Dictionary, Census of Population, 2016
Low-income measure, after tax (LIM-AT)Dictionary, Census of Population, 2016
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 2016 Census of Population, the line applicable to a household is defined as half the Canadian median of the adjusted household after-tax income, multiplied by the square root of household size. The median is determined based on all persons in private households where low-income concepts are applicable. Thresholds for specific household sizes are presented in Table 4.2 Low-income measures thresholds (LIM-AT and LIM-BT) for private households of Canada, 2015, Dictionary, Census of Population, 2016.

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. Since the LIM-AT threshold and household income are unique within each household, low-income status based on LIM-AT can also be reported for households.

For the 2016 Census, the reference period is the calendar year 2015 for all income variables.

Statistical unit(s)

Person
Private household

Classification(s)

Not applicable

Reported in

2016 (100% data); 2011^{Note 1} (30% sample).

Reported for

Private households where low-income concepts are applicable (see Remarks).

Question number(s)

Not applicable

Responses

Not applicable

Remarks

Following the practice of many international organizations, Statistics Canada began to publish Low-income measures, before-tax and after-tax in 1991. 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, no inflation adjustment is required. Unlike the low-income cut-offs (LICOs) and the Market Basket Measure (MBM), LIM-AT does not vary by size of area of residence.

See also low-income status; prevalence of low income; low-income gap; low-income gap ratio and adjusted after-tax income.

Low-income concepts do not apply to the full population. For example, persons living in collective households are excluded from the concepts because their living arrangements and expenditure patterns can be quite different from those of persons living in private households.

The low-income concepts are also not applied in the territories and in certain areas based on census subdivision type (such as Indian reserves). The existence of substantial in-kind transfers (such as subsidized housing and First Nations band housing) and sizeable barter economies or consumption from own production (such as product from hunting, farming or fishing) could make the interpretation of low-income statistics more difficult in these situations.

Since their initial publication, Statistics Canada has clearly and consistently emphasized that the low-income lines are not measures of poverty. Rather, low-income lines reflect a consistent and well-defined methodology that identifies those who are substantially worse off than average. These measures have enabled Statistics Canada to report important trends, such as the changing composition of those below the low-income lines over time.

For additional information on various low-income concepts, see 'Low income lines,' 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, 2016.

Note