How to destroy a good poverty line

Posted on February 15, 2012 in Social Security Policy Context

Source: — Authors: , , – business
February 14, 2012.    By Michael Goldberg and Steve Kerstetter and Seth Klein, Vancouver Sun

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 per cent. 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-bed-room or three-bedroom apartment in Metro 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 B.C., there were also major cuts elsewhere when the revisions went into effect:

. Toronto dropped 31 per cent, from $13,477 to $9,346 ($779/month).

. Winnipeg dropped 29 per cent, from $8,961 to $6,325 ($527/ month).

. Fredericton dropped 28 per cent, from $9,729 to $7,034 ($586/ month).

. Calgary dropped 27 per cent, from $12,002 to $8,758 ($730/month).

. Ottawa dropped 26 per cent, from $12,373 to $9,134 ($761/month).

. Halifax dropped almost 26 per cent, 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 ser-vices. 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 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 longtime 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.

We 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 were 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.

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