A June article in Policy Options highlighted a relatively new and important measure of economic hardship for older Canadians – the material deprivation index (MDI). Poverty among older adults is indeed complex and requires multiple indicators to assess it comprehensively.

The two established indicators – the market basket measure (MBM) and the low-income measure (LIM) – define poverty in terms of income while the MDI provides a direct assessment of financial hardship by evaluating a household’s ability to afford essential goods and services.

The National Institute on Ageing collected the MDI data for the first time in its 2024 annual survey on aging in Canada.

A striking contrast is highlighted in the Policy Options article, “The case for using several ways to measure the economic reality of older adults.”

While the MBM, Canada’s official poverty measure, reports that five per cent of older Canadians lack sufficient income to cover basic needs, both the MDI and LIM suggest that financial hardship affects 14 per cent of people 65 and older.

The article concludes that all three indicators, which measure different dimensions of financial hardship, and other measures should be used to get the clearest picture.

The MDI does offer policymakers and researchers a valuable new tool for identifying and understanding financial hardship in later life. However, in welcoming this innovation, we must also be careful not to treat the MDI, or any small set of indicators, as sufficient on their own.

We must also be careful to avoid the trap of assuming that age, taken in isolation, is a big factor in assessing the adequacy of government income-support programs.

The need for a broader approach

The need to use multiple indicators in financial hardship analysis is well-established worldwide and is even entrenched in legislation in Canada.

The 2019 Poverty Reduction Act, based on the federal Opportunity for All report, designates the MBM as the official poverty measure but says it must be supported by additional metrics that provide a more complete picture.

This led to the creation of Statistics Canada’s Dimensions of Poverty Hub, which is regularly updated and currently presents 12 key indicators capturing various dimensions of poverty in addition to the MBM.

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These indicators include some that also assess material deprivation. A deep-poverty indicator provides an income-based proxy for deprivation while indicators of unmet housing needs and chronic homelessness, food insecurity and access to health care provide direct measures in key areas of potential deprivation.

The Policy Options article highlights three key indicators. However, a fuller understanding of the challenges facing vulnerable seniors requires a more comprehensive dashboard including some indicators already in the poverty hub, as well as related measures of social well-being and a deep analysis of the detailed micro-level data on which those indicators are based.

The hub would be more useful in such applications if it were to incorporate a comprehensive measure of deprivation such as the MDI and provide links to disaggregated indicators for various population groups, including people in different age brackets. A feasibility study would be welcome.

Avoiding simple age-based analysis

There is a second and perhaps more subtle caution that must also be raised in policy analysis and design: the risks of relying too heavily on age-based categories. The NIA’s annual survey, for example, uses age 50 as a cutoff for “older adults,” while government policies such as pensions focus on those 65 and older. These categories are convenient, but their use can result in misleading policy analysis.

Analysis based on older people taken in isolation ignores a key finding that that is apparent when the full range of Statistics Canada indicators are taken into account – that there is much less financial hardship among people when they become older than when they were of working age.

In addition, when looking at financial hardship and other measures of well-being, older people do not constitute a homogeneous entity.

Poverty in older people is concentrated in groups such as those (often widows) living alone, those from some immigrant communities and those with disabilities or needing long-term care.

However, there are also middle-aged and young people in all of these vulnerable groups. Limiting our analysis and policies to only the older people in these vulnerable groups could be seen as edging toward age discrimination.

Moreover, most older people do not belong to vulnerable groups and are not in financial difficulty. NIA’s full report points out that based on the MDI, seniors are actually less deprived compared with younger age groups, even in vulnerable groups such as single households.

Poverty in later life often has earlier roots

It’s also crucial to recognize that the conditions leading to financial insecurity in older age are often shaped much earlier in life. Inadequate retirement savings, limited access to workplace pensions, poor health, precarious employment histories or insufficient financial literacy are all long-term contributors to economic vulnerability in later years.

Policies that focus exclusively on seniors without addressing these earlier-life risks are likely to miss the mark.

The same is true in the workplace. Employer practices can have lasting effects – both positive and negative – on financial readiness for retirement and other dimensions of quality of life.

Incentive structures that push people out of the labour market prematurely despite their health, skills and willingness to work can lead to unnecessarily reduced incomes and poorer well-being in retirement.

A broader perspective for better policy

In summary, the Policy Options article does a valuable service by highlighting the role the MDI can play in our understanding of poverty among older adults. But its findings need to be placed in a broader analytical context.

Good policy design requires that we see beyond age brackets. Age-based categories, while often necessary for program delivery, are blunt instruments for analysis. Economic hardship and social vulnerability are not the exclusive preserve of any one age group. Analyses and the policies that flow from them must reflect this complexity.

If we are serious about reducing poverty in old age and throughout life, we must adopt a multidimensional lens grounded in data and an understanding of the pathways that lead to well-being or hardship. Policy analysis must be based on evidence drawn from multiple sources.