Measuring poverty and inequality in northern Canada

We provide the first direct comparisons of poverty and inequality in the North (i.e. Yukon, Northwest Territories, Nunavut) with elsewhere in Canada. We do so by first constructing a northern equivalence scale. Based on an Engel methodology, we estimate the extra income needed by families in the North to devote the same share to necessities as those in southern Canada. Using econometric techniques and public use microdata from the Survey of Household Spending, we find that cost of living is 1.46 times higher in the North. We use this scale to adjust the incomes of northern residents so that purchasing power is, for the purposes of our model, equal to that in the South. We subsequently measure poverty and inequality in northern versus southern Canada over the period 1997–2009. Our findings indicate that incidence of poverty is much higher in the North. For example, 31.1% of northern families with children are poor, compared with 9.9% in the South. Moreover, while approximately 10% of the southern population is represented in each income decile, 31.1% of northern families with children are in the bottom 10%. Only 3% have incomes that would place them among the richest 10% of Canadians.