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Governance Transparency

2011 NHS: data may not be released at all due to data quality, communities to lose vital data source

A friend recently shared an interesting perspective on the perils of criticising the 2011 National Household Survey (NHS) before the data is even released. The thinking went something like this:

The current federal government had been signalling its intention to eliminate the long-form Census from the moment it took office in 2006. Unfortunately (for that government; fortunately for Canada), the process was too far along to stop, given it took office February 6 and Census day was May 16, 2006. The same government went on to cancel the 2011 long-form Census, replacing it with the voluntary NHS.  Inevitably, the data quality would significantly deteriorate, likely to the point of being completely useless in many areas. This deterioration in data quality would subsequently provide justification for the government to announce the cancellation of the long-form Census/NHS all together. It would be deemed too costly to maintain for the lousy quality data it produced. Not so long ago, this would have seemed a somewhat far-fetched conspiracy theory; it’s a pretty interesting theory given the current state of Canadian federal politics.

Given this theory, any criticism of the NHS data before it even comes out could  be used to build a narrative to justify the cancellation of the long-form survey all together, ignoring critics’ true intent. This thinking of course is premised on the idea that the 2011 NHS data would be released much in the same way the 2006 Census 2B data was. Given that both long-form surveys took place the same month (May) of their respective years, the delay in release dates between the two (2006 and 2011) should clearly indicate it’s not business as usual. But more on that shortly.

Municipal amalgamation in larger metropolitan areas across Canada over the last 10-15 years has resulted in the dissolution of geographic boundaries that once defined smaller, well-established communities. While whether / how great an economic efficiency resulted from amalgamation is certainly a topic of debate, the fact is dissolution of those boundaries did not change reality in those communities. Community organisations continued to tend to the specific needs of their residents. In some cases, provincial health an social service organisations were re-organised / expanded in an effort to better meet community needs. Some communities, in collaboration with their respective newly-amalgamated municipalities, caught on to the idea of using more micro-level geographic (dissemination area – DA, census tract – CT) Census data to recreate the dissolved boundaries of their communities. In this way they could continue to discern the specific needs of their residents, much as they had prior to the formal dissolution of their communities’ boundaries.

At least that was the case prior to the long-form Census cancellation. As reported by numerous media outlets in the summer of 2010, the cancellation of the long-form Census and replacement by the NHS would result in less reliable data. What did not garner as much attention back then was the practical impact the less reliable data would have. Statscan faces a rather unenviable task with respect to the 2011 NHS lower-level geographic data dissemination: Release unreliable data and risk the reputation of the agency, or withhold it and risk the ire of community and social organisation across the country. It’s a lose-lose proposition – intentionally so, if you accept the proposed theory. Given the context, it should come as no surprise that the regular release schedule was pushed back.

In anticipation, some community organisations have inquired as to whether they will be able to update their community profiles with the 2011 NHS data. Not surprisingly, the formal response from Statscan:

The National Household Survey product line is currently under development, so we are unable to provide a response at this time regarding availability of data at small levels of geography.

i.e. We’re not sure if data for lower-level geographies will be released at all.  Slightly different in wording, but materially different in meaning, from the information provided in the ’Important findings’ section of this Census report (updated July 2012):

It is unknown at this point what the impact of the non-response will be on the quality of the NHS data, particularly for low geographic areas and small populations, and to what extent this quality will meet users’ needs.

The long-form Census had ~95% response rate and 20% sampling. The NHS had an estimated ~50% response rate (Statscan has since claimed 2/3 of households responded, but questions have been raised re the standard of what it deemed an acceptable response under NHS) and 30% sampling. The mandatory nature of the Census ensured that each household receiving a questionnaire had almost the same high likelihood of returning it, and that nearly the entire 20% sample would be captured. The voluntary NHS with its expected response rate would capture a 15% sample of whoever-felt-like-answering. Much like an online poll;  imagine policy decisions based on data that unreliable.

There are a couple of adjustments that could be made, like reweighing the distribution of the NHS responses to match the age/gender/language distributions from the short-form for a given geographic area. The better electoral polls do this, and we know how accurate those have been in recent federal and provincial elections. Such adjustments only go so far, since certain subgroups of the population (e.g. immigrants) are not evenly distributed across those three demographic traits, nor are they evenly distributed geographically at lower levels within a community (e.g. ethnic enclaves). What Statscan will invariably end up doing is using the 2006 Census as a base and estimate the 2011 NHS distributions with it as well as other, more up-to-date surveys and  administrative data. Which defeats the whole purpose of the exercise, since the 2011 Census was supposed to be the new benchmark.

In any case, the process is likely not going well if Statscan’s not sure if it will release 2011 NHS data at lower level geographies only six months prior to its first scheduled release. The demographics from the short-form (e.g. the sharp rise in young adults staying at / returning home) suggests a significant deterioration of socio-economic well-being since 2006. Unfortunately, a full and accurate measure of the impact will likely be difficult, if not completely impossible, to capture at the community level.

Categories
Governance Homelessness Housing Immigration Justice Media Transparency Youth

Census 2011: Prison population rose 17.3% as population in shelters rose by only 2.8% (updated 25/09/2012)

With the release today of its 2011 Census families and living arrangements report, media, and doubtless reader, attention was likely diverted by the news that Statistics Canada had mistakenly counted same-sex roommates as gay couples.  What did not receive much attention today was the  2011 Census collective dwelling type release.  The release figures indicated a rise in the prison population of 17.3% as the population in shelters rose by only 2.8% (relative to the figures provided in the 2006 Census collective dwelling type release).  Yet between 2006 and 2011, crime decreased dramatically and the country went through a severe economic downturn.  Given these facts, the opposite outcome would have been anticipated.

Categories
Children Employment Financial security Food security Governance Health Homelessness Housing Poverty

Austerity budgets target those already living in austere conditions: the disabled, the poor and their children

Ontario’s budget will include welfare freeze: McGuinty
The Canadian Press Mar. 25, 2012

According to the Oxford English dictionary:

austere

ADJECTIVE (austerer, austerest)
(Of living conditions or a way of life) having no comforts or luxuries.

Origin
Middle English: via Old French from Latin austerus, from Greek austēros ‘severe’.

One could argue few have less comforts or luxuries than those dependent on already well-below-subsistence-level government income supplements such as Ontario Works, Disability Support and Child Benefit programs.

Welfare incomes by household type (Ontario), 1989-2010

These programs have not been indexed to reflect the cost of living over the years.  In constant dollars, social assistance supplements for all recipients are less today than they were two decades ago.  If that’s the case, then how have social assistance payments become such a budgetary burden in recent years?

Ontario Works and ODSP beneficiaries, Oct 2008 - Jan 2012

Answer: Volume.  From October 2008 thru January this year, the number of Ontario Works beneficiaries increased by one third,  and Ontario Disability Support beneficiaries by one fifth.  Both figures are well beyond Ontario population growth over the same period (3.78% from Q3 2008 to Q4 2011, CANSIM Table 051-0005).  It’s not the ageing population either, as the elderly cannot collect federal Old Age Security / Guaranteed Income Supplement and provincial income supplements at the same time.

A significant part of the explanation for the ballooning Ontario Works numbers stems from the Great Recession. Job losses began to mount in October 2008, Ontario’s Manufacturing sector particularly hard hit.  That recession and the current jobless (non)recovery have now spanned more than three years.  However, federal Employment Insurance (EI) benefits, for the increasingly few who qualify for them, only extend for a few months in Ontario’s major (urban) population centres.  As EI benefits lapsed… well, the numbers speak for themselves.

Categories
Financial security Food security Governance Poverty Taxation

Why taxing food staples should not be considered a policy option in Canada

Charge GST on food, economists say
The Canadian Press Posted: Feb 24, 2012 11:11 AM ET

Low-income households can’t buy food today with a larger HST rebate they hope to get sometime in the future.  A key objective of the social safety net, welfare, disability, unemployment, child tax, old age, guaranteed income and other benefits, is income smoothing.  It is why these payments are made bi-weekly or monthly.  Telling households already struggling to meet their basic needs that they will have to pay more at the point of sale, but that in turn they may receive a larger annual HST rebate undermines this key objective.  As it stands many of these social benefit programs have already seen significant real cuts as they have not been indexed to the cost of living.  Also, Canada does not have a  Supplemental Nutrition Assistance Program (aka ‘food stamps’) like the U.S. does.  Low-income Canadian households who won’t be able to make their weekly grocery budgets stretch a little further due to higher food staple prices will end up either at food banks, at soup kitchens or malnourished.

And that’s assuming an HST rebate will fully compensate the increased cost low-income households would bear. The current GST rebate does not fully offset its cost to lower-income households nor has it had an effect on the redistribution of income.  While tax hikes intended to more equitably distribute income should be zero-sum, like all tax schemes the HST on food will be designed to offset implementation costs  (admin, enforcement)  and limit benefits to net federal government income.

The argument that not taxing food staples adds to income disparity by needlessly subsidising the rich (high-income and/or wealth) is intellectually dishonest on at least two fronts. Food staples, which is what is at the heart of this argument since prepared foods and restaurant meals are already taxed, comprise a much smaller proportion of rich households’ budgets. The relative disbenefit of this ‘subsidy’ to the rich is negligible when contrasted to the food affordability benefit to lower-income households. See Text table 2 – Average expenditures by income level, 2009 (PDF file) on food as percentage of total expenditure by quintile from SHS, Adjusted market, total and after-tax income, by adjusted income quintiles, annual from SLID.

If the objective is to offset an unfair subsidy to the rich through the federal tax-and-transfer system, the goal would be more easily and efficiently achieved by taxing premium luxury goods consumed by rich households and their estates inheritance. High-end luxury goods also have a low demand elasticity: a potential exotic car or luxury home buyer will unlikely reconsider their purchase decision because they have to pay an extra 5-10% tax. And apparently the market for these goods remains exceptionally strong, fuelled by rising income/wealth disparity.  Likewise, an estate tax on the relatively few inheritances over say $1M would be more efficient, not to mention altruistic, than a tax that could affect relatively many low-income households’ food security.

Neither the estate tax idea nor the $1M amount are novel; they are from the Estate Tax administered by the IRS in the U.S.  The current Canadian tax code treats inherited assets as capital assets deemed disposed (for capital gains/losses/cost allowances) since  Canada’s estate tax was repealed back in 1972.  Nor is the luxury tax novel; see the Luxury Car Tax administered by the ATO in Australia or the 10% luxury car tax proposed by the U.S. EPA.  B.C used to have a provincial luxury car tax that was eliminated with introduction of the HST. Ontario has in place the means to  implement a luxury home tax through the HST on new property, although it may wish to reconsider extending it to resale homes and adjusting/varying the thresholds ($400K in Toronto today is average, not ‘luxury’).

In addition to inheritance and luxury consumption taxes, there are the popular arguments for raising Canada’s capital gains tax (and/or applying it all gains), reversing previous corporate income tax (CIT) rate cuts and eliminating tax-free savings accounts (TFSA).  While lower tax rates applied to investment income than those applied to salaries and wages do inherently benefit the rich, there are a number of issues that make these proposals more challenging to implement.  These include the need to keep the capital gains and CIT in line with prevailing U.S. rates and policies.  That said, the U.S. federal capital gains tax rate is higher (15-20% v 14.5%) and CIT rate significantly higher (35% v 15%) than Canada’s.

In addition to championing the idea of taxing food staples, Mr. Mintz is also known to expound the benefits of cutting federal CIT rates because they theoretically increase capital investment and create jobs. There is little real-world evidence to support the theory (see here). Mr. Mintz was asked if the objective of the continuous federal CIT rate cut (Excel file) was to increase capital investment and employment, whether it would not be more efficient to provide a ‘tax-cum-subsidy’ that would reward only those companies that invested and hired. This did not sit well with Mr. Mintz. While he looks favourably on giving low-income households an HST rebate after they have had to make sacrifices at the grocery store, he draws the line at rewarding rather profitable corporations with tax benefits after they have invested and hired in Canada. It is a rather peculiar double-standard. In any event, Mr. Mintz danced around the question by incoherently going on about capital flight in today’s more open international financial market system (given the amount of FDI going into Canada’s resource sector, one could argue capital controls would not be a bad idea).

To the point, the arguments in support of applying HST to food staples are as intellectually dishonest as those put forward in support of cutting taxes on profitable corporations.

Categories
Governance Poverty Transparency

Inaccurate measures of poverty: A brief Canadian history

Low income cut-off (LICO)

For several decades, Statistics Canada used LICO as its primary measure of relative poverty in Canada.  Although it was not formally referred to as the ‘poverty line’, that is the purpose it served for many.   It was a general measure that took the average family’s expenditure on food, shelter and clothing (adjusted for family and community size), added a margin of 20% to it, and that was it.  If a family’s income fell below its respective LICO threshold, it was counted as low-income.  The LICOs were occasionally updated to account for increases in average family expenditure on the three basics.  What the LICO lacked in precision, it compensated for as a historical index:  LICO could be traced as far back as 1968 and it allowed for the creation of historical maps such as the ones published with the 2006 Census income release.

Low income before tax cut-offs, 2005 

Low income cut-off, after tax (LICO-AT)

The LICO was changed in the early 1990′s.  In 1991, LICOs based on after-tax income were published for the first time.  It seemed reasonable at first glance:  Canada supposedly had a progressive taxation system with tax rates that rose relative to income bracket, and the LICOs should reflect that.  Problem?  The Census (and SLID) income data was the basis for the denominator. The Family Expenditure Survey (FAMEX) and later Survey of Household spending (SHS) would be the basis for the numerator.  The Census (and SLID) income tax data was notoriously unreliable, where it was available at all.  If reliable income tax data was not available, then what were the after-tax LICOs based on?

There is no simple relationship, such as the average amount of taxes payable, to distinguish the two types of cut-offs.  Although both sets of low income cut-offs and rates continue to be available, Statistics Canada prefers the use of the after-tax measure…  The number of people falling below the cut-offs has been consistently lower on an after-tax basis than on a before-tax basis.

Basically, the amount of income tax paid was assumed using the tax brackets and aggregated Canada Revenue Agency T1 data, irrespective of how much actual tax a person or family actually paid.  That’s inaccurate, as many high-income and/or wealthy families could defer, offset or reduce a significant share of their earnings through various registered investment plans, capital gains and other tax shelters.  Lower-income families’ earnings on the other hand largely consist of wages and salaries, from which personal income taxes are usually already deducted.  The lowest personal income tax rate is higher than the effective capital gains tax rate on the highest personal income tax bracket in Canada. Even if they do qualify for tax rebates, lower-income families are less likely to apply for or receive them as they  don’t  generally benefit from professional tax preparation services. Some families with little income do not file returns at all.

While it was no more accurate than it’s newly-dubbed ‘before-tax’ counterpart, the after-tax LICO did have one notable effect: by lowering the cut-offs across the board,  it also lowered the number of Canadians falling below them, effectively reducing low-income incidence.

Low income after-tax cut-offs, 2005

Low-income measure (LIM)

Also introduced in 1991, the LIM is a fixed percentage (50%) of median adjusted family income based on family size.  Canadians would only be considered low-income if their total family income was less than half the median same-size family’s income.  Community size was not taken into account .

The LIMs are based on the Survey of Labour and Income Dynamic (SLID), a voluntary survey of a small number of households sampled from the LFS (in turn sampled from the Census).

Oh, and in many cases the more general LIMs also happened to further lower the income thresholds, effectively reducing low-income incidence.

LIM after-tax thresholds, 2006

MBM 

Introduced in 2000, unlike the LICO and LIM, which were relative measures of low-income based on average family income and/or  consumption, the MBM measure was normative:

The MBM and the MBM disposable income were designed by a working group of Federal, Provincial and Territorial officials, led by Human Resources Development Canada (HRSDC) between 1997 and 1999. 

Bureaucrats got together to figure out what/how poor people should live and created a basket of goods based on these assumptions, which, not surprisingly, were rather questionable.  Probably the most questionable of these was:

The MBM thresholds are calculated as the cost of purchasing the following items: …Transportation costs, using public transit where available or costs associated with owning and operating a modest vehicle where public transit is not available.

A low-income family of four (two adults,  two children) living in a major urban area  (CA/CMA) where transit is available gets a couple of transit passes added to its basket for transportation costs.  Because the working poor in areas where transit is available presumably needn’t drive – not the Molly Maids, the delivery drivers, the general labour contractors, etc.  This assumption was plainly wrong and was easily demonstrated to be so by a simple calculation (using Q47 of the 2006 20% sample Census).  Nevertheless, it remained.

In addition to being an inaccurate measure, in many cases the MBMs further lowered income thresholds, effectively reducing low-income incidence.

MBM thresholds for reference family, 2007

‘Progress’

The historical ‘progress’ of low-income measurement in Canada can be demonstrated with an example.  A family of four (two adults, two children) living in Montréal:

LICO-BT (2005)       38,610
LICO-AT (2005)       32,556
LIM-AT (2006)         30,358
MBM (2007)            26,560

With each subsequent new measure, the income cut-off was lowered, cut by nearly a third overall for that family of four living in Montréal. It seems ‘progress’ in Canadian poverty reduction is simply a matter of changing metrics.