Material Deprivation in Canada Geranda Notten, University of Ottawa Julie Charest, Statistics Canada Andrew Heisz, Statistics Canada Prepared for Canadian Economic Association Annual Conference 2017
Overview � We test and construct a material deprivation index using Canadian data � Study the incidence of material deprivation across socio- demographic groups � Explore the overlap in incidence between material deprivation and low income 06/06/2017 Statistics Canada • Statistique Canada 2
Measuring poverty – two distinct indicators � Poverty: experiencing adverse material outcomes due to a lack of financial resources • Traditionally measured using low-income indicators • More recently, also measured using material deprivation indicators � A large body of research finds that there is a positive but imperfect correlation between low-income and material deprivation indicators. • Two studies using Canada and Ontario data (Heisz and Langevin 2011; Notten 2015) → Population identified as ‘poor’ according to one indicator only partially overlaps with that identified as ‘poor’ by the other. 06/06/2017 Statistics Canada • Statistique Canada 3
Low income indicators � Measure whether family has enough income to purchase goods and services needed for an acceptable level of well-being. • Monetary, resource-based � Measurement issues: • Income is not the only source for financing needs � Low income does not necessarily lead to adverse material outcomes • Income is a resource, not an outcome � Persons above low-income line can experience adverse material outcomes • Reporting error 06/06/2017 Statistics Canada • Statistique Canada 4
Material deprivation indicators � Measures whether family is missing an item or aspect considered necessary in their society due to insufficient financial resources. • Non-monetary, outcome-based � Measurement issues: • Assumption of common needs and priorities • Under-reporting due to adaptive preferences and shame 06/06/2017 Statistics Canada • Statistique Canada 5
Why use a material deprivation index � The two types of indicators will always disagree. � Relying on low income alone biases poverty analyses. � Material deprivation indicators are thus considered complementary to low income indicators. • Use in policy-making and poverty research has become more common over past decades . � In our paper, we construct a material deprivation index to identify those at risk of poverty in Canada. 06/06/2017 Statistics Canada • Statistique Canada 6
Data � Canadian Survey of Economic Well-being (CSEW) conducted on one-time basis in 2013 � Final sample of 24,258 households, 57,911 individuals � Collected information on households’ ability to satisfy 17 basic material or social needs (material deprivation items) • For each item, respondent was asked if the household has the item • Those answering “no” were then asked: “Is this because you cannot afford it or for some other reason?” • Those who said they could not afford it are deprived of that item � Five questions on economic hardship • Whether the household experienced financial difficulty in past 12 months � Income information self-reported 06/06/2017 Statistics Canada • Statistique Canada 7
High-incidence items Item % deprived Replace worn-out furniture 16.6 Cover an unexpected expense of $500 from own pocket 16.5 Regular dental care for all household members 10.3 Small amount of weekly spending money for each adult 9.7 household member 06/06/2017 Statistics Canada • Statistique Canada 8
Medium-incidence items Item % deprived Replace a broken or damaged appliance 7.1 Pay bills on time 4.9 All household members have a hobby 4.7 06/06/2017 Statistics Canada • Statistique Canada 9
Low-incidence items Item % deprived Have friends and family over for a meal once a month 3.2 Eat fresh fruits and vegetables every day 2.4 Job interview clothing for each adult 2.1 Buy small gifts for family or friends once a year 2.1 Two pairs of suitable footwear per household member 2.0 Eat meat or equivalent every day 1.5 Keep home at a comfortable temperature 1.5 Access Internet in or outside the home 1.1 Live in a home free of unwanted pests 0.9 Get around in community by car or public transportation 0.6 06/06/2017 Statistics Canada • Statistique Canada 10
Four test criteria � First step in calculating the index was determining which items in CSEW are fit to be included in the index. � Following Guio et al (2016), used four scientific criteria to test the items: • Suitability, Validity, Reliability, Additivity. � We concluded that all items meet the criteria and could be used in the index. 06/06/2017 Statistics Canada • Statistique Canada 11
Pass Criterion Testing method /Fail • Share of households ‘wanting’ the item is high Suitability Pass • Most people view the item as necessary (auxiliary data) • Correlation between item and known risk factors: Pass • Low income (LIM), difficulty meeting expenses, and Validity economic hardship • Cronbach’s alpha: • Together, items measure latent concept • Item Response Theory (unidimensional 2-parameter test): Pass Reliability • Severity: Items measure varying degrees of deprivation • Discrimination: All items sufficiently differentiate between deprived vs. non-deprived individual • For each pair of items (136), ANOVA model shows that average income is lower for: Pass Additivity • Those deprived of one item compared to none • Those deprived of both items compared to one 06/06/2017 Statistics Canada • Statistique Canada 12
Setting a threshold � Need to set a cumulative deprivation threshold (minimum number of deprivations). • Goal is to separate population into group that is (likely) materially deprived and a group that is (likely) not materially deprived. � The choice of threshold has a large impact on the index. 06/06/2017 Statistics Canada • Statistique Canada 13
Setting a threshold Material deprivation rate at different cumulative deprivation thresholds 28.8 30 25 % deprived 18.6 20 15 12.9 9.1 10 6.2 5 0 1 or more 2 or more 3 or more 4 or more 5 or more Cumulative deprivation threshold (number of items) 06/06/2017 Statistics Canada • Statistique Canada 14
Index construction � We use a headcount index – equal to the percentage of the population that is deprived of at least two items. � All deprivation items are equally weighted. � Advantage is ease of interpretation. 06/06/2017 Statistics Canada • Statistique Canada 15
Results � In 2013, 18.6% of individuals were materially deprived according to the material deprivation index we constructed (threshold of 2+ items). • Higher than the low income rates published for Canada in 2013: � LIM after-tax 13.4%; Market Basket Measure 12.2%; Low- income cut-off 9.8%. � Using CSEW data, 15.9% of individuals have a low income (LIM before-tax). � Difference in incidence rates hides two main insights: • Population groups with a high risk of low income often, but not always, also have a high risk of material deprivation. • A large share of those identified as ‘poor’ by one indicator are not by the other. 06/06/2017 Statistics Canada • Statistique Canada 16
Higher risk of material deprivation � Nova Scotia (25.3%) or New Brunswick (22.3%) � Rented dwelling (36.7%) � Main household income source is gov. transfers (44.6%) � Live alone (24.1%) or lone-parent (50.4%) � Household reference person: • Unemployed (42.2%) • Not in labour force, unable to work (55.0%) • High school diploma (22.9%) or less (31.0%) • Immigrant (22.7%) or Aboriginal (33.0%) 06/06/2017 Statistics Canada • Statistique Canada 17
Lower risk of material deprivation � Saskatchewan (14.0%) � Live in owned dwelling (13.3%) � Main household income source is employment (16.2%) or investment/retirement (6.2%) � Couple household without children (11.6%) � Household reference person: • Employed (15.7%) • Bachelor’s degree (11.7%) or higher (10.4%) 06/06/2017 Statistics Canada • Statistique Canada 18
Discrepancies in risk characteristics Material Low deprivation risk income risk Newfoundland and Labrador - High Saskatchewan - Low Alberta - Low Couple household with children - Low Reference person not in labour - High force, able to work Reference person highest High - education high school diploma 06/06/2017 Statistics Canada • Statistique Canada 19
Overlap with low income Materially Low income deprived (15.9%) (18.6%) Only Only Both low deprived (8.0%) income (10.6 %) (7.9%) 26.5% of the population could be experiencing poverty 06/06/2017 Statistics Canada • Statistique Canada 20
Overlap with low income � Also a limited overlap at the population-group level. � Total percentage of individuals identified as ‘poor’ by one or both indicators is: • Much higher than at the national level for groups with a high-risk characteristic. • Much lower than at the national level for those with a low-risk characteristic. • Examples: � 50% of individuals in a rented dwellings identified as ‘poor’ by one or both measures. � 18% of individuals in couple households without children identified as ‘poor’ by one or both measures. 06/06/2017 Statistics Canada • Statistique Canada 21
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