Dictionary, Census of Population, 2021
Low-income cut-offs, before tax (LICO-BT)

Definition

The Low‑income cut‑offs, before tax refer to income thresholds, defined using 1992 expenditure data, below which economic families or persons not in economic families would likely have devoted a larger share of their total income than average to the necessities of food, shelter and clothing. More specifically, the thresholds represented income levels at which these families or persons were expected to spend 20 percentage points or more of their total income than average on food, shelter and clothing. These thresholds have been adjusted to current dollars using the all‑items Consumer Price Index (CPI).

The LICO‑BT has 35 cut‑offs varying by seven family sizes to account for economies of scale and five different sizes of area of residence to account for potential differences in cost of living in communities of different sizes. These thresholds are presented in Table 2.6 Low‑income cut‑offs, before tax (LICO-BT ‒ 1992 base) for economic families and persons not in economic families, 2020, Dictionary, Census of Population, 2021.

When the total income of an economic family or a person not in an economic family falls below the threshold applicable to the person, the person, or every member in the case of an economic family is considered to be in low income according to LICO‑BT. Low‑income status is typically presented for persons, but since the LICO‑BT threshold and family income are unique within each economic family, low‑income status based on LICO‑BT can also be reported for economic families.

For the 2021 Census, the reference period for low‑income data is the calendar year 2020.

Statistical unit(s)

• Economic family
• Person

Classification(s)

• Not applicable

Reported in

2021 and 2016 (100% data); 2011^{Footnote 1} (30% sample); 2006, 2001, 1996, 1991, 1986 and 1981 (20% sample). For availability prior to 1981, refer to Appendix 2.1.

Reported for

Economic families and persons not in economic families aged 15 years and over in private households where low‑income concepts are applicable (see Remarks).

Question number(s)

Not applicable

Responses

Not applicable

Remarks

The Low‑income cut‑offs, before tax were first introduced in Canada in 1968 based on 1961 Census income data and 1959 family expenditure patterns. At that time, there were five different cut‑offs varying between persons not in economic families and families of size two to five or more. Subsequent to these initial cut‑offs, low‑income cut‑offs were revised based on national family expenditure data from 1969, 1978, 1986 and 1992, and the number of cut‑offs increased to 35 compared to 5 in the 1959 base. These 35 cut‑offs vary by seven family sizes and five different sizes of area of residence to account for economies of scale and potential differences in cost of living in communities of different sizes.

The most recent Low‑income cut‑offs, before tax are based on the 1992 Family Expenditure Survey, which estimated that families spent on average 50% of their total income on necessities of food, clothing and shelter. The LICO‑BT thresholds were thus set to income levels where 70% of total income would likely be spent on these necessities.

The 1992‑based cut‑offs are the most commonly used. Cut‑offs for any given reference year are indexed by applying the corresponding annual all‑items Consumer Price Index (CPI) to the cut‑offs from the 1992 base year.

Low‑income cut‑offs, before tax is one of a series of low‑income lines used in the Census.

See also low‑income status; prevalence of low income; low‑income gap; low‑income gap ratio and total income.

Note that persons living in collective households are considered out of scope, as in the past Censuses, for all of the low‑income concepts because their living arrangements and expenditure patterns can be quite different from those of persons living in private households.

The LICO low‑income concept is also not applied in the territories and on reserve because the original evaluation of income and expenditure patterns was not conducted in those areas.

Since the initial publication of the low‑income lines, Statistics Canada has clearly and consistently emphasized that poverty is not something that can be defined by a National Statistical Organization. Instead, defining poverty is the responsibility of the policy departments of the government. In 2018, the Government of Canada released Opportunity for All – Canada's First Poverty Reduction Strategy. In this report, it was recognized that poverty is a multifaceted problem that goes beyond not having enough income. Based on the recommendation of this strategy, the government designated, the Market Basket Measure of low income as Canada's official poverty line under the Poverty Reduction Act in 2019. For more information about the official poverty line, see Market Basket Measure (MBM).

As a statistical agency, Statistics Canada's role is to publish measures of low income based on consistent and well‑defined methodology and to update these measures to reflect the current state of the Canadian society and economy. These measures would allow for the reporting of important trends in low income and economic well‑being, such as identifying those who are substantially worse off than average and tracking the changes in composition of those below any given low‑income or poverty line over time.

For additional information on various low‑income concepts, see 'Low Income Lines: What they are and how they are created' and 'Low Income in Canada - A Multi‑line and Multi‑index Perspective' in the Income Research Paper Series (Catalogue no. 75F0002M).

For additional information about data collection method, coverage, reference period, concepts, data quality and intercensal comparability of the income data, refer to the Income Reference Guide, Census of Population, 2021.

Note(s)