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Printed from The Vanier Institute of the Family's website at www.vifamily.ca. © 2007.
TRANSITION MAGAZINE Money and the Canadian Family 
Money isn’t everything but there are indisputable links between a family’s finances and its well-being. Which is why this issue of Transition returns to the topic of money—a topic we last explored in the Summer of 1999. In the first article of this issue, Rich Canadians, Poor Canadians, and Everyone in Between, Roger Sauvé once again gives us a broad picture of how Canada’s families are doing—this time by focusing especially on their net worth. His analysis of data on the assets, debts, and wealth of Canadian households reveals that certain factors—such as age, marital status, gender, and language—play important roles in determining how rich or poor we are. In Dealing with Debt, Mike McCracken tackles an issue most of us would prefer to ignore. But we ignore our debts at our peril, as he makes clear. Mr. McCracken shows both the benefits and the dangers of debt, along with recommendations for sensible actions to be taken by families and by governments. And finally, How Much Money Do Families Need? makes a case for the profound influence of money on families, and especially on children. This item quotes from research by the Canadian Council on Social Development which presents “abundant and compelling evidence” that children are harmed by a life of poverty, and that our definition of poverty needs to change if we want to maximize the potential of the next generation. Rich Canadians, Poor Canadians, and Everyone in Between
Wealth—or “net worth”—is an important element of Canadian society. Most Canadians aspire to wealth, and advertisers constantly remind us of all the wonderful things money can buy. For some, the dream and the reality become one: Canada has nearly 500,000 millionaire households. Many factors may have contributed to their wealth—a combination of a good start, hard work, discipline, making the right choices along the way, being born in the right family and so on. For many Canadians, however, the dream never does become reality. The poorest 10% of Canadian households have a median net worth of only $150. Most people in Canada end up somewhere in the middle of the wealth spectrum. My focus here is on “the median household,” meaning the household in the middle, where half of all households have less and half have more. (A household can be just one person living alone, or a family of two or more people.) The household in the middle of all Canadian households had a net worth of $109,200 in 1999. 1999 is the most recent year for this kind of information. In 1999, Statistics Canada collected detailed information about the financial assets, debts and wealth of Canadian households. Before that, the last survey of this type had been conducted in 1984. This article uses data from both surveys to look at the current circumstances and prospects of Canadian households, and also to occasionally glance at how things changed during the fifteen years between surveys. Looking at Trends and Patterns What are you worth? This very personal question is often asked when people borrow money or get serious about a new relationship. We ask ourselves the same question at various stages in life, especially when going through hard times or beginning to think about retirement. When it comes to the accumulation of assets and debts, households typically go through phases that depend on the age of the major income recipient in the household. While there are certainly many variations, the “typical” household in each age group can give us a feel for where we stand relative to others in the same age group. Who Has What? Most households have some assets. These can include assets as minor as an inexpensive watch or a few dollars in a savings account, or they can be significant assets such as a home or a "big pot" of pension assets accumulated over many years. While most households have assets, the median value of the assets of younger households (where the major income recipient is under 35) is much less than that of households aged 55-64: $32,700 versus $306,000. Statistics Canada classifies assets into four major groups: The first group is made up of financial assets that are pension-related and intended to be used to replace earned income on retirement. About 71% of Canadian households have pension assets of some kind, with a median value of $50,000. Some 48% have an RPP (Registered Pension Plan) sponsored by an employer, with a median value of over $49,000. And RRSPs (Registered Retirement Savings Plans) have become quite popular: between 1984 and 1999 the aggregate amount of assets held in RRSPs grew more than sixfold, the percentage of households with RRSPs almost doubled from 28% to 55%, and the median value more than doubled to $20,000. In the second asset group are non-pension financial assets, including deposits, mutual and investment funds, stocks and bonds. About 90% of households hold non-pension financial assets, but their median value is only $4,800. This relatively small amount suggests that many households do not have a lot of readily available resources to tap into in times of financial stress, which may mean they’ll be forced to sell-off other assets or to borrow when times get tough. This is especially so for younger households. In the third group are non-financial assets, including homes, real estate, vehicles, furniture, jewelry, collectibles, and so on. Virtually every household in Canada has assets of this type, and their median value is $103,000. Most households own both a vehicle and a house. Seventy-seven percent own one or more vehicles (cars, vans, trucks, motorcycles, snowmobiles, etc.) at a median value of $9,000, and that doesn’t even include households with a leased vehicle. Meanwhile, about 60% of households own their homes, which have a median value of $125,000. The last asset category is equity in a business, including privately held companies, farms, and other small businesses or partnerships. Nineteen percent of households have such assets, with a median value of $10,000.
Who Owes What? About 68% of Canadian households have some outstanding debt. The rest are totally debt-free. Among those with debt, the median level of debt is $29,000, meaning half of them have more and half have less debt. Age has a lot to do with which households are in debt. About 80% of households under the age of 55 are in debt, but this dips to 62% among households aged 55-64, and to just 27% for those 65 and over. The median debt load carried by the under-35 group is about $19,000. It rises to about $49,000 for those aged 35-44 and then falls gradually to only $6,500 for those aged 65 and over. While most households can handle their debts, many are stressed in meeting their obligations.
Who Has the Wealth? Wealth, or net worth, is the difference between your assets and your debts. In other words, net worth is the amount of money you’d have if you sold all your assets such as your house, and paid off all your debts. Wealth is certainly not evenly distributed among households across Canada; it varies by province, household structure, age, education, labour force status and other characteristics. Inherited wealth and opportunities also play very significant roles in wealth distribution among households, although we’re not able to measure their impact.
The net worth for the median household is highest in Ontario at $132,900, followed closely by Saskatchewan ($131,400), British Columbia ($127,200) and Alberta ($122,000). The lowest net worth is in Newfoundland, at $65,300. In other words, the net worth in Ontario is 22% above the median for Canada as a whole, and more than twice that for Newfoundland. An easy way to assess inequality is to divide all of Canada’s households into 10 groups of equal size from the poorest to the richest. In each group there are about a million households.
The Rich Get Richer and the Poor Get Poorer! In actual dollars, the median wealth of all households improved by 11% between 1984 and 1999. In contrast, the poorest 10% had a negative net worth (they owed more than they owned) in 1984 and the situation worsened further (-216%!) by 1999. The second poorest group experienced an 85% decline in wealth and the third poorest group experienced a 12% decline. Each of the other seven groups had an actual increase in wealth, ranging from 6% for the fourth group from the bottom to about 35% for each of the top two wealthiest groups. Introducing Canada’s Wealthy Millionaire status can now be claimed by 484,000 Canadian households, all with a net worth of at least $1 million. While they make up only 4% of all households, this millionaire group holds 31% of all the household wealth in Canada. Millionaires are most evident in Ontario (232,000 households), Quebec (85,100) and British Columbia (81,200). About 1.1 million households have a net worth of $500,000 to $1 million. This group represents 9% of all households and holds 26% of all the wealth. While these two groups together comprise only 13% of all households, they hold 57% of all the household wealth. Their wealth totaled $1,721,490,000,000 ($1.7 trillion) in 1999, and if cashed out, could have bought all the consumer goods and services purchased in Canada during the previous three years. Age: A Key to Understanding Wealth Older households, such as senior couples, should naturally tend to have higher net worth since they have had more years to accumulate assets and pay off debt. In contrast, lone-parent families tend to be much younger, and thus less wealthy. Households in which the major income recipient is under the age of 35 have a median net worth of just $18,800. Net worth peaks at $272,200 for households aged 55-64, and then declines as they reach retirement age and begin to draw from their accumulated wealth to support themselves. Changes in the median net worth of Canadian households between 1984 and 1999 depended very much on the age of the household:
Obviously, paying down the mortgage adds to net worth. In a number of ways, home ownership reveals the critical role of age in wealth accumulation:
Surprisingly, the median value of homes varies relatively little by age. The lowest median value of homes is $120,000, both for those under 35, and for those 65 and over. The highest price was $138,500, for those aged 45-54. It seems that the “moving-up” trend is very short-lived and may simply reflect the space needs of a larger family in the home rather than a higher income. The size of the average household peaks at about three persons for those aged 35- 44, declines to 2.3 at ages 55-64, and then drops down to only 1.7 for those aged 65 and over. Couples Have the Highest Net Worth Families typically have more wealth than unattached individuals have. Married and common-law couples have a median net worth of $174,000. This is 2.3 times the net worth in households where the main income recipient is separated, divorced or widowed, and 13 times larger than in households where the main income recipient has never been married. The wealthiest households are senior families; they have a median net worth of over $300,000. The second wealthiest households are non-senior families, with a median net worth of $212,000. This group is largely comprised of couples or lone parents living with children aged 18 or over, or a group of related persons living together. The households that are the least well-off financially are those headed by unattached females aged 15-64 or female lone parents. Both of these groups have a net worth of just over $14,000. Unattached males aged 15-64 are also at the low end, with a median net worth of only $15,600. It is noteworthy that male lone parents have a median net worth of $80,800—much higher than that of female lone parents. Some of the difference reflects the lower wage rates and lifetime earnings of female workers. But the difference can also be attributed to the fact that male lone parents, as a group, are much older than female lone parents. As such, male lone parents have, on average, been in the labour force longer. Only 14% of male lone parents are under the age of 35, compared to about 30% of female lone parents. Net Worth Improves for Some Between 1984 and 1999, the biggest improvements in net worth were experienced by lone parents (+96%), unattached seniors (+69%), elderly couples (+47%), and couples with no children at home (+42%). The median net worth of couples with children at home stayed more or less the same. Among young couples aged 25-34 with children under 18, the percentage with zero or negative net worth rose from 9.5% in 1984 to 16.1% in 1999. As Statistics Canada points out, these young families “may be vulnerable to negative shocks, i.e. have no accumulated savings that can provide liquidity in periods of economic stress.” Gender Has Surprising Impact on Wealth Gender seems to be one of the most significant determinants of net worth—but with a twist at age 55. Looking at all age groups together, married and common-law couples in which the major income recipient is a male have a higher median net worth ($183,400) than the 30% of couples where the female is the major income recipient ($151,300). And now the twist: for those under age 55, net worth is actually a bit higher among couples in which the female is the major income recipient. Among couples 55 and over, net worth is significantly higher when it’s the male partner who is the major income recipient. The female advantage among the younger groups likely reflects the narrowing wage differential between men and women, major advances in the educational levels of females relative to males, plus the upward mobility of women into the professional and managerial ranks. Among households in which the major income recipient is separated, divorced or widowed, it’s males who have the higher net worth. This is true across all age groups, with the smallest difference being among those aged 55-64 and the biggest difference among those aged 65 and over. The Impact of Language and Country of Birth Mother tongue and country of birth also significantly affect net worth. Contrary to what one might expect, households in which the mother tongue of the major income recipient is “other than English or French” have the highest median net worth, at $137,500. The net worth of a household where English is the mother tongue is 16% lower, and where French is the mother tongue it’s 42% lower. Households in which the major income recipient was born outside of Canada have a median net worth of $134,000, or 27% more than for those born in Canada. But the foreign-born advantage is evident only for those 45 and over. The net worth of foreign-born households aged under 45 is lower than that of Canadian-born households—evidence that more recent immigrants are not doing as well as earlier immigrants. From a longer-term perspective, the median net worth of immigrants who had been in Canada for less than 10 years saw their wealth shrink by one-quarter from 1984 to 1999, while those who had been in Canada for more than 20 years saw their net worth jump by over 40%.
More Education . . . More Wealth Education means more wealth in both the short term and the long term:
Self-Employed and Long-Term Employees Do Best People participate in the labour force in many different ways, and how they participate has an impact on their net worth.
Saving Enough to Retire Some Canadians will be able to retire early and live comfortably. Many others will not be able to maintain their current lifestyle even if they delay retirement until age 65. Statistics Canada has tried to provide an answer to the popular question: “Who has not saved enough to retire?” by considering an average couple aged 45-64, with employment income of about $55,000 and an average home. The person with the highest income is assumed to be 55 and is expected to keep earning income until retiring at age 65. Various specialists suggest couples may need anywhere from 50% to 80% of their pre-retirement income to maintain their current lifestyle during retirement but Statistics Canada assumes our average couple will need two-thirds (66%), which works out to $36,685. Statistics Canada also assumes this couple might get a maximum of $22,900 annually from a combination of the Canada or Quebec Pension Plan, and/or other public plans like Old Age Security and the Guaranteed Income Supplement. This amount would put them just above the low-income (poverty) line for couples living in a major city. (In reality, many couples would not qualify for the maximum from all these programs, so this base income level is not assured.) Where would this couple get the missing $13,785 ($36,685 minus $22,900) per year needed to maintain their standard of living? Assuming they have no employment income after the age of 65, they could only get this extra money from their accumulated “retirement assets.” For this couple, retirement assets were assumed to include half the equity in their home and any private pension assets or business equity they had accumulated. Using a complicated formula, Statistics Canada estimates this couple would be able to generate $13,785 if they had about $120,000 in retirement assets at age 65. Of course, the return on their investments could vary significantly depending on interest rates and other variables during their retirement. Statistics Canada has also calculated which Canadians aged 45-64 may not have adequate savings by the age of 65—which means being unable to replace at least two-thirds of pre-retirement employment earnings, or living on an income below the low-income (poverty) line. Those who may not have saved enough include:
While this hypothetical exercise provides a ballpark estimate of what’s needed in retirement, readers are encouraged to discuss their personal situation with a professional advisor. Planning is needed since, on average, Canadians are living longer than in the past.
As individuals, Canadians need a greater understanding of what it takes to build wealth. As citizens of Canada, we also need to work together to ensure that every household has the opportunity to build up enough net worth during their accumulation years so they can live comfortably and securely when their earning years end. At present, far too many Canadians are facing an uncertain financial future—in part because throughout their accumulation years they have to struggle just to make ends meet, making it almost impossible to save for retirement.
Neither a borrower nor a lender be, Did Polonius’ advice to his son amount to the wisdom of age or simply the rattling of an old fool? What were interest rates like at that time? (Probably high.) Could borrowers be trusted to pay back their debts? (Tough to enforce.) Whatever the situation in Shakespeare’s time, it is readily apparent that today borrowing from banks and credit card companies is big business, with millions of consumers using debt as an integral part of their overall financial management. At the same time, most Canadians are lenders by virtue of having invested some of their money in savings accounts, RRSPs, brokerage accounts, and so on. Obviously we have not heeded Polonius’ advice. The advice given today is far more complicated, and lacks the ring of Shakespeare. In these pages I have outlined the basic steps that families and individuals can take to improve their finances, and that governments can take to help Canadians reach their goals. The Positive Role of Debt Most families are likely to be borrowers, even those with some financial assets. But should families borrow? The ability to borrow is an important capacity that every consumer should strive to attain and then to maintain. In essence this ability gives the consumer the power to buy goods and services, or to make investments when he or she wants to. This choice of timing can be important for taking advantage of a bargain, satisfying a need, or allowing a change in lifestyle or career direction. Not everyone has the power to borrow. Low income, a bad credit history, lack of a job, or other problems in paying back the loan and the interest can limit the borrowing capacity of a consumer. Retaining the power to borrow requires establishing a credit history by borrowing and repaying in a timely fashion, and maintaining debt in line with income. If a family does this, then its line of credit or borrowing capacity is likely to be increased, even if its income doesn’t change. This leads to the advice of being a cautious, prudent borrower—borrowing and repaying promptly in order to maintain your ability to borrow in the future. What are the common forms of borrowing by families? To Mortgage or Not to Mortgage One of the major borrowing decisions made in every household is whether or not to take on a mortgage so as to buy a home to live in instead of renting. The costs of servicing the mortgage and covering the house repairs substitute for paying rent to someone else. But is being your own landlord a good idea? About 67% of households in Canada seem to think so, and almost half of these households (or about 33% of all households) have a mortgage on the property. Homeownership rises with rising income, which is not surprising. But what is perhaps surprising is that the percentage of homes with mortgages also increases with income. The alternative to mortgages would be a society in which most people would rent until they could afford to buy a house outright. Of course that would mean fewer people would ever become homeowners, and many families would not be in a position to buy until their children were older. Which would be better from a societal perspective—more homeowners or more renters? On the one hand, it is usually thought that homeowners are more “stable,” active in the community, and take better care of their property—qualities that contribute to social cohesion and community development. On the other hand, home ownership can be a barrier to mobility by discouraging people from moving to better jobs that require a change of residence. Well-developed secondary housing markets (e.g., real estate agents, want ads) make this less of a problem, since it is relatively easy to sell a house in one location and buy in another. Still, moving from your own home can seem like a bigger decision than moving out of a rental unit. Making the adjustment from a large “owned” house to a smaller rental unit after the kids have left home can also be a problem, and many people are understandably reluctant to do so. Other Consumer Durables Consumers frequently buy cars, appliances, furniture, and other consumer durables on credit, sometimes at an arti-ficially low interest rate and other times at a very high rate buried in the sales agreement. Borrowing to buy motor vehicles is a major business, with specialized lenders owned by the automobile man-ufacturers, and banks working through car dealers. Borrowing for a Business or Investment People starting up a new business or trying to sustain an existing one often use their personal borrowing capacity to finance their own business or that of their relatives or friends. The major advantage of this type of borrowing is that the interest paid is deductible from income, particularly if there is income from the business or at least the expectation of income. As well, if the business fails (as many do), the principal may be deductible from income as a small-business loss. But the risk of such lending can be high. The personal borrowing must still be paid back, leaving the lender in the difficult position of repaying a debt with nothing to show for the investment. Borrowing to invest in the stock market can be equally risky, with losses leaving people quite vulnerable. Credit Card Debt There are more credit cards than people in Canada—44 million cards versus 30 million people—implying that many people have several credit cards. Some credit cards are used simply for convenience, with payments made at the end of each month for purchases made that month, so that the consumer pays little or nothing for their use. But many consumers end up with balances that are subject to interest charges. And these charges can be quite high relative to mortgage rates and other interest rates on conventional borrowing. About 44% of credit cards (or 20 million accounts) have balances that might incur interest charges. The average balance was almost $2,000 in October 2001, compared to $950 in 1991. Should credit card debt be a matter of concern? With relatively high interest rates, little growth in incomes, and growing uncertainty about job security, people are well advised to reduce their credit card balances as quickly as possible. For many families this might mean postponing significant discretionary purchases until their outstanding balances have been reduced. Credit ratings are quickly affected by missed payments on credit cards, possibly damaging that “ability to borrow” that can be so important. Are there public policy issues around credit card debt? Most credit card companies insist that merchants not charge cash-paying customers less than those using credit cards. As a result, all consumers implicitly pay for the merchant charges levied by the credit card companies. The Dangers of Debt The real concern arises if, each month, the debt owed rises relative to the previous month, in spite of efforts to reduce purchases and repay the debt. If debt is rising as a share of income, then the situation is potentially unstable. And the problem can be exacerbated if a family earner gets laid off. Symptoms
Results If you cannot reduce your debt, then several things may happen. If you have put up security on your debt, then the lender can seize the collateral, and you remain liable for any residual debt owing after the lender sells your property. Your failure to repay your debt, and the subsequent actions taken against you, will be registered, and other creditors will soon become aware of your situation. They will move quickly to secure their loans or to demand immediate repayment. This will also make it very difficult to borrow any additional funds. If the unsecured creditors feel they would be better off demanding immediate repayment, they can force you into a situation of having to dispose of all of your assets or even to start bankruptcy proceedings. Personal bankruptcy is a relatively rare event among Canadians. About 80,000 households or seven of every thousand households declare bankruptcy each year. But many more lose their assets in order to pay off their debts, while others have their salaries garnisheed, reducing their available income for as long as it takes to satisfy their creditors. And, in the process, many consumers lose their capacity to borrow for years to come.
The Household Balance Sheet The household balance sheet and budget (or income statement) form the fundamental framework for good financial management. In essence, the balance sheet represents your total assets and your total debts, with the difference being your net worth. This balance sheet is done at a particular point in time— for example at the end of the year—and represents the accumulation of your past decisions about acquiring assets or taking on debt. The budget or income statement describes the revenue coming in and the living expenses going out. The difference, or residual, is saving, and is thought of as an amount flowing over a period of time. For example, someone with an after-tax income of $30,000 per year and living expenses of $28,000 per year would be saving $2,000 per year. The linkage between these two statements is through the uses of saving. If the family does nothing with the extra money, their cash balance (an asset) will show an increase, matched by an increase in net worth. If the family spends the money on physical assets above their normal living costs, then the balance sheet will reflect lower cash and more physical assets, with no change in net worth. Similarly, if the family pays down debt, then there will be less cash at the end of the year and less debt, with no change in net worth. The equivalence of increasing assets (financial or non-financial), and of reducing debt, is sometimes missed. The key thing is that the family is increasing their net worth by saving some portion of their income. As long as that happens, then there is little concern about debt being too high. The family finances are in trouble, however, if their net worth falls because their living expenses (including the servicing income. servicing of debt through interest payments) exceed their income.
Sensible Actions for a Family
Poverty The very poor often do not have debt because they can’t get it! Lenders avoid, if possible, lending money to people who do not have sufficient savings to repay their debts. The “transitory poor” may have a severe problem; a financial setback may cause them to lose their assets and perhaps even become permanently poor. In this group are many who’ve lost their jobs or faced a major necessary expense, like medical costs not covered by public or private health insurance. The challenge of getting out of poverty involves finding ways to increase income, pay off existing debts, and stay out of debt long enough to establish a good borrowing capacity. This can be extremely difficult, particularly at times when government policy makes jobs scarcer. Government’s Role This brings us to the role played by every family’s “partner”—namely the federal, provincial, and local governments that affect our incomes, our expenses, the interest rates we pay, and the rules under which we operate. Government actions can help families, through transfer payments like Employment Insurance and Social Assistance. Governments can help regulate financial institutions, preventing extremely high interest rates on consumer borrowing. They can also make tax cuts, leaving more discretionary income for building a nest egg. And other actions can help create jobs—the principal source of income for most families. But, instead of helping families, governments sometimes take actions that trash family budgets through tax increases, cuts to transfer payments, or higher costs on borrowing through interest rate hikes. Or they take steps that lead to job losses in certain regions or sectors of the economy. Of course, “macroeconomics”—which speaks in terms of the overall inflation rate, unemployment, or GDP growth—and its tools of fiscal and monetary policy, seem quite remote from the individual family and its concerns about credit card balances and its own budget and balance sheet. But the implementation of macroeconomic policy invariably affects individual consumers (and businesses), often resulting in massive adjustments to family budgets. Governments should, therefore, be held partially responsible for the microeconomic consequences of their macroeconomic policies. Direct linkages can be made between bankruptcy rates and unemployment rates, real interest rate levels, and broad economic performance. If governments want to minimize their damage to families, the best advice is obvious:
Future Prospects Although we have managed to get through the past, the future often looks more desperate. A major question at the moment is whether we’re facing an imminent debt-induced crash. The ratio of consumer debt to disposable income is at an all-time high. Credit card interest rates are quite high. Personal bankruptcy rates are at historically high levels, above those of the recessions of 1981-82 and 1990-92. Is the system about to unravel? Households have had a tough time since 1981, with the real value of disposable income changing little. Personal saving has been steadily weakening, from a saving rate above 10% of income to less than 5% since 1997. And consumer debt, including mortgages, has risen relative to disposable income. There have been some signs of improvement in recent years, and so far in this period of economic weakness the consumer has stood up well. Lower interest rates in 2001 and 2002 have helped. Recent increases, however, may herald a period of additional stress ahead. The optimists will point out that stock market increases, and increases in the value of homes, have helped to improve the financial wealth of households. These changes are not picked up in the aggregate measures of disposable income. Some services provided by government are of direct benefit to households as well. Unfortunately, with cutbacks in healthcare and increases in the private cost of education, additional burdens have been added to the family’s responsibilities. What about prospects for the next twenty years? The situation for families is beginning to look better than it has for many years—with rising productivity, less rapacious governments, lower inflation, and better economic performance with higher employment ratios. All of these factors should help consumers keep their houses in order, and should improve the net worth of the household sector. Federal government policy needs to keep interest rates low, support job growth, and ensure that wages participate in productivity improvements and keep up with inflation. Provincial governments should keep the public infrastructure in good shape and avoid off-loading health and education costs onto consumers. Otherwise, discretionary income will be squeezed further, saving will fall, and debt problems will grow. How Much Money Do Families Need? How much money do families need to create an environment that allows their children to grow into healthy, productive adults? The Canadian Council on Social Development answers this and other crucial questions in its report Income and Child Well-Being: A New Perspective on the Poverty Debate (1999). The study, which looks at two-parent families only, clearly shows that growing up in a low-income family all too often means children suffer from the poverty of missed opportunities. The CCSD study by David P. Ross and Paul Roberts reveals that income is linked to an astonishing variety of factors involving children’s family environment (for example, how well the family functions and how often children have to change schools), their community environment (how safe it is to live in their neighbourhood), their behaviour (how many have emotional problems), and their health (how likely it is that they have basic health problems), as well as their ability to learn and their level of participation in recreational activities. Below are some highlights from the study. (For the full report, visit www.ccsd.ca.) "For the first time in Canada, there is abundant and compelling evidence that a wide range of child outcomes and living conditions is affected by family income levels. Using data from two longitudinal surveys—the National Longitudinal Survey of Children and Youth, and the National Population Health Survey—this report examines the links between family income and 27 variables that measure child outcomes and the living conditions in families and neighbourhoods. In each case, children living in families with lower incomes are found to be at a greater risk of experiencing negative outcomes and poor living conditions than those in higher-income families. "Children’s development is complex, and many environmental factors—including their family, their home and their community—influence the process. Children begin with their own basic genetic make-up, but along the way, environmental influences enhance or detract from their ability to optimize their potential. "In our research, we found that in 80% of the factors examined, child outcomes improved substantially as annual family income rose towards $30,000. In 50% of the factors examined, this trend continued steadily as family income rose to $40,000. Beyond this income level, there continued to be some improvement in child outcomes for all the factors examined, but the rate of change was not as substantial as was seen at the lower income ranges." Some specific findings include:
"Each year, Statistics Canada releases figures on the number of people living below its low income cut-offs, referred to as LICOs. Children who live in families with incomes below the LICOs have poorer health, behaviour and learning outcomes, and they live in considerably worse family and neighbourhood conditions than children in families at higher income levels. "In Canada, poverty lines are used primarily to estimate the number of poor people; they are rarely used as a goal for redistribution policies. For example, social assistance rates in all provinces fall well below the LICOs. We believe that a poverty line should not only be used as a way to estimate the number of poor people; it should also be considered as a threshold, below which society will not tolerate income inequality. "To improve the likelihood that all of Canada’s children could develop to their full potential, our findings indicate that we would need to establish a floor for income inequality in the $30,000 to $40,000 range for a family of four. As well, we should consider how to improve access to the public and private services that are necessary for healthy child development, but that are not currently available to low-income families. The appropriate solution may involve a combination of income enhancement and improved public services. "It must become an important public priority and a collective endeavour to better equalize the opportunities for Canada’s children to succeed. The result of such a collective endeavour will be a prosperous society in which our social, economic, and criminal justice costs are minimized, and our productivity, tax revenues, social cohesion, and civility are maximized."
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