Canada Poverty Rate In 2022: Lower than You Think

6.4% of Canadians live below the poverty line, according to Stats Canada and the most recent numbers available from 2020.

I don’t know about you, but that number surprised me with how low it was. I was expecting at least 10%.

That percentage continually decreased over the years. So, what exactly are the Canada poverty rate and the poverty line, and how is it measured?

The Poverty Rate, Explained

Canadians describe poverty as when a person or household lacks basic resources, financial or otherwise, to maintain a modest standard of living.

The measurement comes from the Market Based Measure (MBM), which considers the costs of essential goods and services for a family of four.

The rate decreased in 2019 from 10.3% to the current level, 6.4% representing over 1.4 million Canadians now above poverty levels.

According to the government, a big reason for the decrease is due to the swift response of federal emergency and recovery benefit programs implemented due to the COVID-19 pandemic.

This support helped those on the brink pull out of the poverty line. In addition, income inequality continues to fall to some of the lowest levels seen in decades.

While there is still work to do, these numerical decreases show Canadians they’re on the right track and working towards a more inclusive economy.

The Market Based Measure (MBM)

The Market Based Measure (MBM)

The government adopted the MBM in 2018 to help effectively monitor poverty from year to year, along with any initiatives aimed at reducing it.

This calculation considers the community size, location, and household composition. From there, an estimation of the disposable income needed to fit basic needs is calculated.

Canada just started using this method in 2018, so to help with comparisons, researchers performed back calculations to 2000.

Other Measurements

In addition to the poverty line, other indicators help track progress by specific categories. They are as follows:

Dignity

Dignity ensures basic needs like food, shelter, and healthcare. To help assess and track progress, here’s a breakdown of the measured indicators.

  • Deep income poverty. This pillar helps identify families with disposable income below 75% of Canada’s poverty line.
  • Unmet housing needs. Canadians that live in unaffordable or unsuitable housing are required for the size of their family.
  • Unmet healthcare needs. To track this, Canadians reported unmet health needs within the past year.
  • Food insecurity. This indicator helps track Canadians that don’t have enough money to buy food to live a healthy life.

Opportunity and Inclusion

Another pillar used to help reduce poverty, opportunity and inclusion works towards aiding the low-income to join the middle class.

  • The relative low-income indicator measures Canadians living in low income.
  • Bottom 40% income share. The government tracks this to measure the share of total after-tax income held by 40% of the population at the bottom of the income distribution.
  • Youth engagement. This pillar measures youth from 15-24 not employed, in an educational setting, or in a training situation.
  • Literacy and numeracy. This everyday indicator assesses the skills needed in reading, writing, and basic mathematics to function throughout the day.

Resilience and Security

This indicator helps to support and help build up the middle class, so they don’t fall into poverty.

  • Median hourly wage. To help track income, researchers need to know the average hourly wage of Canadians.
  • The average poverty gap shows the shortfall below the poverty line for those already living below it.
  • Asset resilience. This indicator determines if Canadians can pull from their assets for a three-month period if they need to cover unexpected expenses.
  • Low-income entry and exit rates. These rates show how low-income tax filers’ status changes from one year to the next. The calculation helps track non-low-income filers that end up as low-income filers.

Why Did the Poverty Rate Drop?

Why Did the Poverty Rate Drop?

There are several reasons Canada’s poverty rate dropped over the past few years. To start, the government adopted the Opportunity for All legislation which works towards reducing poverty by 50% by 2030.

This reduction strategy placed the pillars and indicators mentioned above to help monitor progress and track how the country was doing overall.

In addition, the government introduced new strategies and investments to help fund early learning and childcare, home care and mental health benefits, as well as introducing Indigenous skills and trades training and housing plans.

Over the past five years, the government spent billions intending to reduce poverty and meet its 2030 goal. That goal would help move more than 2.1 million Canadians out of poverty, based on numbers from 2015.

Final Thoughts

Canada Poverty Rate

The most recent numbers indicate that 6.4% of Canadians live below the poverty line, a decrease from years prior. While it’s great news and means Canada is moving in the right direction, there’s still work to do.

There are still inequities within the social constructs of the country, especially for those recently marginalized by the COVID-19 pandemic.

A big part of fighting poverty is a decent living wage. To find out more about Canada’s norms, check out this article about the average income by age.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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