Survival basics eat 52% of budget of Canada's poor
Bruce Little

Toronto Globe and Mail, Monday, Dec. 22, 2003

This is the time of year when Canadians are probably more conscious of
their spending than any other time. So the latest raft of data on household
spending from Statistics Canada, published last week, is especially timely.

The numbers contain plenty of useful stuff and some that's fun as well.

Almost every home had a colour television in 2002 (more than 99 per cent),
but 25 per cent had three or more colour TVs, up from 20 per cent in 1999.

Most homes had a video cassette recorder (92 per cent) and one-third had
two or more of them.

DVD players had already found a place in 36 per cent of Canadian homes last
year and the dramatic fall in the price of DVDs this year is likely to
raise that figure considerably when Statscan gathers the data for 2003.

Almost 64 per cent of homes had a computer last year (up from just under 50
per cent in 1999) and 54 per cent used the Internet from home (up from 33
per cent).

Cellphones could be found in 52 per cent of homes, cracking the halfway
mark for the first time. The average home spent $260 staying connected on
their cellphones, up 25 per cent from only a year earlier. But then, we
always knew Canadians love telephones; after all, 42 per cent of homes had
three or more phones in 2002.

Even more useful are the data on all household spending, which tell us
plenty about how Canadians in different financial circumstances manage
their money.

Bluntly put, the well-off spend their money differently than the worse-off.

Statscan divided households into five equal groups -- called quintiles --
according to their 2002 income. What's apparent from the spending data is
that the lower the income, the more of that income must be spent on the
basics of life, like food, shelter and clothing.

At the bottom end are those with incomes under $23,470; at the top are
households with incomes of $88,240 and above. The bottom group spent an
average of $20,220, while the top group spent $120,230.

The average spending of all Canadian households worked out to $60,090, so
it's easier to keep these numbers in mind if you remember that the bottom
end spent one-third the average and the top end spent double the average.

Where did the money go? Food accounted for just over 17 per of all spending
in low-income households and 9 per cent in high-income homes. Shelter took
a bit more than 30 per cent of the budget in low-income homes, and only 15
per cent in high-income households. Outlays for clothing were about the
same -- 4 per cent.

Those three items are the basics of life. In the poorest homes, they
gobbled up 52 per cent of the family budget, but only 28 per cent in the
richest homes.

Looking only at these shares of spending is informative, but also a bit
misleading, because the high-income group probably bought better food,
lived in much better accommodation and put their clothing money into better
items as well. All told, low-income households spent $10,510 on these three
categories of consumption, while the high-income groups spent about triple
that -- $33,230.

Transportation accounted for about 13 per cent and all other consumer goods
and services about 33 per cent of all spending by low- and high-income
households alike.

By now, we've accounted for almost all spending by low-income homes, but a
much smaller chunk of the spending by high-income families.

The difference is personal taxes. The low-income group paid only $770 in
taxes (4 per cent of all their spending) while the high-income group paid
$33,700 (28 per cent).

There is an almost spooky symmetry in these figures. Low-income and
high-income households alike devoted 56 per cent of their budgets to life's
basics plus taxes. For the former, the split was 52 and 4, while for the
latter, it was 28 and 28.

Another way of looking at the budgets of well-off and badly-off households
is to examine the spending ratios between the two on various items.

You'll recall that spending by the top-end households is six times that of
the low-end homes. But the wealthier also spent 44 times the poorer in
personal taxes -- almost $33,800 compared with under $800. If you take
those compulsory sums out, what was left for what we might loosely call
freely-chosen spending was $86,460 for the high-income households, about
4.4 times the $19,450 for low-income homes.

But spending by high-end homes on food and shelter was only triple that of
the low-end homes; there's only so much more expensive food you can eat and
housing you can use. That leaves the better-off much more room in their
budgets to consume everything else; and sure enough, the data show that
they spend about six times as much on that "everything else" as the
badly-off.

Compared with the poor, they tend to buy pricier, more fashionable duds,
they use air travel far more and consume more recreation (think golf clubs
and travel), education and reading material. Since they need less of their
income to finance the basics, they can use it to enjoy the luxuries.

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