Dictionary, Census of Population, 2021
Low-income measure, after tax (LIM-AT)

Definition

The Low‑income measure, after tax, refers to a fixed percentage (50%) of median adjusted after‑tax income of private households. The household after‑tax income is adjusted by an equivalence scale to take economies of scale into account. This adjustment for different household sizes reflects the fact that a household's needs increase, but at a decreasing rate, as the number of members increases.

Using data from the 2021 Census of Population, the line applicable to a household is defined as half the Canadian median of adjusted household after‑tax income, multiplied by the square root of household size. The median is computed from all persons in private households. Thresholds for specific household sizes are presented in Table 2.4 Low‑income measures thresholds (LIM‑AT and LIM‑BT) for private households of Canada, 2020, Dictionary, Census of Population, 2021.

​When the unadjusted after‑tax income of household pertaining to a person falls below the threshold applicable to the person based on household size, the person is considered to be in low income according to LIM‑AT. Low‑income status is typically presented for persons but, since the LIM‑AT threshold and household income are unique and shared by all members within each household, low‑income status based on LIM‑AT can also be reported for households.

For the 2021 Census, the reference period for low‑income data is the calendar year 2020.

Statistical unit(s)

• Person
• Private household

Classification(s)

• Not applicable

Reported in

2021 and 2016 (100% data); 2011^{Footnote 1} (30% sample).

Reported for

Private households

Question number(s)

Not applicable

Responses

Not applicable

Remarks

Following the practice of many international organizations, Statistics Canada publishes Low-income measures, before‑tax and after‑tax. The choice of using Low‑income measures, before‑tax or after‑tax depends upon the analysis undertaken. The Low‑income measure, after‑tax takes into account the reduced spending power of households because of income taxes paid.

In 2010, after a comprehensive review of LIMs, the following three aspects of LIMs were revised:

1. Accounting unit utilized: the median began to be calculated over the population of individuals, as opposed to over that of families or households. As a result, each person in the population is represented by their adjusted household income.
2. Unit of analysis: the household replaced the economic family as the accounting unit in which individuals pooled income to enjoy economies of scale for consumption.
3. Equivalence scale: to follow the international standard, the equivalence scale was changed and adjusted household income was calculated by dividing household income by the square root of the number of members in the household instead of by an equivalence scale that also depended on the age of each household member.

Low‑income measure, after tax is one of a series of low‑income lines used in the census. The LIM‑AT thresholds are derived in multiple steps:

1. Calculate the 'adjusted household after‑tax income' for each household by dividing the household after‑tax income by the equivalence scale, which is the square root of the number of persons in the household.
2. Assign this adjusted household after‑tax income to each person in the household.
3. Determine the median of the adjusted household after‑tax income over the population. The median is the level at where half of the population will have adjusted household after‑tax income above it and half below it.
4. Set the LIM‑AT for one‑person households to 50% of this median and the LIM‑AT for households of other sizes to 50% of the median multiplied by the corresponding equivalence scale.

Since LIM‑AT is both derived from and applied to the same data source and time period, no inflation adjustment is required. Unlike the low‑income cut‑offs (LICOs) and the Market Basket Measure (MBM), LIM‑AT does not vary by area of residence.

Prior to the 2021 Census, the LIM thresholds and the LIM low income statistics were derived and reported for the population residing outside of the territories and off reserve only. It was based on the consideration that the income, prices and expenditure patterns could be quite different in the territories and on reserve, and thus, could make the interpretation of the LIM low‑income statistics difficult.

Since the 2016 Census, there were research studies^{Footnote 2} that analyzed the feasibility of defining LIM thresholds that include the population living in the territories and on reserve, and examined the aspects that should be considered when interpreting low‑income statistics based on this definition.  With the guidance and support of such research, the 2021 Census expanded the coverage of the LIM concept to all regions in Canada, making it the only low-income concept that is applicable to the population living in the territories and on reserve.

As emphasized in the forth‑mentioned research, caution should be used when applying low‑income concepts to certain geographic areas or to certain populations. The existence of substantial in‑kind transfers (such as subsidized housing), economies based on sharing and consumption from own production (such as product from hunting, farming or fishing), differences in cost of living and expenditure patterns, challenges in collection such as non‑response and incomplete enumeration of reserves must be considered when interpreting low‑income statistics.

Note that persons living in collective households remain out of scope, as in the past Censuses, for all of the low‑income concepts because their living arrangements and expenditure patterns can be quite different from those of persons living in private households.

Since the initial publication of the low‑income lines, Statistics Canada has clearly and consistently emphasized that poverty is not something that can be defined by a National Statistical Organization. Instead, defining poverty is the responsibility of the policy departments of the government. In 2018, the Government of Canada released Opportunity for All – Canada's First Poverty Reduction Strategy. In this report, it was recognized that poverty is a multifaceted problem that goes beyond not having enough income. Based on the recommendation of this strategy, the government designated the Market Basket Measure of low income as Canada's official poverty line under the Poverty Reduction Act in 2019. For more information about the official poverty line, see Market Basket Measure (MBM).

As a statistical agency, Statistics Canada's role is to publish measures of low income based on consistent and well‑defined methodology and to update these measures to reflect the current state of the Canadian society and economy. These measures would allow for the reporting of important trends in low income and economic well‑being, such as identifying those who are substantially worse off than average and tracking the changes in composition of those below any given low‑income or poverty line over time.

See also low‑income status, prevalence of low income, low‑income gap, low‑income gap ratio and adjusted after‑tax income.

For additional information on various low‑income concepts, see 'Low Income Lines: What they are and how they are created' and 'Low Income in Canada - A Multi‑line and Multi‑index Perspective' 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, 2021.

Note(s)

Related 2021 data products

• Census Profile, 2021 Census of Population (98-316-X2021001)
• Census Program Data Viewer (CPDV) (98-507-X2021001)