and the CIS are due to differences in the definitions of income (e.g., DHEA estimates include factors not included in the CIS income definition such as imputed rent), the reference unit (CIS uses economic families for MBM and other related income indicators, while the DHEA uses households), and other factors.

Chart 4

Data table for Chart 4


















Data table for Chart 4

Table summary

This table displays the results of Data table for Chart 4. The information is grouped by Year (appearing as row headers), Official poverty rate, Predicted poverty rate and Modelled poverty rate, calculated using percent units of measure (appearing as column headers).

Year Official poverty rate Predicted poverty rate Modelled poverty rate
percent
2015 14.5 14.5 12.7
2016 12.9 12.9 12.0
2017 11.9 11.9 11.7
2018 11.2 11.2 11.5
2019 10.3 10.3 11.2
2020 6.4 6.4 7.6
2021 Note : not applicable 7.0 8.3
2022 Note : not applicable 9.8 11.8



Chart 4 presents predicted values of the poverty rate from 2015 to 2022 based upon the results of a regression model which describes the MBM poverty rate as a function of bottom quintile income from the DHEA, the CPI and a time trend.Note  This model is calibrated using data from 2002 to 2020, and then predicted values for the poverty rate are calculated using DHEA and CPI estimates through 2022. According to this model, the poverty rate is predicted to change relatively little between 2020 and 2021, up by 9.2%. Between 2021 and 2022 a larger change is predicted, with the poverty rate predicted to rise by an additional 41.5%. Annual growth rates of 9.2% and 41.5% imply a predicted poverty rate value of 7.0% in 2021 and 9.8% in 2022. It is underscored that these expectations are based on a model, and the official poverty rates would be different depending on the actual data.

Conclusion

This paper introduces Statistics Canada’s new practice of publishing MBM thresholds in advance of an annual income data release, making these estimates available as early as possible for policy analysts and others who are interested in the potential influence of price changes on the poverty rate. The poverty thresholds are shown to follow the CPI closely, which is to be predicted, given that various CPI adjustors are used to update the MBM thresholds. Other things being equal, poverty rates would fall as the incomes of lower-income Canadians increase and rise as inflation increases. Modelled results indicate that, based on current macro-economic conditions and price trends, Canada’s poverty rate is predicted to rise in 2021 and 2022, returning to a level close to the pre-pandemic levels by 2022.

Appendix A: Provisional 2022 poverty thresholds for MBM regions






























































Table A.1

Provisional Market Basket Measure (MBM) thresholds for the reference family by MBM region and component for reference year 2022, based on price trends through to September 2022, using the 2018-base

Table summary

This table displays the results of Provisional Market Basket Measure (MBM) thresholds for the reference family by MBM region and component for reference year 2022. The information is grouped by MBM Geography (appearing as row headers), Total threshold, Food, Clothing and footwear, Shelter, Transportation and Other necessities (appearing as column headers).

MBM Geography Total threshold Food Clothing and footwear Shelter Transportation Other necessities
Province Region current dollars
Newfoundland and Labrador rural 47,684 15,304 2,103 11,429 5,171 13,677
< 30,000 48,114 15,304 2,103 11,859 5,171 13,677
30,000-99,999 49,489 15,304 2,103 13,872 4,533 13,677
St. John’s 50,167 14,582 2,103 15,607 4,717 13,158
Prince Edward Island rural 48,312 15,377 2,147 12,006 4,886 13,896
< 30,000 49,189 15,377 2,147 12,883 4,886 13,896
Charlottetown 50,288 15,377 2,147 14,595 4,272 13,896
Nova Scotia rural 47,533 14,935 2,194 11,151 5,407 13,846
< 30,000 48,558 14,935 2,194 12,176 5,407 13,846
30,000-99,999 48,909 14,935 2,194 13,047 4,887 13,846
Halifax 51,597 14,307 2,194 17,348 4,353 13,396
Cape Breton 47,428 14,007 2,194 13,328 4,716 13,182
New Brunswick rural 46,665 15,120 2,425 10,183 5,163 13,774
< 30,000 48,379 15,120 2,425 11,897 5,163 13,774
30,000-99,999 48,124 15,120 2,425 11,642 5,163 13,774
Fredericton 50,238 15,043 2,425 14,503 4,547 13,720
Saint John 47,728 14,681 2,425 12,591 4,568 13,463
Moncton 48,055 14,150 2,425 13,965 4,428 13,087
Quebec rural 42,741 13,147 2,193 10,020 4,869 12,513
< 30,000 42,280 13,147 2,193 9,559 4,869 12,513
30,000-99,999 42,300 13,147 2,193 10,187 4,260 12,513
100,000-499,999 42,842 13,147 2,193 10,634 4,356 12,513
Québec 44,702 13,326 2,193 12,310 4,230 12,644
Montréal 45,331 13,445 2,193 12,841 4,122 12,731
Ontario rural 45,932 12,473 2,198 13,683 5,536 12,043
< 30,000 46,693 12,473 2,198 14,443 5,536 12,043
30,000-99,999 46,146 12,473 2,198 14,851 4,581 12,043
100,000-499,999 48,592 12,985 2,198 16,077 4,921 12,411
500,000+ 50,752 12,985 2,198 18,146 5,011 12,411
Ottawa 53,428 13,464 2,198 20,088 4,922 12,756
Hamilton/Burlington 49,216 12,683 2,198 16,851 5,290 12,194
Toronto 54,419 12,760 1,881 21,708 6,085 11,985
Manitoba rural 44,436 12,801 2,071 11,674 5,604 12,286
< 30,000 46,510 12,801 2,071 13,748 5,604 12,286
30,000-99,999 46,582 12,801 2,071 13,820 5,604 12,286
Brandon 46,017 12,801 2,071 14,089 4,770 12,286
Winnipeg 50,129 13,260 2,071 17,216 4,958 12,623
Saskatchewan rural 45,324 12,977 2,262 12,134 5,481 12,471
< 30,000 47,241 12,977 2,262 14,051 5,481 12,471
30,000-99,999 47,434 12,977 2,262 15,022 4,702 12,471
Saskatoon 51,275 13,219 2,262 18,327 4,823 12,644
Regina 50,353 13,098 2,262 17,550 4,887 12,556
Alberta rural 51,230 14,646 1,882 16,403 4,865 13,434
< 30,000 52,480 14,646 1,882 17,652 4,865 13,434
30,000-99,999 51,046 14,646 1,882 16,992 4,092 13,434
100,000-499,999 51,709 14,646 1,882 17,427 4,319 13,434
Edmonton 54,343 13,637 1,882 21,427 4,678 12,719
Calgary 54,888 13,756 1,882 21,778 4,669 12,803
British Columbia rural 46,950 13,455 2,076 13,337 5,394 12,688
< 30,000 48,240 13,455 2,076 14,627 5,394 12,688
30,000-99,999 48,491 13,455 2,076 15,677 4,596 12,688
100,000-499,999 53,350 14,320 2,076 19,066 4,580 13,308
Vancouver 55,062 13,698 2,076 21,548 4,877 12,862

Appendix B: Predicted poverty trends based upon trends in bottom-quintile disposable income from the Distributed Household Economic Accounts (DHEA) model

For predicted poverty trends, a model is estimated which describes the poverty rate as a function of the average bottom quintile disposable income, in current dollars, per household from the DHEA, the CPI and a time trend. National (all provinces) MBM poverty rates from 2002 through 2020 are used from all of the three MBM bases available (i.e., the 2000, 2008 and 2018 base data were all used). The model expresses poverty rate, the DHEA disposable income and the CPI index in logs, the time trend is linear and dummy variables are added to account for differences in poverty rates from different MBM bases. Results of the regression are in Table B.1.

















Table B.1

Regression results

Table summary

This table displays the results of Regression results DV=ln(poverty rate), calculated using Parameter and Standard Error units of measure (appearing as column headers).

DV=ln(poverty rate)
Parameter Standard Error
Intercept -5.806 12.274
ln(disposable income) -1.322Note *** 0.376
ln(CPI) 4.694Note * 2.726
2000-base -0.364Note *** 0.074
2008-base – 0.142Note ** 0.056
Time -0.079Note * 0.046
N 31 Note : not applicable
R2 0.742Note *** Note : not applicable

The regression has a modest quality overall fit, with an R2 of 0.742. As expected, disposable income enters the model with a negative coefficient, indicating poverty falls when disposable income rises, and CPI is estimated to have a positive coefficient indicating the poverty rate would fall when prices fall (all else being equal). Published and modelled data are shown in Table B.2.






























Table B.2

Published and modelled data, Canada, 2002-2022

Table summary

This table displays the results of Published and modelled data Official poverty rates, Average disposable income per household in the bottom income quintile (DHEA), All-items Consumer Price Index, 2002=100 and Modelled poverty rates (appearing as column headers).
Official poverty rates Average disposable income per household in the bottom income quintile (DHEA) All-items Consumer Price Index, 2002=100 Modelled poverty rates
2000-base 2008-base 2018-base 2000-base 2008-base 2018-base
Year
2002 12.9 Note : not applicable Note : not applicable 16,110 100.0 13.0 Note : not applicable Note : not applicable
2003 12.5 Note : not applicable Note : not applicable 16,719 102.8 13.0 Note : not applicable Note : not applicable
2004 12.5 Note : not applicable Note : not applicable 16,792 104.7 13.0 Note : not applicable Note : not applicable
2005 11.8 Note : not applicable Note : not applicable 16,468 107.0 13.6 Note : not applicable Note : not applicable
2006 12.4 15.6 Note : not applicable 18,060 109.1 12.2 15.2 Note : not applicable
2007 10.8 13.9 Note : not applicable 19,253 111.5 11.5 14.3 Note : not applicable
2008 10.2 12.4 Note : not applicable 19,564 114.1 11.6 14.4 Note : not applicable
2009 11.3 13.4 Note : not applicable 20,329 114.4 10.3 12.8 Note : not applicable
2010 10.4 12.3 Note : not applicable 21,011 116.5 9.9 12.4 Note : not applicable
2011 10.5 12.7 Note : not applicable 21,689 119.9 10.1 12.6 Note : not applicable
2012 10.8 12.7 Note : not applicable 23,097 121.7 9.2 11.4 Note : not applicable
2013 Note : not applicable 12.1 Note : not applicable 22,766 122.8 Note : not applicable 11.2 Note : not applicable
2014 Note : not applicable 11.3 Note : not applicable 23,215 125.2 Note : not applicable 11.1 Note : not applicable
2015 Note : not applicable 12.1 14.5 22,867 126.6 Note : not applicable 11.0 12.7
2016 Note : not applicable 10.6 12.9 23,637 128.4 Note : not applicable 10.4 12.0
2017 Note : not applicable 9.7 11.9 24,025 130.4 Note : not applicable 10.1 11.7
2018 Note : not applicable 9.0 11.2 24,888 133.4 Note : not applicable 9.9 11.5
2019 Note : not applicable 8.3 10.3 25,633 136.0 Note : not applicable 9.7 11.2
2020 Note : not applicable Note : not applicable 6.4 33,024 137.0 Note : not applicable Note : not applicable 7.6
2021 Note : not applicable Note : not applicable Note : not applicable 32,716 141.6 Note : not applicable Note : not applicable 8.3
2022 Note : not applicable Note : not applicable Note : not applicable 29,360Note * 150.2Note ** Note : not applicable Note : not applicable 11.8

References

Devin, Nancy, Burton Gustajtis, Keith Lam and Sarah McDermott (2021), “Construction of a Northern Market Basket Measure of poverty for Yukon and the Northwest Territories”. Catalogue no. 75F0002M2021007.

Djidel, Samir, Burton Gustajtis, Andrew Heisz, Keith Lam, Isabelle Marchand and Sarah McDermott (2020), “Report on the second comprehensive review of the Market Basket Measure”. Catalogue No. 75F0002M2020002.

Expert Group on Poverty Statistic (Rio Group). Rio de Janeiro, September 2006, “Compendium of best practices in poverty measurement”. ISBN 85-240-3908-6.

Gustajtis, Burton and Andrew Heisz (2022), “Market Basket Measure Technical Paper: The other necessities component”. Catalogue No. 75F0002M2022006.

Keshishbanoosy, Roobina and Lance Taylor (2019), “New approach for estimating the rent component of the Consumer Price Index”. Catalogue no. 62F0014M2019002.

Statistics Canada (2021), “Consumer Price Index: Annual review, 2021”. Catalogue No. 11-001-X.

link

Leave a Reply

Your email address will not be published. Required fields are marked *