Market Basket Measure (MBM)

Part A - Short definition:

Based on concepts developed by Human Resources and Skills Development Canada (HRSDC), the Market Basket Measure (MBM) is a measure of low income based on the cost of a specified basket of goods and services representing a modest, basic standard of living.

Part B - Detailed definition:

Based on concepts developed by Human Resources and Skills Development Canada (HRSDC), the Market Basket Measure (MBM) is a measure of low income based on the cost of a specified basket of goods and services representing a modest, basic standard of living. Taken into consideration are the costs of specified qualities and quantities of food, clothing, footwear, transportation, a shelter and other expenses for a reference family of two adults aged 25 to 49 and two children aged 9 and 13.

A key feature of the MBM is that it is more sensitive than other low-income measures to geographical variations in the cost of many typical items of expenditure. Calculated for 19 specific communities and 30 population centre size and province combinations, the MBM threshold recognizes differences in the cost of the basket between similar sized communities in different provinces and between different geographical regions within provinces.

An important concept underlying the MBM is that the income to be compared to the thresholds should not be gross income, but rather a measure of the income closer to what is actually available to purchase these goods and services. Certain deductions must be made, for payments or outlays that are considered non discretionary as they represent income that is not available to purchase the goods and services in the basket. Thus, the income compared to the basket cost is the disposable income for the MBM.

In calculating the MBM thresholds, the equivalence scale used is the square root of economic family size. This method adjusts the threshold for families of a different size.

Presented below is the matrix of Market Basket Measure (MBM) thresholds for 2010:

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Remarks:

The MBM and the MBM disposable income were designed by a working group of federal, provincial and territorial officials, led by Human Resources and Skills Development Canada (HRSDC) between 1997 and 1999 (Hatfield 2002; Michaud, Cotton and Bishop 2004). During 2009 and early 2010, it underwent a comprehensive review of both content and methodology (Hatfield, Pyper and Gustajtis 2010). The consultation process, led by HRSDC, involved officials from provincial and territorial governments, other federal government departments and agencies, including Statistics Canada, and a panel of experts in low-income measurement. This review process led to a rebased series of thresholds (MBM, 2008 base), revised historically to 2000, the beginning of the MBM time series. Among the changes to the MBM resulting from the comprehensive review was the revision of the shelter component to include the costs of homeowners without mortgages. This revision recognized that, in a given year, homeowners without mortgages may pay less for shelter than they would if they were renting.

During 2012, HRSDC officials re-examined the methodology for including homeowners without mortgages in order to better implement the conceptual decision to reflect these costs in the MBM. Following this re-examination, a revised methodology was adopted that adjusts the MBM disposable income of homeowners without mortgages to account for the potential differences in their shelter-related expenses.

The NHS uses this 2012-based MBM.

While HRSDC was responsible for defining the components of the basket, Statistics Canada collects the data on the cost of goods and services in the basket to calculate thresholds and produce low-income statistics.

See also Prevalence of low income, Income status, Low-income gap and Severity of low income.

Refer to the data quality notes in the Income Reference Guide, National Household Survey, 2011.