This week Statistics Canada released good news: Canadians have seen an increase in after-tax income. Not only do these figures let us know trends in incomes, they can help with personal financial planning: how much income the average family needs to live on, while working and while retired.
The figures for 2017 show a 3.3% increase in median household incomes to $59,800 due to the combined impact of higher wages and increased child benefits. The median income of non-senior families rose 2.7% from 2016 to $92,400 in 2017. This was driven by the strong employment market which pushed median wages and salaries income to $85,500. The median after-tax income of senior families (where the highest income earner is age 6a5+) has trended up steadily since 2012, and totalled $61,200 in 2017.
We also continued a positive trend to reduce the percent of Canadians living in poverty. The Official Poverty Line as defined for the first time in 2018, fell from 10.6% in 2016 to 9.5% in 2017.
Prior to 2018, poverty was described by different measures. The Low Income Measure (LIM) is defined as household earnings of less than half the national median income -- $22,133 for a single person, or $38,335 for a family of three. The LIM rate is 12.7% in 2017, not significantly different from the rate of 13.0% in 2016. The Market Basket Measure shows that the number of people living below poverty line has dropped from 15% in 2012 to 12.1% in 2013 and now 9.5% in 2017 per Market Basket Measure.
The Low Income Cut-off (LICO) measures poverty based on the share of income that households must devote to food, clothing and shelter. The LICO measure has been dropping steadily: 15.2% in 1996 to 13.7% in 2005 9.7% in 2013 and to 8.8% in 2014. During that period, Canadians were helped by an increase in the amount people could earn before paying income tax, and a 90% reduction in federal income tax on families earning less than $30,000.
Looking at all three of the poverty measures available in 2014, the percent of Canadians in poverty was 8.8% according to the Low Income Cut-off measure, was 11.3% per the Market Basket measure, and 13% per the Low Income measure (LIM).
While Canadians continue to struggle with the high cost of housing and with heavy debt loads, it is good to see leaders over many years helping to increase after tax incomes, especially for the poor. Families have different spending patterns, and therefore will have different income needs in retirement. We hope these figures help you to see where your income falls against the average and will help you with your budgeting, savings, and retirement plans. Please contact your Certified Financial Planner to discuss your personal situation.
Elaine Kelly MBA CFP FCSI
Senior Investment Advisor, Manulife Securities Incorporated