Definition of Income Class

Question

A researcher at McMaster is looking for definition on what constitutes a lower, middle and higher income class in Canada. She needs the income range of families belonging to each class (lower, middle and upper). I have looked through Census guides and many other publications but could not come across anything that she wants.

Answer

The classification of income into low, middle and high, is a very difficult concept. What is a high income in one area of the country (say an annual income of $100,000) could be considered as middle or low in another area of the country or province. Setting aside actual income dollars, even the "median" income of people in one part of the country could be considered as "high" or "low" in other parts of the country.

Similarly there is no standard as to what is poverty or the poverty line. Again a number of factors have to be taken into account when trying to identify individuals and families who are "below the poverty line". For these reasons Statistics Canada instead publishes something called the "low income cut-offs. to help users in identifying people who are in financially difficult situations. As stated in
http://www.statcan.ca/english/research/13F0027XIE/13F0027XIE.htm

"For many years, Statistics Canada has published a set of measures called the low income cut-offs. We regularly and consistently emphasize that these are quite different from measures of poverty. They reflect a well-defined methodology which identifies those who are substantially worse off than the average. Of course, being significantly worse off than the average does not necessarily mean that one is poor."

A 1994 article in the US based "Monthly Labor Review" states that: "Intuitively, income is a natural choice for a classifying variable because it is an indicator of consumers' financial ability to purchase goods and services and therefore is assumed to be a measure of their economic well-being. However, there are theoretical and practical drawbacks pertaining to income that make alternative measures more attractive, at least for some applications."

Also an article in the Winter 2002 issue of the STC publication "Perspectives on Labour and Income" states that; because the same income can affects different families in different ways " ...to make comparisons between different family types, it is necessary to look at both income pooling and economies of scale within families. An equivalency scale is the device most commonly used to level the playing field."

In any case, if you can not find an acceptable definition or classification of high, middle and low income it probably because there is no universally acceptable standard. Income Division has told us, for example, that "in SLID there are no definitions of lower, middle and upper incomes." In fact what they suggest is to use quintiles to divide the population. They also suggest that the researcher define their own groups using previous employed/published groupings, either their own or those of someone else.