If poverty is measured using the low income measure (or LIM) then it is being compared to a region’s standard of living. LIM is set on the median family income and those below this line live in poverty. The challenge with this measure is that there is great disparity in standards of living across a region (e.g. Alberta) that the measurement won’t accurately describe local conditions.
Measuring poverty using the market basket measure (or MBM) is more precise than LIM as it looks at purchasing power in the community where you live. This measurement looks at the cost of a basket of goods (i.e. food, shelter, clothing, transportation and other necessary goods and services) in comparison to disposable income to determine the poverty line. However, there can be much argument about what is in the “basket”. This is how the Government of Canada tracks progress to reducing poverty. Learn more here.
The most commonly used measure is Low Income Cut Offs (or LICO) as it shows the most accurate picture of how much income is needed before or after taxes to meet your basic needs. This measurement is updated based on the Consumer Price Index.