Dictionary, Census of Population, 2016
Low-income cut-offs, before tax (LICO-BT)Dictionary, Census of Population, 2016
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 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. These thresholds are presented in Table 4.4: Low-income cut-offs, before tax (LICO-BT ‒ 1992 base) for economic families and persons not in economic families, 2015, Dictionary, Census of Population, 2016.

When the total income of an economic family member or a person not in an economic family falls below the threshold applicable to the person, the person is considered to be in low income according to LICO-BT.

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 2016 Census, the reference period is the calendar year 2015 for all income variables.

Statistical unit(s)

Person
Economic family

Classification(s)

Not applicable

Reported in

2016 (100% data); 2011^{Note 1} (30% sample); 2006, 2001, 1996, 1991, 1986 and 1981 (20% sample). For availability prior to 1981, refer to Appendix 2.0.

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.

Low-income concepts do not apply to the full population. For example, persons living in collective households are excluded from the concepts because their living arrangements and expenditure patterns can be quite different from those of persons living in private households.

The low-income concepts are also not applied in the territories and in certain areas based on census subdivision type (such as Indian reserves). The existence of substantial in-kind transfers (such as subsidized housing and First Nations band housing) and sizeable barter economies or consumption from own production (such as product from hunting, farming or fishing) could make the interpretation of low-income statistics more difficult in these situations.

Since their initial publication, Statistics Canada has clearly and consistently emphasized that the low-income lines are not measures of poverty. Rather, low-income lines reflect a consistent and well-defined methodology that identifies those who are substantially worse off than average. These measures have enabled Statistics Canada to report important trends, such as the changing composition of those below the low-income lines over time.

For additional information on various low-income concepts, see 'Low income lines,' 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, 2016.

Note