Income Composition in Canada

Highlights

Over 95% of Canadians aged 15 and over received income in 2010, predominantly from private sources, and 70% of Canadians received income from government transfers

  • In 2010, over 95% of Canadians aged 15 years and over received some form of income with a median total income of $29,900.
  • Close to 83% of Canadians received some of their income from private sources.
  • While 70% of Canadians received some government transfers, 13% received government transfers as their only source of income. Overall, 57% of Canadians received income from both private sources and government transfers.
  • Income from private sources accounted for 87.6% of total income while 12.4% was from government transfers.

Employment was the main source of income for Canadians

  • Close to 70% of Canadians aged 15 years and over earned income through employment. Those earnings represented 74.7% of the total income received by private households in Canada.
  • In the Northwest Territories, employment income accounted for 87.8% of total income, the highest in the country, while in Prince Edward Island, employment income was 68.6% of total income, the lowest in the country.

Government transfers made up a large proportion of the income of seniors and of Canadians with the lowest income

  • Government transfers accounted for 41.1% of the total income for Canadians aged 65 years and over and 90% of these transfers came from Canada Pension Plan/Quebec Pension Plan (CPP/QPP), Old Age Security pension (OAS), and Guaranteed Income Supplement (GIS).
  • For the 10% of Canadians with the lowest family after-tax incomes, government transfers contributed 67.5% of their income.

Income redistributed through income taxes and government transfers

  • Collectively, Canadians in each of the lowest five deciles received more money from government transfers than they paid in income taxes.
  • The 10% of Canadians with the highest family after-tax incomes paid 25% of their income in income taxes and received 2% of their income from government transfers.

Income and income composition varied across different types of families

  • Employment income made up 84.7% of the total income of couple families with children under 6 years old and 81.5% of the total income of male lone-parent families with children under 6 years old. For female lone-parent families with children under 6 years old, employment income accounted for 54.9%.

Text box 1

Box 1: National Household Survey

This is the third release of data from the National Household Survey (NHS). Roughly 4.5 million households across Canada were selected for the NHS, representing about one-third of all households.

This analytical document contains the results from the NHS on income. A companion analytical document, Homeownership and Shelter Costs in Canada, Catalogue no. 99-014-X2011002, analyses findings from the NHS on housing.

In addition, there are three articles in the NHS in Brief series entitled Education and occupation of high-income Canadians, Persons living in low-income neighbourhoods and Condominium dwellings in Canada, Catalogue no. 99-014-X2011003.

Further information on the National Household Survey can be found in the National Household Survey User Guide, Catalogue no. 99-001-X. Specific information on the quality and comparability of NHS data on income can be found in the Income Reference Guide, National Household Survey, Catalogue no. 99-014-X2011006.

End of text box 1.

Part 1: Overview of income composition in Canada

Most Canadians aged 15 years and over had income, and the large majority of that income came from market sources

New data from the 2011 NHS showed that 95.1% of the 27,259,525 Canadians aged 15 years and overNote 1 received some form of income in 2010,Note 2 in total they received 1.1 trillion dollars.

Income can broadly be classified into income from private sources (market income) and income from government sources (government transfers).Note 3 In 2010, 87.6% of total income that Canadians received was in the form of market income and the remaining 12.4% was in the form of government transfer payments.

Over half of Canadians received both market income and government transfers

Although the share of total income from government transfer payments was small compared to market income, 70% of the population received some form of government transfer. The median total income received from government transfers was $4,100. A large majority of Canadians (82.5%) had some market income, with the median amount being $29,900.Note 4 In all, 57.4% of the Canadian population were recipients of both market income and government transfers. In contrast, just over 25% of Canadians received income from market sources alone while close to 13% of people received income from government transfers alone.

Part 2: Income from private sources

Employment income was the main component of total income

Employment income was the dominant component of total income. Close to 70% of the population had some employment income, accounting for 74.7% of total income. Employment income can be further broken down into wages and salaries and self-employment income. Of the 74.7% of employment income, wages and salaries accounted for 70.3% while the other 4.4% came from self-employment.

In contrast to total income from employment, the other three components of market income combined – investment income, private retirement income and other private income – contributed 12.9% to the total income of Canadians aged 15 years and over in 2010. Individually, investment income accounted for 4.6%, retirement income from private sources accounted for 6.7% and other private income, such as child and spousal support payments and scholarships, accounted for 1.7% of total income. While nearly one in three Canadians had some investment income, less than 15% of Canadians reported receiving either private retirement income or other private income.

The contribution of employment income to total income varied across the country

The share of total income coming from employment was the highest in Alberta and the three territories. In Alberta, employment income accounted for 81.3% of total income. However, the shares were higher in all three territories, with 81.8% in Yukon, 84.3% in Nunavut, and 87.8% in the Northwest Territories.

Ontario, with an employment income share of 74.8%, was close to the national average of 74.7%. Manitoba and Saskatchewan were slightly above the national average, at 75.4% and 75.6%, respectively.

The shares of income from employment in the other provinces were below the national average of 74.7%, ranging from 73.7% in British Columbia to 68.6% in Prince Edward Island.

Reflecting the high shares for employment income in Alberta, Calgary and Edmonton had the highest share of employment income among the census metropolitan areas (CMAs). The share of employment income was 82.2% and 81.3% respectively in 2010. The CMAs with the next highest share of income from employment were Saskatoon (79.1%), Toronto (78.5%), Regina (78.3%) and St. John's (78.2%).

The three CMAs with the lowest share of income from employment were Trois-Rivières (67.1%), Peterborough (67.0%) and St. Catharines - Niagara (66.6%).

Reliance on employment income began to decline after age 50, but at age 66, about four in ten still had employment incomeNote 5

At all ages from 25 through 50, employment income represented nearly 90% of total income. After the age of 50, the share of income from employment began to drop. At age 55, the share dropped to 86.5%, and by 60, it fell to 70.4%. A sharp drop (to 42.1%) occurred at 65 when CPP/QPP and OAS benefits usually become available. By the age of 75, employment income accounted for less than 10% of total income.

The decline in the proportion of people with employment income was more gradual than the decline in the share of employment income, indicating that average remuneration is dropping faster than the number of workers. For people aged 25 to 54, 84.3% received some employment income. By the age of 60, the proportion dropped to 68.8% and by the age 66 it had fallen to 43.1%. Further decline continued with age, but at age 75, the proportion of Canadians with employment income was still 18.2%.

After the age of 55, the proportion of people with wages and salaries declined more quickly than the proportion with self-employment income

Between the ages of 55 and 64, the proportion of people with wages and salaries declined from 73.6% to 45.8%, while the proportion receiving self-employment income changed little from 12.9% to 12.6%. From age 65 to 75, the proportion of people with wages and salaries declined from 41.2% to 12.7%, while the proportion with self-employment income declined from 12.2% to 6.7%. As such, the self employed tended to leave the labour market when they were slightly older than wage earners. At age 55, the proportion with wages and salaries was nearly six times greater than the proportion with self-employment income, whereas by age 75, this had dropped to less than twice the proportion with self-employment income.

Employment income is the major source of income for people in the middle and the top of the income distribution

The importance of employment income also varies by income group or decile.Note 6 Employment income represented between 73.6% and 83.8% of total income for people in the top half (top five deciles) of the income distribution. For Canadians in the third, fourth and fifth deciles, earnings made up 54.8% to 69.0% of their total income. Earnings represented less than 40% of total income for people in the bottom two income deciles.

These differences in the share of employment income by decile reflect, in part, the age profile and education level of the people in the various income deciles. For example, the top half of the income distribution, that is the top five deciles, had a greater proportion of persons between the ages of 25 and 64 (72.1%) than did the bottom half (62.5%). The proportion of seniors was highest in the second and the third deciles; where they made up 32.1% and 26.1% of the population aged 15 years and over respectively. In addition, people in the top half of the distribution had more education with close to 63% of the people in the top half having a post-secondary education, compared to 45% of the people in the bottom half.

People with high income had relatively more self-employment income

People in the top income decile received 7.6% of their total income from self-employment, compared to 4.5% or less in all the other income deciles. For people in the middle eight deciles, self-employment income represented 2.8% to 4.5% of their income. Self-employment income contributed very little to total income in the lowest decile.Note 7

The median amount of self-employment income reported in the top decile was $7,800, compared to $5,500 for the overall population.

About 14% of the population aged 15 years and over in the top decile reported having self-employment income. In contrast, between 7.2% and 9.8% of the population aged 15 years and over in each of the other income deciles had income from this source.

Western Canada had highest proportion of people with self-employment income

Nationally, 9.5% of Canadians had self-employment income. More than 15% of the population in Saskatchewan had self-employment income in 2010, the highest proportion in Canada. Manitoba, Alberta and British Columbia also had relatively high rates, at around 10% to 11%.

Saskatchewan was the only province with self-employment income making up more than 5% of total income while Newfoundland and Labrador, Nova Scotia and New Brunswick were the only provinces with self-employment making up less than 3% of total income.

Investment income is an important source for high-income Canadians and seniors

About half (50.2%) of the population aged 15 years and over in the top income decile had some investment income. This proportion dropped gradually from 36.8% in the second highest decile to 10.0% in the bottom decile. The median investment income in the top decile was $1,300, in comparison to between $400 and $500 for the other deciles. Over half (56.7%) of all investment income reported was received by people in the top decile and 11.3% went to people in the next highest decile, leaving 32.0% of all investment income spread amongst people in the other eight deciles.

People aged 65 years and over were also more likely to have investment income. The proportion of seniors with investment income was 51.8%, compared to 29.0% for the general population. Over 10% of seniors' income came from this source, and the median amount was $1,300, more than double the national median of $600.

Private retirement income represented about 30% of seniors' income

Amongst those aged 65 years and over, private retirement pension income represented 29.9% of total income in 2010. Private pensions were received by 59.2% of seniors and the median amount was $11,700.

There were relatively large numbers of people in the 55 to 59 (10.9%) and 60 to 64 (27.1%) age groups with private retirement income as well. The median amounts of retirement income in these two age groups were very similar, at about $25,500, significantly higher than that for the 65 years and over age group. Private retirement income represented 6.2% of total income for those between 55 and 59, and 17.3% for those between 60 and 64.

Part 3: Income from public sources

Government transfers supplemented income for a variety of population groups

In 2010, government transfers reached 70% of the population aged 15 years and over and represented 12.4% of the total income received by Canadians.

CPP/QPP as well as OAS/GIS were the two largest components of income from government. This is not surprising given that about 14% of the overall Canadian population was aged 65 years and over and 90% of these seniors received some kind of government pension. With 3.5% of total income coming from CPP/QPP and 3.1% from OAS/GIS, these two sources accounted for over half (52.8%) of all income from government sources.

Benefits received from either the Employment Insurance (EI) or child benefit programs were the next largest sources of income from government. They represented 1.8% and 1.5% of total income received by Canadians.

Other income from government, composed of a number of programs but mostly of social assistance, worker's compensation, and refundable tax credits, accounted for the remaining 2.6% of total income. Nearly half (48.2%) of the population aged 15 years and over in 2010 had income from this source.

Over 40% of seniors' income was from government sources

Government transfers accounted for 41.1% of the total income of the senior population, with the vast majority coming from CPP/QPP and OAS/GIS,Note 8 which made up 17.3% and 20.3% of seniors' total income, respectively. The median benefits received were $6,800 for CPP/QPP and $6,200 for OAS/GIS. Each of these sources was received by over 90% of the senior population.

Share of income from government transfers highest in Newfoundland and Labrador and Prince Edward Island

In most provinces, the bulk of the government transfers took the form of CPP/QPP or OAS/GIS benefits according to the 2011 NHS. However, in Newfoundland and Labrador and Prince Edward Island, income from EI benefits exceeded that from either OAS/GIS or CPP/QPP.

In the 2011 NHS, EI benefits accounted for 6.1% of total income in Newfoundland and Labrador, compared to 1.8% for Canada. This contributed to bringing the share of total income from government transfers to 19.3% in Newfoundland and Labrador, the highest in the country. The proportion of people in the province with EI benefits was 23.6%, compared to 10.3% in Canada as a whole. The median EI benefit was $7,900, compared to $5,000 in Canada.

Prince Edward Island had a similar picture. In 2010, just under 23% of the population received EI benefits, contributing 5.8% of total income, versus 5.0% and 4.3% from CPP/QPP and OAS/GIS benefits. The higher than average EI benefits in Prince Edward Island drove the share of total government transfers to be the second highest in the country, at 17.8% of total income.

More women than men received Employment Insurance benefits in the 25 to 39 age range

Due in part to the maternal benefits which are part of the EI program, women between the age of 25 and 39 saw a larger share of their income come from Employment Insurance than was the case for their male counterparts. The difference in share of income from EI benefits was the most pronounced in the 30 to 34 age group (5.9% of total income for females vs. 2.2% for males).

The proportion of persons who received EI benefits was higher among females than among males in three age groups: 25 to 29 (19.0% vs. 17.7%), 30 to 34 (23.5% vs. 17.7%) and 35 to 39 (16.7% vs. 15.4%). The median amount of EI benefits was also higher for females than males in these three age groups only. The difference was largest among those aged 30 to 34, with females receiving a median amount of $7,400 in EI benefits versus $4,300 for males in this age group.

People in the bottom two income deciles had more than half of their income from government sources

In the bottom two income deciles, 67.5% (first decile) and 55.1% (second decile) of total income came from government sources. In contrast, government transfers represented 5.0% of total income in the 9th decile and 2.1% in the top decile.

People in the bottom decile and people in the second decile received government assistance from different transfer programs. Given that 32.1% of persons in the second decile were aged 65 and over, OAS/GIS and other government income were the main sources of transfer income for this group, representing 21.1% and 12.3% of total income. Government assistance to people in the bottom income decile came mainly from child benefits (17.3%) and other government income (35.0%).

Part 4: Redistribution of income

Income redistributed to the bottom half of the distribution

According to the NHS, Canadians paid 16.4% of their total income in income taxes,Note 9 leaving 83.6% of total income as after-tax income. Overall, 63.7% of the population aged 15 and over reported paying income tax.

Progressive income taxes and means-tested income transfers serve in part to redistribute income from people with higher incomes to people with lower incomes. People in the top three income deciles received 55.7% of the nation's total income and paid 71.5% of the nation's total income tax. Of this group, people in the top decile received 28.1% of the nation's income, while paying 42.1% of the nation's income tax. As a proportion of their total income, the top decile paid 24.5% in federal and provincial income tax. At the other end of the income distribution, over 55% of the other income from government went to people in the bottom three deciles.

Looking at both income tax and government transfers, collectively, people in the bottom half of the income distribution received more in government transfers than they paid in income taxes overall. In the lowest and second lowest deciles, government transfers received less income taxes paid accounted for 60.7% and 52.8% of total income respectively. In contrast, as a group, the income taxes paid by people in the top half of the distribution exceeded the government transfers they received.

In three provinces – Newfoundland and Labrador, Prince Edward Island and New Brunswick – the total in transfers received was slightly more than the total taxes they paid. As a percentage of total income, Alberta was the only province whose taxes exceeded transfers by more than 10 percentage points. In the Northwest Territories, income taxes exceeded transfers by 8.7 percentage points, the second highest rate in Canada.

Part 5: Economic families

The analyses in the previous sections are largely based on individual income. In this section, the composition of income for selected economic family types and persons not in economic families is presented.Note 10,Note 11 In 2010, the median family total income was $76,600, versus a median of $28,200 for persons living alone.Note 12 Families had a higher share of income from market sources, at 88.6% of family total income, than persons living alone (82.6%).

Individuals living in couple families with children had a larger portion of their income from employment income

Although employment income was the major source of income for all family types, the amount varied. The share of employment income was highest for couple families with children under 6 (84.7%) or with children between 6 and 17 only (87.9%). For couples living without other relatives or children, the proportion was lower at 64.1%, as a larger proportion of their income came from retirement income and government transfers.

The share of employment income was lowest among female lone-parent families with children under 6 (54.9%). In contrast, for individuals in female-lone parent families with children between age 6 and 17, 73.8% of income was from employment income. The share of total income from employment for male lone-parent families with children under 6 (81.5%) or with children between 6 and 17 only (83.7%) were slightly below that of couple families with children.

The proportion of couple families with children under 6 years of age with employment income was also higher, at 95.4%, compared to 85.8% for male lone-parent families with children under 6 and 65.2% for female lone-parent families with children under 6.

Median employment income of female lone-parent families with children under 6 was $21,200, about half the median of male lone-parent families with children under 6 ($43,300) and less than one-third of the median employment income of couple families with children under 6 ($75,600).Note 13

Employment Insurance benefits and child benefits were the two main sources of government transfers for couple families with young children

For couple families with children under 6 years of age, EI benefits and child benefits accounted for 4.1% and 4.7% of total income. Over 40% of these families received EI benefits. The child benefits reached a much larger number of these families as 92.4% of the couples with children under 6 received such benefits. The median benefits from these two sources were $8,400 and $3,900 for couple families with children under 6 years of age.

Child benefits and other government income were the two main sources for government transfers for male and female lone-parent families with children under 18 years of age

Government transfers presented a major component of the income of female lone-parent families with children under 6, representing 41.6% of their income. Child benefits and other government income, in particular, contributed 22.7% and 13.6% to their income. For male lone-parents with children under 6, the shares of income from these two sources were 6.9% and 4.5%.

Female lone-parent families were more likely to be recipients of child benefits and other income from government than male lone-parent families. In 2010, 95.8% of female lone-parent families with children under 18 received child benefits, whereas 63.9% of male lone-parent families with children under 18 had such benefits. As for other income from government (mainly social assistance, worker's compensation and refundable tax credits), 89.3% of female lone-parent families with children under 18 and 75.4% of male lone-parent families with children aged under 18 were recipients.

Text box 2
Box 2: Concepts and definitions

The income data collected in the 2011 NHS was reported for the previous year (2010). Other characteristics such as age, or family type, were reported as of May 10, 2011 – the reference date of the NHS.

Total income refers to the sum of income from private sources (market income) and income from government sources (government transfers).

Income from private sources (also known as market income) is composed of employment income, investment income (excluding capital gains income), and private retirement income and other income from private sources.

Income from government sources (also known as government transfers) is composed of Canada/Quebec Pension Plan benefits, Old Age Security pensions and the Guaranteed Income Supplement, Employment Insurance benefits, child benefits and other income from government sources.

Taxes used in this report are based on the concept of income tax measured in the National Household Survey, which excludes other taxes or contributions collected by governments through sales tax, payroll tax or other channels.

Income composition refers to the relative mix of income components that make up total income. People with negative income were included in the analysis of income composition. It is possible to have a negative income for total income, market income, employment income, self-employment income and investment income.

Share of total income from an income component is the percentage of total income that an income component represents.

Median income is the amount which divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount. The medians for individuals are based on people aged 15 years and over with income from a given source.

Adjusted after-tax economic family income decile is a way of classifying people based on their family income level. Under this method, the population living in private households is ranked based on their family's income and then classified into 10 income groupings of equal numbers of people. The income concept used to define the deciles in this report is the adjusted after-tax economic family income. The after-tax economic family income is adjusted using the square root of family size to account for the possibility of economies of scales for larger families.

Canadians refers to people living in private households aged 15 years and over (born before May 10, 1996).

Private household refers to a person or a group of persons (other than foreign residents) who occupy the same private dwelling and do not have a usual place of residence elsewhere in Canada. Household members who are temporarily absent on May 10, 2011 (e.g., temporarily residing elsewhere) are considered as part of their usual household. Every person is a member of one and only one household.

Economic family refers to a group of two or more persons living in the same dwelling and are related to each other by blood, marriage, common-law, adoption or a foster relationship. A couple may be of opposite or same sex.

Economic family structure refers to the classification of economic families as couple families, lone-parent families or other economic families.

  • Couple families – Those in which a member of either a married or common-law couple is the economic family reference person.
  • Lone-parent families – Those in which either a male or female lone parent is the economic family reference person.
  • Other economic families – Those in which the economic family reference person has other relatives but does not have a married spouse or common-law partner or a child in their census family.

Seniors refers to people aged 65 and over.

End of text box 2.

Additional information

Additional information on income can be found in the NHS Data Tables, Catalogue nos. 99-014-X2011032 through 99-014-X2011044, the NHS Profile, Catalogue no. 99-004-X, as well as in the NHS Focus on Geography Series, Catalogue no. 99-010-X2011005.

One thematic map on income composition is available: Market income as a percentage of total income in 2010 by 2011 census division (CD).

For details on the concepts, definitions, universes, variables and geographic terms used in the 2011 National Household Survey, please consult the National Household Survey Dictionary, Catalogue no. 99-000-X. For detailed explanations on concepts and for information on data quality, please refer to the reference guides on the 2011 National Household Survey (NHS) website.

Note to readers

Random rounding and percentage distributions: To ensure the confidentiality of responses collected for the 2011 National Household Survey while maintaining the quality of the results, a random rounding process is used to alter the values reported in individual cells. As a result, when these data are summed or grouped, the total value may not match the sum of the individual values, since the total and subtotals are independently rounded. Similarly, percentage distributions, which are calculated on rounded data, may not necessarily add up to 100%.

Due to random rounding, estimates and percentages may vary slightly between different 2011 National Household Survey products, such as the analytical documents and various data tables.

Comparability between estimates from the 2006 Census long form and the 2011 National Household Survey estimates: When comparing estimates from the 2006 Census long form and estimates from the 2011 National Household Survey (NHS) users should take into account the fact that the two sources represent different populations. The target population for the 2006 Census long form includes usual residents in collective dwellings and persons living abroad whereas the target population for the NHS excludes them. Moreover, the NHS estimates are derived from a voluntary survey and are therefore subject to potentially higher non‑response error than those derived from the 2006 Census long form.

Comparing income data from the National Household Survey to other sources: When comparing income indicators from one source to another, users should be aware that the methodology of how the information was collected, the concepts used and response patterns can affect the comparability of income information. Given the sensitivity of most income indicators to such methodological differences, users should use caution when comparing income estimates from the NHS to other household income surveys, administrative data or 2006 or earlier censuses. In this analytical document, no comparisons to other data sources are presented.

Acknowledgments

This report was prepared by staff members of Statistics Canada's Income Statistics Division, with the assistance of Statistics Canada's Census Subject Matter Secretariat, Geography Division, Census Operations Division, Dissemination Division and Communications Division.

Notes

Footnote 1

Unless otherwise stated, the population in this document refers to the population living in private households aged 15 years and over at the time of the NHS in 2011.

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Footnote 2

Note that the NHS reference date was May 10, 2011, whereas the reference period for the income questions was the full year of 2010.

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Footnote 3

Income from private sources, which is also known as market income, encompasses employment income, investment income and private retirement income, etc. Income from government sources, which is synonymous with government transfer payments, covers benefits from the Canada Pension Plan, Quebec Pension Plan, Old Age Security pension, Guaranteed Income Supplement, Employment Insurance benefits and child benefits, etc.

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Footnote 4

Median income is the amount which divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount. The medians for individuals are based on people aged 15 years and over with income from a given source.

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Footnote 5

Age is reported in the National Household Survey according to the reference day of this survey, that is, May 10, 2011.

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Footnote 6

All people have been classified into 10 equal income groups according to the adjusted after-tax income of their economic family. In the first decile group the median individuals' total income was $7,400, in the fifth decile group it was $33,000, and in the top decile group it was $80,600.

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Footnote 7

A number of persons in the first decile incurred net losses from self-employment that offset those with positive self employment income.

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Footnote 8

Only seniors who received income from OAS, after taking into account the OAS repayment, are counted as receiving OAS.

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Footnote 9

Not all the components of total income are subject to income tax and taxable income sources such as capital gains are not included in the total income concept.

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Footnote 10

Persons not in economic family and persons living alone will be used interchangeably in this article.

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Footnote 11

In this section, each income component is aggregated to the family level.

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Footnote 12

The calculations of median total excluded those with zero income.

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Footnote 13

Families with zero employment income were excluded from the calculations of median. If zero employment income was included, the median employment income of female lone-parent families with children under 6 was $7,800. For male lone-parent families with children under 6, it was $37,200. For couple families with children under 6, it was $72,700.

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