This month on Mean, Median and Moose we look at income in Canada through four lenses: choosing you partner, measures of low income, what people who make different amounts spend their money on, and taxes.
Income between married and common law partners
Statistics Canada collected data in the 2016 census on the differences in income between married and common law partners. We got curious if it could be used to answer questions like if you’re more likely to marry someone in a similar income bracket to you. Let’s start with that.
In the graph below, you can see a general trend in that, broadly, those with higher incomes marry or have common law relationships with others of higher incomes.
There could be a number of reasons for this. If you make a lot of money, perhaps you prefer partners with higher earning potential. It could also be that high income earners have social circles with higher income earners – a simple example would be people meeting during post secondary education or lawyers meeting other lawyers as a matter of course in their work.
Interestingly the percentage difference between the higher income earners and the lower income earners in these couples stays relatively consistently at between 40 and 60 percent except for the low and high income extremities.
This Stats Canada data set has an additional variable related to whether the male or female earner in the relationship is the higher wage earner. You can look at the proportion of people in each bracket when the male or female is the higher wage earner, but unfortunately it does not provide the median incomes for those subcategories so we can’t see if the above trends are stable across those lines. They do provide geographic breakdowns though, so if you want to see how the above breaks down for your province, tweet us at @MeanMedianMoose.
How to Measure Low Income?
A major element of the July Census release is the data on income.
The thresholds of low income levels vary based on their methodology of calculation which does create challenges around knowing which method is best. A simple albeit crude way to discern the difference is like this:
Low Income Cut Off (LICO) – Measure of comparative of poverty – the LICO represents the income level at which a family may be in straitened circumstances because it has to spend a greater proportion of its income on necessities than the average family of similar size.
Low Income Measure (LIM) – Measure of breadth of poverty – Set at 50% of the median income adjusted for family size the LIM is a much broader measure of low income. The measure is widely used in the OECD as a measure of poverty allowing cross
Market Basket Measure (MBM) – Measures how much it costs to not be in poverty – Calculated based on the cost of key essentials scaled by family size. The challenge is that the Market Basket isn’t calculated in every city, rather it is calculated at a regional and population level which creates wide challenges in comparison of poverty levels between different sub-national geographies.
One item that isn’t captured in the tables above is the before tax data. Tables with before tax thresholds are available but generally speaking after tax tends to be used as it captures government support which often target low income populations.
The Market Basket Measure is the new “official” measure of Poverty in Canada and in mid-july the Census data will announce the new poverty rates across the country…. But it’s not that simple.
Household Spending by Household Income Quintile
Generally, we know a pattern holds that the more money you make, the more money you spend. Statistics Canada puts out a table (Table 11-10-0223-01) each year based on the Survey of Household Spending that shows the average expenditure per household by income quintile for hundreds of categories of goods and services, ranging from how much a household spends on restaurant meals to how much a household spends on hair care products. Taking a look at the data from 2019, as you might suspect, household spending increases quite a bit from the lowest to the second to the third to the fourth to the highest quintile, jumping from 37k to 55k to 79k to 110k and finally to 185k.
Before jumping into some of the more interesting data within this table, it’s important to note there are no dollar amounts associated with the income quintiles in the table itself, but we requested and received this information from Statistics Canada! The lowest quintile ranges from an income of $0 to $34,590, the second from $34,591 to $62,190, the third from $62,191 to $93,519, the fourth from $93,520 to $141,765, and the highest from $141,766 onwards. However, there are no characteristics of the households included like the size of the household or the ages of its members, so even with these quintile ranges, it is still difficult to know exactly what kind of picture of household spending is being painted. Nonetheless, the data is worth taking a look at!
One of the more interesting points of data to take a look at is expenditure on rented living quarters vs owned living quarters. Those in the lowest quintile who are renting spend an average of $6,373 while those in the lowest quintile who own spend an average of $3,885; however in the second quintile, this almost evens out at $5,582 for those who rent and $6,014 for those who own, and in the third quintile, the gap reverses significantly at $4,417 for renters and $10,156 for owners.
Again, without any associated household characteristics, there are seemingly endless possibilities for these differences! Students could be those in the lowest renting quintile paying high prices, while boomers could be the owners spending a lot less. The second quintile could be made up of a lot of young couples who are living in their first apartment or just bought their first house. The third quintile’s gap is perhaps a bit harder to guess at though – why is it that those in the same income quintile are paying quite different amounts to rent vs own? Are the renters seniors on fixed incomes and the owners middle aged families? There may be another StatsCan table out there that can piece this puzzle together, but what we can conclude is even those with similar incomes might spend vastly different amounts of that income on housing.
Another interesting data point is the huge discrepancy in child care expenditures between the quintiles, ranging from $97 in the lowest quintile, to $210 in the second, $426 in the third, $952 in the fourth, and $1,555 in the last.
Is this discrepancy as simple as those in the lowest quintile being unable to afford child care or that they’re covered by social programs, or do most in that quintile simply not have kids? More importantly, this gap demonstrates that for those households who do have children, those children who are from high income households are receiving vastly more resources directed toward their care, and their parents are likely free to earn the income that qualifies them for this quintile, while those in the low income quintile are seemingly left to find their own way if they are not part of programs providing low-cost child care.
On a more trivial note, it’s fun to take a look at certain categories in this data to see how the low income and the high income do and don’t lead very different lives! When it comes to deodorants, it seems the first three quintiles are spending around $15 a year, while the wealthiest among us have managed to spend $34 a year on average – whether this is due to bigger households in this quintile or simply much fancier deodorants is unknown. Cannabis, similarly, seems to be something all households enjoy rather equally, ranging from an average of $78 to $126 spent per year on average in 2019. Lots to look at in this StatsCan table, and hopefully StatsCan might consider adding some additional details to it in the future!
Income Tax Revenue
Canada has a progressive income tax system in which higher earners pay a larger share of their income in tax. This progression is defined by “tax brackets” that serve as thresholds for increasing tax rates – the portion of your income within a given bracket is taxed at that bracket’s rate. Canada releases datasets on the amount of revenue generated by tax bracket and the number of people in each tax bracket, broken out by province. We compiled these values into a spreadsheet to calculate percentages, then created a JSON file to use in making a visualization. You can find the JSON file here. You can take a look at the interactive visualization on Observable.
Some interesting findings from this data: more than 57% of the tax revenue from non-residents in Canada comes from just 2,200 people earning over the threshold of the highest tax bracket. Of Canadian jurisdictions, Nunavut collects the lowest share of overall tax revenue from high-income earners – only 10.32% of income taxes collected in Nunavut while Alberta is the highest at 29.58%. Prince Edward Island gets the largest share of overall tax revenue from low-income earners – 21.71% of revenue – and Northwest Territories collects the smallest share at just under 6%. Overall, more than half of the income tax revenue collected by the Canadian government is paid by people earning more than $93,208 – a group representing 8.7% of the overall population with income. The lowest tax bracket (under $46,605) is about 65% of the income earning population and pays less than 12% of the overall income tax collected.