For the first time in two years, living standards have improved modestly for materially less well-off Canadians. The other piece of good news is the major improvement in seniors’ ability to afford regular dental care thanks to the Canadian Dental Care Plan, a recent federal anti-poverty initiative.

But only the first development is likely to show up in Canada’s official income-based poverty statistics. They’ll miss the second altogether.

There is a way to prevent the omission, though.

A timely and accurate tracker

Official income poverty statistics measure whether households’ income falls below a poverty line, but the material deprivation index (MDI) tracks the number of Canadians who cannot afford two or more items of an eleven-item scale.

Containing a selection of goods, services and activities that many Canadians consider necessary for a decent standard of living, the MDI measures outcomes arising from a lack of money, be it income or another financial resource. The MDI was developed and tested in 2023, and since then Food Banks Canada has continued collecting annual surveys during the spring.

Figure 1 shows that the rate of poverty went from 25 per cent in 2023 to 33 per cent in 2024, then down to 28 per cent in 2025, according to the MDI.

This suggests that living standards among Canada’s materially less well-off first deteriorated considerably between 2023 and 2024 and then improved modestly in 2025. The MDI trend follows that of inflation and wage growth, both well-known and major drivers of living standards, with inflation gradually reducing to a normal level in 2024 (after reaching a record level in 2022) and wage growth slowly regaining some of that lost purchasing power.

How the MDI works

One advantage of the MDI is that the data can be collected and released much quicker than income data, with the latter originating from administrative tax data that are released 16 months after the end of the reference year.

Another advantage is that the MDI automatically and exactly accounts for any shortfalls between income and increases in the costs of living as experienced by each individual household.

Canada’s official poverty measure, the market basket measure (MBM), only accounts for average increases in consumer prices, while households’ specific experiences may differ considerably.

For instance, the MDI captures the impact of a tenant who is forced to move from a rent-controlled unit to one at the current market price, whereas the MBM would not. Another commonly used income poverty measure, the low-income measure (LIM), doesn’t say anything about whether low-income households can afford the high cost of living.

Table 1 shows the eleven components in the MDI and the proportion of Canadian adults who said they could not afford them. Most components show a similar rise that is followed by a fall compared to the overall MDI (Figure 1).

This co-movement is not surprising because the MDI’s components were selected to form a scale that can track the level and severity of material deprivation, within and across populations, and over time.

It is intentionally a shortlist of necessities commonly deemed important for a large part of the population rather than a comprehensive list. The variation in incidence rates across deprivation items is also intentional and reflects the fact that items with a lower incidence tend to reflect more severe deprivation.

The MDI can track the poverty reduction effects of policies that reduce the need for out-of-pocket spending, such as the Canadian Dental Care Plan, whereas income poverty measures would partially or altogether miss them.

Anti-poverty policies reduce poverty by increasing the financial resources available to households or by reducing the need for such resources in attaining a certain living standard. Income transfers and progressive taxing are examples of the former, whereas the Canadian Dental Care Plan is an example of the latter.

The dental plan is a federal government program that covers a portion of the costs of various dental care services for eligible Canadian residents who do not currently have dental insurance and have a household income below $90,000. The program initially focused on seniors aged 70 and above in December 2023, expanding in May 2024 to seniors aged 65 and older, individuals qualifying for a disability tax credit and children under 18, and in May 2025 to all remaining eligible Canadians. The program is projected to cost $4.4 billion per year, reflecting a considerable ongoing investment in social policy.

The dental plan thus works by reducing out-of-pocket spending on dental care for eligible Canadians and the gradual phase-in of the program meant that by the MDI data collection in the spring of 2025, the program was open to all eligible seniors and children.

The MDI can pick up this effect because it tracks material outcomes. One pathway through which this works is by freeing up money the household previously spent on dental care for other necessities. Income poverty measures may only partially pick up the effect or not at all because the program doesn’t involve an income transfer or a tax credit.

The MDI rates suggest that the dental plan may be having such an effect.

Figure 2 shows the MDI rates for the entire population, seniors and households with children. Whereas all groups register a reduction in MDI rate between 2024 and 2025, reductions are larger for seniors and households with children, reaching close to or below 2023 levels, whereas the MDI for the overall population is still three percentage points above the 2023 level.

As an aside, the well below average MDI rates for seniors indicate that their risk of poverty is low compared to the entire population. Income poverty and food insecurity statistics similarly show this. Much of the credit for this result goes to the relatively generous minimum pension income programs, old age security and the general income supplement.

A second pathway through the poverty reduction effect of the Canadian Dental Care Plan is picked up by the MDI is through the item “not able to get regular dental care.” When developing this index in 2022-23, we included this item in the index because 82 per cent of Canadians consider regular dental care a necessity (table 14 in the link). Simultaneously, well-known gaps in dental insurance coverage meant that considerable number of Canadians need to spend out of pocket to obtain dental care or forego needed dental care services altogether.

And thus, while MDIs, such as the one used here, are not designed to specifically measure the effects of certain programs, the dental item allows for a more focused assessment of the potential effect of the dental plan with Figure 3 showing the evolution of incidence rates for this item for the entire population, seniors and households with children.

Whereas the rate declined for all three groups between 2024 and 2025, the decline was particularly strong for seniors, with 20 per cent of seniors not having or being able to afford dental care in 2024, down to 10 per cent in 2025. While a statistical evaluation using these data could yield stronger evidence, these findings suggest that the dental plan may have reduced poverty.

How an MDI can be used

In short, these results reinforce the benefits of incorporating an MDI as a complement to current income-based poverty measures. Benefits include being able to help better assess progress on poverty reduction, enable more in-depth analysis of the effects of poverty reduction policies, and provide more real-time feedback on current economic conditions.

In these turbulent times, a strong Canada means we must not only track the full scope of poverty but also highlight when our efforts to address it are successful. Combining these different poverty indicators can enable us to do this and invest more in policies that create an acceptable standard of living for all Canadians.

The authors thank Alexi White for his feedback on an earlier draft.