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On May 27, 2003, Human Resources Development Canada released its new approach to measuring low income, the so-called Market Basket Measure (MBM). This method calculates the cost of food, clothing, shelter and other essentials deemed necessary for a family of four, and adjusts the amount for different cities. This amount basically becomes the poverty line. The MBM method is said to be “absolute”, in contrast to Statistics Canada’s “Low Income Cut-Off”(LICO), which considers a person to be in “straightened circumstances” if she allocates 20% or more of her income than an average person would spend on food, clothing and shelter. The LICO is thus a relative measure of poverty that takes into consideration the real changes in consumption as well as the increase in the population’s standard of living. A third measure, the “Low Income Measure”(LIM) is even more equitable, since it measures poverty as being less than one half of the median gross income.
To everyone’s surprise, the Market Basket Measure did not decrease the poverty rate, when compared to the LICO (calculated after tax). Thus the overall rate of low income rose to 13.1% from 10.9%, and child poverty is up to 16.9% from 12.6%. (However, when compared to the LICO before income tax which has been, until very recently, the most commonly used barometer of low income, the overall poverty rate would indeed decrease from 14.7%).
This may reassure some anti-poverty activists, who feared that the government would cave into the Fraser Institute and right wing lobby proposals with an absolute method that would artificially lower the poverty rate. However, a preliminary analysis seems to indicate that the MBM will indeed “disappear” the poverty of some groups of people, in particular elderly women.
The effect of the MBM on unattached women who are over 65 years of age is indeed important: 21% of these women were low income under the after tax LICO (and 46.4% before tax) in the year 2000. However, under the MBM, only 11% of unattached, elderly women will be considered “low income”. Thus the number of unattached, elderly women living in poverty has basically been cut by half, without any substantive change in their real living conditions. Does this make sense?
The MBM is said to be more sensitive to provincial variations, and in Québec the poverty rate of unattached elderly women is down from 37.6% when measured with the after tax LICO (64.6% when measured to the before tax LICO), to only 5.1% with the MBM. On May 28, 2003, Le Devoir carried a headline proclaiming that the statistics released by HRDC prove that Québec has improved its record on the anti-poverty front (Dufour, Valérie (2003). Le Québec s’améliore au tableau de la pauvreté. Le Devoir, May 28, 2003.). How will the new provincial Liberal government use this data in its plan to “re-engineer” the Québec state? Recently, it announced that it is abolishing the universality of the much-loved $5 a day daycare program, and imposing drastic cuts in its welfare budget. It may now be tempted to use the MBM statistics to justify further cuts in programs or reductions in funding.
Has HRDC taken into consideration the specific needs of elderly, unattached women when constituting their market basket? Have they done a gender-based analysis of the impact of this policy? Is the MBM a realistic assessment, or will it throw more confusion on the assessment of the poverty rates and on the development of policy initiatives for older women?
This problem illustrates the basic flaw of the MBM: it is an ad hoc approach, where items are put into a basket according to the priorities of a particular moment in time, and standards and limits are set for many years to come. While in some regards the basket may now seem well-stocked, the ploy of imbedding long-run deterioration in a short-run enhancement will result in short-lived gains. Indeed, the MBM is an absolute, rigid measure of poverty that will not age well, unless it is revised and updated by people who have hands-on experience with, and expertise on, poverty. In a briefing, Federal government officials admitted that there is currently no process or plan to amend the list of items in the market basket. But the MBM is already behind the times: it does not include a family computer or access to the Internet. While the Federal government is proposing “e-democracy”, its Human Resources Department proposes a method to measure low income that excludes one of the modern signposts of citizenship.
The Market Basket Measure is a lot less fair than the LICO or the LIM, and it begs the question: why did HRDC decide that we need a poverty measure that falls short of social inclusion?