June 12, 2023
Poverty rises in 2021
At the beginning of May, Statistics Canada released the Canadian Income Survey for 2021. This included the poverty statistics for 2021 based on the poverty income threshold that uses the market basket measure or MBM. (This is the methodology used by Statistics Canada for establishing Canada’s official poverty line.)
Back in January, we highlighted the decline in the poverty rate to 6.4% in 2020. This was not surprising as there was massive government income support introduced in that year to offset wage losses arising from the COVID lockdown. We anticipated that the poverty rate for 2021 was likely to be roughly the same or marginally higher.
In the Canadian Income Survey for 2021, Statistics Canada estimates that the poverty rate rose to 7.4% in 2021. “The increase in the poverty rates is partially attributable to a reduction in the number of people who received government transfers and the amount they received.”
Statistics Canada estimates that 2.3 million Canadian residents 18 years of age or older were living below the official poverty line based on the MBM in 2021. (See Table 3 of the Canadian Income Survey for 2021.)
We still anticipate that the poverty rate will increase substantially in 2022 as the pandemic related government benefits terminated and inflation started to rise substantially in that year. The poverty data for 2022 will only become available in early 2024.
Is the CVITP designed to serve only the poor?
The official poverty line has been rising slowly but steadily over the last five years. With 53 different poverty lines across Canada[i], the figures for 2021 range from a low of $39,982 to a high of $51,884 for a reference family of four (two adults and two children), depending on where they live in Canada.
This translates into poverty income thresholds for an individual and a couple of as little as $19,991 and $27,987 respectively if they live in the least costly location in the country. If, on the other hand, they live in the costliest location in Canada, this translates into poverty income thresholds for an individual and a couple of as much as $25,942 and $36,318 respectively.
For a few years now, the CRA’s suggested income ceilings for an individual and a couple receiving the free CVITP service have been respectively $35,000 and $45,000. Most host organizations seem to follow the CRA suggested income ceilings.
It is evident from this that the CRA’s suggested income ceilings are well above the poverty income thresholds for an individual and a couple, whether they live in low or high-cost locations in Canada.[ii] If a host organization uses the CRA’s suggested income ceilings, it means that low-income households which are not living below the official poverty line are nevertheless eligible for and are receiving free CVITP services. This is intentional as the CRA says the CVITP service should be open to households with low or modest incomes and not just those living below the official poverty line.
How well is the CVITP doing in reaching the poor?
To answer this question, we will start by assuming that all CVITP clients have incomes falling below the official poverty line. In other words, we will assume that all of people receiving free CVITP services are living in poverty, even though we know that that the CVITP serves some clients who have low incomes but who are not, strictly speaking, poor.
What follows is a comparison of the numbers of clients served in a given year with the overall number of poor, as estimated by Statistics Canada, for the same year.[iii]
**Figures taken from The Evolution of the CVITP – 2022 Update, Part 1 – Results from Delivering Service to Clients
This shows the CVITP is serving at most one quarter of the poor in Canada. We say “at most” because we are assuming that the CVITP is serving only those with incomes below the official poverty line. And as we have pointed out above, this is not true. So, the actual percentage of Canada’s poor being served by the CVITP is less than a quarter of those living in poverty (although by how much, only the CRA knows).
What needs to be done to serve more of the poor?
We assume that the CRA wants to be serving more of the poor. After all, filing a return is necessary if the poor are to get many of the income-tested benefits which are available to them. For the CRA to reach a greater percentage of Canada’s poor with the CVITP, it needs to do two things.
1. Ramp up the scale of the CVITP service
A much larger CVITP service would allow it to serve more low-income clients, including those who are not poor. Central to this effort would be a proactive volunteer recruitment and retention strategy to counter the declining number of volunteers. A more generous grant program (with better targeted funding) would also be important to retain and recruit more host organizations.
However, even if the CRA was successful here, there is no guarantee that the new clients will be mostly drawn from the poor. This is why the second measure is also needed.
2. Greater selectivity in the choice of clients
We have previously argued for this. As host organizations tend to follow the CRA’s income ceiling suggestions, a simple way to do this would be for the CRA to suggest lowering the income ceilings to $30,000 for individuals and $40,000 for couples (with $5,000 rather than $2,500 increments as suggested by the CRA for every other dependant within the household).
Both elements must be part of the CRA’s strategy if it is to serve more of Canada’s poor through the CVITP. However, indications are that the CRA is going in the other direction, scaling back its ambitions for the CVITP.
[i] See this article for a simple explanation of how Canada’s official poverty line is derived.
[ii] While the CVITP income ceilings use total income and the official poverty line uses disposable income, we explain here why the two can be compared in this context.
[iii] Comparing the overall poverty numbers for a particular year with the number of CVITP clients served in the next tax season might be more accurate as the tax season corresponds with the filing of returns for the previous year. But we have chosen to keep it simple as we do not feel it changes the overall conclusion.