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Low-Income Cut-Off

Definition

Low Income Cut-Offs After Tax (LICO-AT) measures the percentage of families that spend a higher than average percentage of their income on basic needs.

Why This Matters 

The Low-Income Cut-off After-Tax (LICO-AT) is the most commonly used measure of low income in Canada (HRSDC, 2009). However, Statistics Canada has emphasized that LICO-AT is not a measure of poverty (Statistics Canada, 2008). Rather, LICO-AT is a measure that identifies levels of income below which Canadians are likely to spend a substantially larger proportion of their income on basic needs (i.e., food, clothing, shelter) than the average family, thereby reducing their expenditures on education, recreation, entertainment, and transportation, among other goods and services.

Measurement and Limitations

The LICO-AT is based on Canadian expenditure patterns. Cut-offs are set at income levels where a family would spend 20 percentage points more of their after-tax income than the average family on food, shelter, and clothing (HRSDC, 2009). This means that they are currently spending at least 63 per cent of their after-tax income on basic needs, rather than the average rate of 43 per cent.

The cut-offs consider family size and area of residence. The cut-offs are calculated for seven different family sizes (one through six and seven or more) and five different community sizes (rural, small urban region, 30,000 to 99,999 residents, 100,000 to 499,999 residents, and 500,000 or more residents). As either one of these variables increases, the cut-off increases. The cut-offs remain constant in 1992 real dollars through being annually indexed to the national Consumer Price Index, such that an individual’s 2008 income must be converted to 1992 real dollars to allow for accurate comparison to the appropriate cut-off (HRSDC, 2009).

Data Source

Human Resources and Skill Development Canada (HRSDC). (2009). Low income in Canada: 2000-2007: Using the market basket measure. Gatineau, Quebec: HRSDC. Retrieved from http://www.hrsdc.gc.ca/eng/publications_resources/research/categories/inclusion/2009/sp-909-07-09/sp_909_07_09e.pdf

Statistics Canada. (2005). Low income after-tax cut-offs (1992 base) for economic families and persons not in economic families, 2005. Retrieved from http://www12.statcan.ca/census-recensement/2006/ref/dict/tables/table-tableau-17-eng.cfm

Statistics Canada. (2008). Low income after-tax cut-offs (LICO-AT). Retrieved from http://www12.statcan.ca/census-recensement/2006/ref/dict/fam019-eng.cfm

 
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Low-Income Cut-Off in the Sustainable Development Goals

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1. End poverty in all its forms everywhere
1. End poverty in all its forms everywhere

1. End poverty in all its forms everywhere

Extreme poverty rates have been cut by more than half since 1990. While this is a remarkable achievement, one in five people in developing regions still live on less than $1.90 a day, and there are millions more who make little more than this daily amount, plus many people risk slipping back into poverty.

Poverty is more than the lack of income and resources to ensure a sustainable livelihood. Its manifestations include hunger and malnutrition, limited access to education and other basic services, social discrimination and exclusion as well as the lack of participation in decision-making. Economic growth must be inclusive to provide sustainable jobs and promote equality.

3. Ensure healthy lives and promote well-being for all at all ages
3. Ensure healthy lives and promote well-being for all at all ages

3. Ensure healthy lives and promote well-being for all at all ages

Ensuring healthy lives and promoting the well-being for all at all ages is essential to sustainable development. Significant strides have been made in increasing life expectancy and reducing some of the common killers associated with child and maternal mortality. Major progress has been made on increasing access to clean water and sanitation, reducing malaria, tuberculosis, polio and the spread of HIV/AIDS. However, many more efforts are needed to fully eradicate a wide range of diseases and address many different persistent and emerging health issues.