07-094-dp farm, rural and urban families and the incidence of low income in canada second meeting of...
TRANSCRIPT
07-094-dp
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, 2009Rome, Italy
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Purpose
1. To illustrate, using Canadian data, the complexities of measuring farm family income and well-being
2. To compare the income levels and incidence of low income for farm, rural and urban families in Canada
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Presentation Outline
1. Family Data in Canada
2. Type and composition of families
3. Annual versus Longitudinal Data
4. Measures of Low Income
5. 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 FamiliesType and Composition of Families
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Family composition is a major factor in determining family income levels
Median and Per Capita Income of Individuals and Families, Canada, 2006
Median income ($)
Per capita income ($)
Individuals 22,800 32,800
Families 63,600 28,200
Couple families 70,400 30,000
Lone-parent families 33,000 16,700
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Farm families account for a small share of all Canadian families; most farm families are couple families
2002-2006 Average All families and individuals Couple families
Couple families as a % of all families and
individuals
% of all families %
Small-Farm 1.8 2.5 77.9
Medium-Farm 0.3 0.5 86.5
Large-Farm 0.1 0.2 89.5
Very Large-Farm 0.1 0.1 86.6
All Farm Families 2.2 3.3 80.0
Rural Non-Farm 17.7 18.4 56.0
Urban Non-Farm 80.0 78.3 52.8
All Families 100.0 100.0 54.0
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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
All families and individuals (2002-2006)
Mean Family income
Median Family Income
Mean-Median difference
Small farm 70,460 51,100 19,360
Medium farm 65,140 50,520 14,620
Large farm 74,540 56,660 17,880
Very large farm 94,880 54,840 40,040
Rural non-farm 49,960 38,140 11,820
Urban non-farm 60,820 42,960 17,860
…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
Couple families (2002-2006)
Mean Family income
Median Family Income
Mean-Median difference
Small farm 78,640 58,580 20,060
Medium farm 68,100 53,580 14,520
Large farm 76,660 59,060 17,600
Very large farm 98,080 57,440 40,640
Rural non-farm 67,320 56,840 10,480
Urban non-farm 85,540 68,000 17,540
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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
2002-2006
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20
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60
80
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All Families andIndividuals
Couple Families Only
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The incidence of low income was higher for farm couple families compared to non-farm couple families
All families and individuals
Couple families
Small-Farm 14.4 12.0
Medium-Farm 18.6 17.5
Large-Farm 17.5 16.9
Very large-Farm 25.1 23.6
All Farm Families 15.5 13.5
Rural-Non-Farm 22.7 10.5
Urban-Non-Farm 21.6 10.8
All Families 21.7 10.8
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 FamiliesAnnual versus Longitudinal data
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Comparing annual data with longitudinal data is complex
Annual data Longitudinal data
Families
Family members of all tax filers matched annually to create a family file
20% sample of tax filersLongitudinal profile is created (of individual tax filers and their families over years) using a special identification number to select same individual tax filer in each year
Farm families
Farm families are families with Gross Farm Income (GFI) >0 in that year
Farm families must report GFI>0 in all five years
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Annual data Longitudinal data
Rural-Urban
Families living in a rural/urban area in that year
Families must have been living in a rural/urban area in all five years
Low Income
Families with income below the low income threshold level in that year
Families with five-year average family income below five-year average low income threshold level
…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
Percentage of families with income below LIM-IBT, 2002 to 2006
Annual data (Couple families)
Longitudinal data (All families)
Small-Farm 12.0 15.0
Medium-Farm 17.5 16.2
Large-Farm 16.9 15.1
Very large-Farm 23.6 18.9
All Farm Families 13.5 15.3
Rural-Non-Farm 10.5 19.4
Urban-Non-Farm 10.8 15.8
All Families 10.8 16.4
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Type and Composition of FamiliesMeasures 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
Rural areas
Urban areas
Less than
30,000
30,000 to
99,999
100,000 to
499,999
500,000 and over
LICO-IBT
Family of 4 27,118 30,851 33,716 33,925 39,393
LIM-IBT
1 adult, 3 children
34,874
2 adults, 2 children
34,874
3 adults, 1 child
36,618
4 adults 38,361
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
Incidence of low income, by family type, LIM-IBT and LICO-IBT, 2002-2006, Canada
Percentage with income below LIM-IBT
Percentage with income below LICO-IBT
Small-Farm 14.4 11.4
Medium-Farm 18.6 11.6
Large-Farm 17.5 13.2
Very large-Farm 25.1 18.8
All Farm Families 15.5 11.7
Rural-Non-Farm 22.7 26.8
Urban-Non-Farm 21.6 30.0
All Families 21.7 29.0
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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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