Fraser Institute defines poverty out of existence...

There are two ways to reduce poverty:

The best way is to get money into the hands of low-income people and adopt other practical and effective measures, such as affordable housing, education and training and so on. The other way is to define poverty out of existence by statistical sleight of hand: Tell the poor, and everyone else, that the poor aren’t really poor, and hope that they just go away.

The Fraser Institute, the private-market-obsessed policy institute, opted for numerical dexterity as it published its latest research paper on poverty in Canada. Author Christopher Sarlo makes the astonishing claim that poverty in Canada has shrunk to a statistically tiny level in recent years.

Sarlo’s conclusion is at odds with the wealth of recent income data from Statistics Canada and well-respected policy institutes such as the University of Toronto’s Centre for Urban and Community Studies and the Canadian Centre for Policy Alternatives.

So, how is it that smart and sensible people can come to such widely varying conclusions?

Here are some observations to help make sense of the Fraser’s very odd dollars:

First, COMPLEXITY. “No single indicator or group of indicators can possibly capture the full complexity of income poverty in the UK.” Those are the opening words of an excellent overview of the tricky and politically-charged task of developing reliable poverty indicators by the UK’s New Policy Institute. Unlike Europe, Canada doesn’t have an officially-approved poverty indicator or indicators. Instead, we have two widely-accepted measures called the Low Income Cut-off (LICO) and the Low Income Measure (LIM) which measure relative poverty, or income inequality. And we have a whole variety of “market baskets” which measure absolute poverty by adding up a list of necessities to create a basic income required for meagre existence. Sarlo exploits the lack of consensus in Canada to dance around the methodological questions and create his very own definition of poverty.

Second, RELATIVE POVERTY. Canada’s LIM is very similar to the official poverty measure of the European Union, which counts the number of people who have incomes that are well below the median income (the statistical middle of all incomes). You’d think that Sarlo and the Fraser Institute would love LIM because what it measures, most fundamentally, is access to private markets. Markets for housing, food and all the other private commodities in Canada - at least according to market theorists - respond to average and median incomes. So, a measure that counts how many people are included (or excluded) from markets would seem to be pretty useful. The trouble is, relative poverty measures in Canada have set a disturbing trend: Incomes in the middle are shrinking, while those at the bottom have been growing, along with those at the top. This growing gap between rich and poor makes market purists uncomfortable, so Sarlo rejects relative poverty measures even though most independent statisticians know that they are very useful to measure how widespread low-income (another word for poverty) is. To be technical, relatively measures are used around the world - and here in Canada - by just about everyone except the Fraser Institute to measure the incidence of poverty.

Third, ABSOLUTE POVERTY. There is another measure of poverty that is widely used to gauge the depth of poverty. Sometimes called the “market basket” approach, absolute poverty creates a bundle of basics (housing, energy, food, medicine, drugs, dental, transportation, clothing and so on) and then prices them. Anyone who falls below the income required to buy that basic basket of goods is considered poor. Sarlo says that his basket of goods includes all the basics and is also sensitive to regional variations (it costs more to rent a home in Toronto than, say, Montreal). All well and good, but the “poverty line” that Sarlo sets out on page 8 of his report is so meagre that it’s impossible for imagine anyone could actually survive on that. No wonder Sarlo is able to proclaim that poverty is virtually non-existent in Canada.

Fourth, REALITY CHECK. Sarlo says that his "basic poverty needs income" for a family of one is $10,520. Consider this: If that single person was living in the neighbourhood of the Wellesley Institute (which includes Central Toronto, with some very low-income neighbourhoods such as St James Town, Regent Park and Moss Park), the average annual rent for a bachelor apartment (the cheapest form of accommodation) in 2007 was $10,056. Toronto Public Health reports that in 2007, a nutritious food basket for a single young man was $2,615. A Metropass on the TTC Discount Plan is $1,200 annually (the cheapest transportation option for Toronto). Add up those costs, and our low-income Torontonian already needs an income of $13,871 - and that’s before paying for energy, clothing, medicine, dental, drugs and the other basics that Sarlo says is part of his basket. So, how can Sarlo get his numbers so low, when the real costs are so much higher?

Defining poverty rates so low that virtually no one in Canada could be called poor may make good ideological fodder, but in the real world that most people inhabit, Sarlo’s dollars just don’t make any sense.