Counting the poor: Lies, Damned Lies and Humble Admissions

web posted September 1997

I've always harbored a bit of mistrust of statistics. Through four years of university, both the methodology behind and the scientific use of statistics, were drilled into my head by well-meaning psychology professors intent to prove that something as mysterious as the human mind could be documented with a few numbers. Probably one of the reasons why I and the pseudo-science parted ways.

One of the nation's trusted purveyors of statistics which is cited quite often in this journal, Statistics Canada, recently made a humbling admission.

"In the final analysis it may well be argued that poverty is simply too subjective a concept to be measured in a statistically objective manner," said the agency in a report released only under the Access to Information legislation.

It seems that the agency has come to the conclusion, that after three decades of trying, and failing, it cannot measure poverty. Indeed, the agency even admits that it cannot define the provide a meaning of the word that is acceptable to all.

Since 1967 Statscan has been publishing what it calls Low Income Cutoffs (LICOs). The LICOs have been used by social activists as the official poverty even though Statscan says that they are not.

"While Statistics Canada has always maintained and continually stressed that the LICOs are not a measure of poverty, little attention has been paid to these cautions."

The problem with LICOs is that they were defined in a completely arbitrary manner. In 1967 it was decided that a family was considered low income if it needed to spend 20 percentage points more for the basic necessities of food, shelter, and clothing than Canadian families spend on average.

And it is that definition that is the gulf between those who accept LICOs and those who do not. Social groups tend to define poverty as a low level of income relative to the average or median income of other Canadians.

On the other side of the debate are groups like The Fraser Institute, long opposed to the measure, who argue that the LICOs do not take into account a family's or individual's wealth. Even Statscan admits that spending on caviar and fur coats would count under money spent on "basic necessities", potentially skewing the numbers.

In a study about a year ago, the Institute argued for moving towards a "basic needs index."

"A basic needs index provides more relevant information about the nature and extent of poverty in Canada," said Chris Sarlo, professor of economics at Nipissing University, North Bay, Ontario. "Most of those who are now defined as poor using conventional measures would have been solidly middle class a generation ago. These conventional measures, such as LICO, tell us about inequality and the lack of 'social comforts', but very little about the true nature of poverty."

The debate between the friends and opponents of the LICOs does not reveal the full extent of damage that it has caused to Canada. It is what is actually done with the figures that has been the cause of consternation for many on the side of less government intervention in our lives.

The LICOs are used by the various governments of Canada to formulate social policy. One example were the recent moves by Ottawa and some provincial governments to attack child poverty, which the low-income cutoffs suggest has been rising.

And for 30 years those figures have been used as justification by successive governments to dump untold billions into the social net. Every year more money was spent but the problem according to the LIDOs only got worse. What was the natural solution? Spend more money. The cycle repeated itself for decades.

And so what happens after this admission? Statistics Canada says that despite its concerns that its low-income cutoffs are being misrepresented as poverty lines and are controversial even as a measure of what it calls "financially difficulty or straitened circumstances," it will continue to publish them because it has not found an acceptable alternative.

" might conclude that after significant studies and much public debate over the matter of income distributions and the definition of poverty, not much real progress has been made...The agency does, however, see the LICOs as a means of publishing complex income distribution data in a readily consumable fashion."

Summary: LICOs is admitted to being a measure with little credibility for what it is used for. We will still continue to publish them because we have nothing else better. They will still be used by social activists to demand more money for failed initiatives and governments will continue to rely on them as measures of their successes and failures.

And so the robbery of Canadians continues, even after a humble admission.

Thanks for reading,

Gord Gekko

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