Farm, Rural and Urban Families and the Incidence of Low Income in Canada

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Farm, Rural and Urban Families and the Incidence
of Low Income in Canada

• Second Meeting of the Wye City Group on
  Statistics on Rural Development and Agriculture
  Household Income
• June 11-12, 2009
• Rome, Italy

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Purpose

• To illustrate, using Canadian data, the
  complexities of measuring farm family income and
  well-being
• To compare the income levels and incidence of low
  income for farm, rural and urban families in
  Canada

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Presentation Outline

• Family Data in Canada
• Type and composition of families
• Annual versus Longitudinal Data
• Measures of Low Income
• Summary

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Family Data in Canada

• Tax records provide both annual and longitudinal
  data on Canadian families
• Annual data
• 24 million tax filers in 2006
• Individual tax filers are matched with family
  members
• Series available from 1982 to 2006
• Longitudinal data
• 20 sample of the annual tax family file
• Sample of 5 million tax filers in 2006
• Series available from 1982 to 2006

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Type and Composition of Families
Type and Composition of Families
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Family composition is a major factor in
determining family income levels
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Farm families account for a small share of all
Canadian families most farm families are couple
families
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Mean and median income levels of all families and
individuals were generally higher for farm
families compared to non-farm families
The larger difference between the mean and
median income for very large farm families
indicates high incomes in this population
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Mean and median income levels of couple families
were generally higher for large and very large
farm and urban non-farm families
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Family definition has a significant impact on the
median income of non-farm families

• For farm families, the family definition had much
  less of an impact on the median income level

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The incidence of low income was higher for farm
couple families compared to non-farm couple
families
Incidence of low income, by family definition and
family type, using LIM-IBT, (), 2002-2006,
Canada
Low Income Measure Income Before Tax (LIM-IBT)
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Type and Composition of Families
Annual versus Longitudinal data
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Comparing annual data with longitudinal data is
complex
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Comparing annual data with longitudinal data is
complex
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Longitudinal data has certain advantages over
annual data

• Performance can be measured over time taking into
  account both low and high income years
• The persistence of both high and low income over
  years can be measured
• Variability of incomes of individual farms over
  more than one year can be measured
• Farms that enter and exit can be eliminated from
  the sample

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Longitudinal data resulted in a lower incidence
of low income for all farm families except those
operating a small farm, compared to non-farm
families
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Type and Composition of Families
Measures of low income
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The frequency of low income can change depending
on the low income measure used

• The Low Income Cut-Off (LICO)
• Based on consumption the percentage of family
  income spent on the basic necessities of food,
  clothing and shelter
• The Low Income Measure (LIM)
• A relative measure based on income
• Equal to one-half of the median of adjusted
  family income
• Family income adjusted according to the number of
  family members using an equivalence scale

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The LICO

• Based on expenditures on basic necessities (food,
  clothing and shelter) of an average Canadian
  family in a base year (1992)
• The average family spent 43 of income on basic
  necessities in 1992 the LICO the income level
  at which 63 of income would be spent on basic
  necessities
• Adjusted for inflation every year
• A separate LICO is calculated for each of
• income before-tax and income after-tax
• rural areas and for four urban community sizes
  and
• up to seven family members

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The LICO varies over a wider range of values
compared to the LIM
Low Income Threshold Levels for a family of four,
LICO-IBT vs. LIM-IBT, Canada, (), 2006
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A lower percentage of farm families were in low
income using the LICO-IBT
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Summary

• This presentation illustrates some of the
  complexities of comparing income levels between
  farm and non-farm families
• The majority of farm families are couple
  families therefore couple families provide the
  most direct farm vs. non-farm comparisons of
  income
• Using a broad definition of family is useful in
  identifying overall low income rates in a country
• Longitudinal data has certain advantages over
  annual data
• The family income situation can be observed over
  more than one year
• Income variability can be smoothed by averaging
  income over years which had the largest impact on
  large and very large farms
• The method used to determine the low income
  threshold level can lead to different results
• Taking into account a lower cost-of-living in
  rural areas results in a lower percentage of
  families in low income in rural areas

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