Canada’s official poverty rate, as measured by the established market basket measure (MBM), is now almost 10 per cent of the population, which is slightly lower than the pre-pandemic rate in 2019.

But is there less poverty today than in 2019? With nearly an 80 per cent increase in food bank use from 2019 to 2023, and a record 32 per cent increase from last year alone, our current official poverty rate does not seem to be telling the full story.

An alternative method of measuring poverty is called a material deprivation index (MDI). This method has been used in Europe for decades to complement income-based measures of poverty (such as the MBM) and counts the number of households that can’t afford items or activities that most of the population would say are essential for a decent standard of living. Examples include having appropriate clothes to wear to a job interview, going to the dentist for an annual check-up, or buying a child a small birthday present.

“25 per cent of Canadians likely have a poverty-level standard of living according to a material deprivation threshold of two items or more.”

• Food Banks Canada report

Our new research study outlines what a made-in-Cananda MDI could look like. The study shows that 25 per cent of Canadians are in poverty according to our MDI.

The proportion is much higher for single parents, those with a disability, and those who identify as Black or Indigenous. This finding is more consistent with the reality that food banks throughout our network are seeing today.

Here are five key takeaways from the study that show how an MDI can complement existing income-based poverty measures, and why Canada should incorporate an MDI as part of the indicator portfolio to assess levels of poverty in Canada.

Assessing poverty goes beyond income.

We found that, in 2023, one in four Canadians aged 18 and older could not afford two or more items that the majority of the population would say are essential for a decent standard of living, and 6 million of those materially deprived Canadians had an income above the poverty threshold.

This disconnect arises because Canada’s official income poverty measures cannot account for the great diversity in needs and circumstances of Canadians.

For instance, due to a recent move, one family’s apartment may cost hundreds of dollars more than that of their neighbors. Or one family spends out-of-pocket on ongoing medication whereas another family with the same income and a job with employer health benefits gets most costs reimbursed.

These, and a myriad of other needs and circumstances, explain why established income poverty metrics often miss the mark.

An MDI reflects public perception of poverty.

The MDI examines what goods, services and activities the majority of the population feels are necessary to have an acceptable standard of living. Our study identified what items should be included in the list by asking Canadians what items they felt were necessary to have an acceptable standard of living in Canada. Our study also went a step further and prioritized items that were more likely to be seen as necessary by those who are at higher risk of experiencing poverty (such as those experiencing food insecurity).

An MDI can provide timely information on conditions that impact Canadians’ standard of living.

An MDI can complement the MBM by providing feedback on current conditions, whereas the MBM will always be a few years behind because of the time it takes to ensure the accuracy of income data. This advantage of the MDI would be especially important in times of rapidly changing economic conditions and the need to react quickly, such as in the height of the recent pandemic and the surge of inflation in its aftermath, or at a time of rapidly rising interest rates.

An MDI would be a useful tool not only for understanding the nature of poverty in Canada, but also for designing better programs to address poverty.

Our research suggests that a simple income payment adjusted for a few factors such as size and age of family will not efficiently address poverty. Instead, we need to understand and address the factors beyond income that determine the lived experience of households. In addition, we have seen that the majority of people who are living in poverty according to an MDI are working or looking for work, so addressing poverty solely through programs aimed only at people who are not in the labour force will fail to reach most of those who require extra support.

An MDI picks up the effects of policies that reduce the need to spend.

When the government increases child benefits, both an MDI and income poverty metrics such as the MBM show a decline in poverty. However, when the government subsidizes goods, services and activities that save households money, income poverty metrics often miss such effects because they do not increase a household’s income. An MDI, on the other hand, picks up poverty reduction due to lower costs of living such as subsidized housing, childcare, pharmacare and public transit.

RECOMMENDATIONS

Based on this study we recommend that the federal government task Statistics Canada with the development and maintenance of a material deprivation index (MDI), alongside the existing income-based poverty measures. We also recommend that Canadian governments use such an index as a complementary poverty measure to assess governments’ progress on poverty reduction and to analyze the effects of governments’ efforts on poverty reduction. This is especially important because income poverty metrics often miss impacts that reduce out-of-pocket spending.

Together, the two types of indicators would inform our efforts to make sure that all Canadians can enjoy food security and a standard of living that is acceptable for a developed country.

Richard Matern is director of research at Food Banks Canada, Michael Mendelson is a Maytree Fellow and former Deputy Minister in Ontario and Manitoba, and Geranda Notten is professor at the Graduate School of Public and International Affairs at the University of Ottawa.