The median after-tax income of Canadian families and unattached individuals was $66,800 in 2020, which represented an increase of $4,400 (+7.1%) from the previous year. The increase in after-tax income was larger for lower-income individuals and families and was mainly driven by income support programs put in place to assist Canadians impacted by the COVID-19 economic shutdowns. Canada’s official poverty rate was 6.4% in 2020, down 3.9 percentage points from the previous year when it stood at 10.3%.
Today, Statistics Canada is releasing new data from the 2020 Canadian Income Survey (CIS) undertaken during the COVID-19 pandemic. In response to the economic shutdowns and restrictions put in place to limit the spread of the pandemic, the Government of Canada introduced a number of income supports for individuals and businesses. It is therefore important to consider the 2020 CIS estimates in light of the unprecedented events during the first year of the pandemic.
The economic shutdown in response to the COVID-19 pandemic resulted in significant losses in market income which were more than offset by government transfers
In March 2020, a sequence of unprecedented government interventions—including the closure of non-essential businesses, travel restrictions, and public health measures directing Canadians to limit public interactions—was introduced to curb the spread of COVID-19. These interventions resulted in a dramatic slowdown in economic activity—they dealt a sudden shock to the Canadian labour market and income from market sources. Altogether, the median market income of Canadian families and unattached individuals went from $57,600 in 2019 to $55,700 in 2020, a decrease of 3.3%.
However, the impacts of the pandemic were not felt equally, and many families did not suffer losses in employment or earnings. Rather, earnings and employment losses tended to be concentrated among families and individuals with lower market income. For example, in 2020, the average market income for families and unattached individuals fell about 20% in the bottom quintile and 10% in the second-lowest quintile, while the upper quintile remained unchanged.
In response to losses in employment and earnings, an unprecedented number of Canadians turned to existing and newly-announced income support measures. The new COVID-19 relief programs with the largest aggregate amounts provided, were the Canada Emergency Response Benefit, the Canada Recovery Benefit (CRB), and the Canada Emergency Student Benefit. According to the CIS, these programs provided approximately $82 billion in income support to 8.1 million Canadian families and unattached individuals in 2020. The median amount in COVID-19 relief support received by these families and unattached individuals was $8,000.
Considering COVID-19 relief programs as well as other government programs such as the Canada Child Benefit, Employment Insurance (EI), Old Age Security, the Canada Pension Plan and the Quebec Pension Plan, median government transfers for Canadian families and unattached individuals doubled from $8,200 in 2019 to $16,400 in 2020, an increase that was largely the result of the COVID-19 benefits.
COVID-19 relief benefits more than offset declines in market income, resulting in an increase in after-tax income. The increase in after-tax income was proportionately larger for lower-income families and unattached individuals. In 2020, average after-tax income of families and unattached individuals increased 16.2% in the bottom quintile and 8.5% in the second-lowest quintile. Gains in after-tax income also occurred for the top quintile, in which average after-tax income grew by 2.4%.
An example of shifts in income sources
In 2019, a single female parent living in Ontario received an average total income of $66,000, $46,000 from market income and $20,000 from government transfers.
In 2020, the average total income increased $3,000 to $69,000. The source of this income changed dramatically, however, with average market income dropping to $41,000, while their average government transfers rose to $28,000.
The poverty rate falls by more than one-third in 2020
The Market Basket Measure (MBM) was adopted as Canada’s Official Poverty Line in June 2019. According to the MBM, a family lives in poverty if it does not have enough income to purchase a specific basket of goods and services in its community.
About 2.4 million Canadians, or 6.4% of the population, lived below Canada’s Official Poverty Line in 2020, down from 10.3% in 2019. The 3.9 percentage point decrease in the poverty rate represented about 1.4 million fewer Canadians in poverty. Although the national poverty rate for years before 2020 was generally trending downward, the large decrease observed from 2019 to 2020 was mostly attributable to the increases in government transfers.
In 2020, the poverty rate for all family types decreased compared with 2019. For example, both senior and non-senior couples saw large declines in their poverty rates. Non-senior couples in Canada saw their poverty rate almost cut in half, from 7.9% in 2019 to 4.3% in 2020. There was also a decrease in the poverty rate for senior couples in Canada, from 2.6% in 2019 to 1.4% in 2020.
The poverty rate cut in half for children
All age groups experienced a decrease in their poverty rates in 2020. The poverty rate for children decreased 4.7 percentage points, going from 9.4% in 2019 to 4.7% in 2020, reducing the number of children in poverty for that year by 50%.
In 2020, the poverty rate decreased in every Canadian province compared with 2019. The largest decreases were in Saskatchewan (down 5.2 percentage points to 6.7% in 2020), Prince Edward Island (down 4.7 percentage points to 7.6%) and Manitoba (down 4.7 percentage points to 6.8%).
Some family types are more vulnerable to poverty
Certain family types, including lone-parent families and unattached individuals, have historically been at a higher risk of being in poverty when compared with other family types. Despite the decline in poverty rates across family types, disparities continued in 2020.
For example, the poverty rate for unattached individuals decreased from 26.9% in 2019 to 20.9% in 2020, which represents about 348,000 fewer individuals in poverty. In comparison, the poverty rate for Canadians in families went from 7.0% in 2019 to 3.4% in 2020, representing about 1.1 million fewer individuals in poverty.
The poverty rate for those living in lone-parent families fell from 22.0% in 2019 to 13.5% in 2020, a decrease of 8.5 percentage points. Although the situation improved for this at-risk group, persons in female lone-parent families (15.0%) still experienced higher poverty rates compared with those in male lone-parent families (7.2%) in 2020.
Children living in female lone-parent families (16.9%) continued to be more vulnerable to poverty compared with children living in couple families (3.0%) in 2020.
The poverty rate among Indigenous people decreases, but the gap with non-Indigenous people remains
The COVID-19 pandemic has brought into sharper focus the pre-existing socio-economic inequities between Indigenous and non-Indigenous people, including historically higher prevalence of low-income and poverty among Indigenous people. The historical and ongoing impacts of colonial policies and practices, including barriers to educational and economic opportunities, have perpetuated the experiences of poverty among First Nations, Métis and Inuit in Canada.
Moreover, research has highlighted the disproportionate socio-economic impacts of the pandemic on Indigenous people, including a slower labour market recovery. Like non-Indigenous people, many First Nations people, Métis and Inuit received benefits from various COVID-19 income support programs in 2020. CIS information for Indigenous people reflects the experience of those who identify as First Nations people living off reserve, Métis, and Inuit, living in the provinces.
Among Indigenous people aged 16 and older, about 89,000 (11.8%) were below the poverty line in 2020. This is a decrease of 6.8 percentage points from the 2019 rate (18.6%). Despite this decline, the poverty rate among Indigenous people remained approximately double that of non-Indigenous people (6.6%).
The poverty rate among First Nations people living off reserve was 15.2% in 2020, down from 22.8% in 2019. Among Métis, the poverty rate was 9.4%, down from 13.7% in 2019. Separate estimates for Inuit could not be published because of a smaller sample.
Persons with a disability are at a higher risk of poverty
Historically, persons with a disability were more likely to live below the poverty line. Approximately 8.5% of persons aged 16 and older with a disability (761,000 persons) lived below the poverty line in 2020. This is a reduction of 5.2 percentage points from the 2019 poverty rate of 13.7%.
Poverty rate for recent immigrants also declines
Among immigrants aged 16 and older who arrived in Canada within the last 10 years, approximately 219,000 (8.6%) lived below the poverty line in 2020. The poverty rate in 2020 represents half the rate reported in 2019 (17.2%).
For the first time, information on income and poverty for population groups designated as visible minorities in Canada is available from the CIS. Although no historical trend is available, the data presented in this section will provide a baseline for future comparisons. Statistics presented below are for persons of all ages.
In 2020, the poverty rate of those who belonged to visible minority groups was higher (8.0%) than that of those who did not (5.8%). Given the diversity of visible minority groups, the rate varied. In 2020, the poverty rates for the three largest visible minority groups in Canada were higher than the national average: South Asian Canadians (7.5%); Chinese Canadians (9.6%); and, Black Canadians (7.5%). A notable difference was Filipino Canadians, with a poverty rate below the national average, at 3.6%, in 2020.
Low income measure also falls in 2020
Statistics Canada also reports low income based on the low income measure (LIM). According to the LIM, which is a relative measure, individuals are considered to be living in low income if their household after-tax income falls below half of the median after-tax income, adjusting for household size.
The low income rate in Canada decreased from 12.1% in 2019 to 9.3% in 2020, the lowest rate since the beginning of the series in 1976.
Similar to the poverty rate, the low-income rate using the LIM either decreased or remained relatively unchanged for all family types and age groups in Canada, and for all provinces.
Government transfers reduce income inequality
Analysis of sustained income growth for the lowest four deciles (the bottom 40% of the population) allows the Government of Canada to track one of its targets outlined in the United Nations’ sustainable development goals. After-tax household income adjusted for household size is a commonly used method to analyze income inequality.
The share of Canadians’ adjusted after-tax income that went to the bottom four income deciles increased from 21.0% in 2019 to 22.2% in 2020, representing the largest annual change and highest proportion since the beginning of the series in 1976. The share of income held by the top income decile was 22.0% in 2020, relatively unchanged from 2019.
Another commonly used method of analyzing inequality is to use the Gini coefficient. It is an index that takes a value ranging from 0, which indicates a state of perfect equality, to 1, which indicates a state of perfect inequality.
The Gini coefficient, based on adjusted after-tax income, decreased from 0.299 in 2019 to 0.281 in 2020. It is the single largest absolute change since 1976 and ties the 1989 value for the lowest index value in 45 years.
Provincial incomes increase across Canada
The median after-tax income for families and unattached individuals increased or remained relatively unchanged for every province in 2020. Ontario had the largest annual increase, going from $65,100 in 2019 to $70,100 in 2020. Conversely, the smallest increase was in New Brunswick, which went from $54,800 in 2019 to $56,900 in 2020.
Families and unattached individuals in Alberta continued to have the highest median after-tax income of the provinces ($77,700), while those in New Brunswick had the lowest ($56,900). However, comparisons between provinces should be made with caution, since these income differences do not take into account additional factors such as the cost of living and the age of the population, which are unique to each province.
The increases in median after-tax income were driven mainly by the introduction of the COVID-19 benefits, which resulted in significant increases in government transfers across all provinces. British Columbia families and unattached individuals had the largest annual increase in median government transfers, almost tripling from $5,400 in 2019 to $15,600 in 2020. Significant increases, in which median government transfers more than doubled, were also seen in Ontario (111% increase from 2019), Saskatchewan (117% increase from 2019) and Alberta (175% increase from 2019).
Income increases for most family types
From 2019 to 2020, median after-tax income increased or remained relatively unchanged for all family types in Canada.
The median after-tax income of couples with children increased by 4.7% to $110,700 from 2019 to 2020. Over the same period, senior couples experienced a similar annual increase of 4.6%, for an after-tax income of $65,900 in 2020. Unattached individuals experienced a relatively larger growth rate in their median after-tax income, up 7.1% to $34,500 in 2020.
Median market income decreased or remained relatively unchanged for all family types in 2020, while median government transfers increased for all family types over the same period. Couples without children had the largest relative increase in median government transfers, from $800 in 2019 to $8,000 in 2020, an increase of $7,200.
Looking at 2021
It is important to underscore that the events of 2020 yielded unprecedented impacts on the incomes of Canadian individuals and families, and some of these changes were not permanent. Therefore, to some degree, the changes observed in market income, government transfers and poverty rates in 2020 were likely temporary.
However, the labour market in 2021 continued to be impacted by the pandemic as public health restrictions fluctuated and employment in lower-paid industries remained affected. Government pandemic income support programs also continued through 2021 with the CRB program and a retooled EI program continuing to deliver benefits to workers affected by shutdowns.
In 2021, there were improvements in economic activity and employment compared with 2020. For example, real gross domestic product posted a strong 4.6% growth in 2021, after the COVID-19 pandemic-induced decline (-5.2%) in 2020. In addition, the unemployment rate was 5.9% in December 2021, which was slightly above its pre-pandemic February 2020 level (5.7%) and there was an overall upward trend in full-time employment from June to December 2021. Furthermore, the number of employees receiving pay or benefits from their employer—measured by the Survey of Employment, Payrolls and Hours as payroll employment—rose by 122,200 (+0.7%) in December 2021, the seventh consecutive monthly increase. All of this implies that the median market income is likely to improve in 2021.
Economy-wide estimates also show that the decreases in income inequality observed in 2020 continued into 2021 because of increases in disposable income for households in the lowest income quintile. The disposable income of households in all other income quintiles either stayed relatively unchanged or decreased.
Trends in inflation could also have an impact on real income levels and income poverty rates in 2021. The Consumer Price Index, a key indicator used to monitor inflationary pressure, rose 3.4% on an annual average basis in 2021, the fastest pace since 1991, following a much smaller increase of 0.7% in 2020. Since the poverty thresholds are updated to take into account inflationary changes from year to year, some families could fall behind if their incomes do not keep up.
The 2021 CIS will continue to track impacts of the pandemic on the income of families and individuals and provide updated information in early 2023.
