The Village Voice: A Hudson Blog Forum

Sunday, November 9, 2008

Second Paper - Of People and Dollars

Part 2 – Of People and Dollars

"Note that using the CPI to update the low income cut-offs takes inflation into account, but does not reflect any changes that might occur over time in the average spending on necessities." - Catalogue no. 75F0002MIE ― No. 004, LICO 2006

Canada (federally) has no official means to calculate poverty line for it's citizens. There are two standardized measures for measuring 'low income bands'. The reasoning is that the Dollar will buy you more in some parts of Canada than others. What these measures look for is the percentage of that Dollar that you are spending on essentials, approximately 61% (or $6.10 out of every $10.00) The first measure is the LICO (Low Income Cut Off) and the second is the LIM (Low Income Mean) which averages out households with a system of percentages for children and other dependents. A household with two parents and two children is considered to be as 2.0 people by LIM measurement; I quote;

"In order to calculate the LIMs, first determine the “adjusted size” of each family. The first person is counted as 1.0 and the second person is counted as 0.4, regardless of age. Additional adults count as 0.4 and additional children count as 0.3 (where a child is defined as being under age 16). See the following section on adjustment for family size for more information. Next, calculate “adjusted family income” for each family by dividing family income by “adjusted family size”. Then determine the median of this “adjusted family income”, such that half of all families will be above it and half below. The LIM for a family of one person with no children is 50% of this median “adjusted family income”, and the LIMs for other kinds of family are equal to this value multiplied by their adjusted family size."

I wonder who in Canada spends less on their children than they do on themselves, and am seriously skeptical of LIM figures. The Onus is not on the government to create household environments when considering the trends in our economy and finance, their Onus should be on ensuring that every citizen is capable of self sufficiency in the economic environment. I have disregarded the LIM in the course of this investigation. Averaging singular population tables will have the same, if not a more exacting effect on the figures I present here. Poverty goes all the way from desperation up to frustration - having no resources to challenge your circumstances is a central theme to poverty of all kinds, reflecting upon the people and the society infected.

-So, Who Are These People Involved?

Population of Canada Sept. '08 = 33,185,549 according to Statistics Canada, September 20th, 2008.

We'll start here, with those who are in the workforce.

1 in 25 workers in the Canadian work force work for minimum wage ($7.50 - $8.75 by province) - Statistics Canada, 2007. This figure is before taxes.

1 in 25 workers = 1,327,422 people, or 4% of population, it is stated by Statscan that 31% of these minimum wage workers (411,501 people) are between the ages of 25-54.

Another segment of population this above percentage does not tally is the income of 5.9% Unemployed Nationally. = 1,957,947 people capped at between 22 to 25k/pa.
Remember that these people are consumers, too. So then nationally, a 40 hour work week at minimum wage= $15,600 up to $18,200 pa (varied by province - before taxations and deductions). This excludes British Colombia which has recently sanctioned a training wage lower than their actual Minimum Wage. So we are adjusted to 9.9% , and that is almost 1 in 10 people you might see on your street. EI, a fixed income, being at reduced income rates up to 55% and capped at $22.620pa for single persons to $25,921pa for lower income families, in the policy of recently revamped federal EI measures.
this above percentage also does not tally those retired persons living on federal and provincial pensions. Another form of fixed income. OAS = $6,203.52pa (at Maximum Benefit), average payment $5,748.84pa, GIS = $7,830.12pa (Maximum Benefit) and $5,212.80pa (Canadian Average). This is an additional 4,687,100 people, or 14.1% of the population.

We now stand, readjusted, at between 18.1% up to 24%± of Canadian citizens. Getting pretty close to 1 in 4 here, and still not done yet.

this above percentage also does not tally the incomes of self-employed workers. Or 15.5% of the population (a further 4,977,832 people).

-So what exactly does this mean?

This means that if our economy were a boat on the water it would be listing to one side very badly; a huge segment of people are unable to make significant contributions into this market economy.

So to figure out the LICO I will refer back to the first part of this paper; 1992 will become the Zero year for income, and 100% for purposes of the CPI index, the only difference is that I will simply be adding the CPI index to the LICO measurement, or those dollars that you have spent just to keep food, shelter and clothing for one single person the year of 1992. The formula will look like LICO 1992 x 29.9%(CPI 2006) + LICO 1992 = LICO 2006.

-A Hidden Rise?

First I will add the five subsections that the Statscan provide against population ratio, Statscan has divided LICO into five different cross sections – from Rural to 500,000+ with different values for each. So I will add the five together, then divide the sum by 5 to gain their average. This number (LICO 1992) is $11,047.
(LICO 2006) then is $14,350, by adding 29.9%(CPI 2006) to (LICO 1992).
When I average Statscan's 2006 figures with the same equation I come up with this as well; $14,350.20. Remembering to add back 38.9% because the LICO is measured against spending 61.1% of your income on essentials. $11,047 (LICO 1992) then is actually a $15,344pa wage (1992 Dollars) to give you the ability to make those purchases at 61.1%. This is $7.37 per hour (clear of taxes) for a 40 hour work week, in 1992 Dollars. This wage (LICO 2006) is $19,932.42pa, or $9.58h (clear of taxes) in 2006 dollars. Note: 34% must be added to this because of the depreciation in the purchasing power of that dollar against income increases as I analyzed in the first paper. Added in this case because of the loss of purchase value in the consumer Dollar at the hands of the CPI since 1992. This $19,932.42pa as such becomes $26,709.44. with this readjustment the LICO 2006 is $16,319.47

We have already established that 18% - 24% of the population is either below or very close to this line, income wise. How can they spend? How high is this disposable income line, really, and how much can demand slip?

In 2008?

The CPI has risen another 5.4% since 2006, totaling 35.3%, as of November.
(LICO 2008) = $14,946.59, it's parent wage, readjusted with 38.9% is $20,760.81. or $9.98h (clear of taxes) for a 40 hour week. This is how quick it can climb the ladder, a rise of .40cents on the dollar in two years. And adding back the 34% loss in purchasing power that affected an income of $20,000 I arrive at $27,818.40pa 2008 dollars.

61.1% (LICO 2008) $16,997.04, it's parent wage is $27,818.40pa, $534.96 per week or $13.37h clear of taxes. As stated in the Abstract of Part One, if you spent every cent of this at a cash register, you would need to spend $16,997.04 just on essential items, and this has increased $677.57 in only two years, against however much your income has increased.

These are Real terms.

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