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After-Tax Family Income Distribution

Income Distribution

Lorenz Curve and Gini Coefficient

Median Share of Income

Statistics Canada provides an indicator of income distribution among the population by sorting the Canadian population in private households according to their after-tax family* income and dividing the population into 10 equal groups, each containing 10% of the population. A person’s after-tax family income can then be compared to see where it falls in the Canadian distribution. For example, a large percentage of the population in the lower deciles or in the bottom half of the distribution would indicate a larger amount of the population has lower income compared to the Canadian population.

The income distribution in Simcoe Muskoka was fairly evenly distributed compared to the Ontario and Canadian population in 2015, with 48% (or 252,015) of the population in the bottom half of the distribution and 52% (or 277,455) in the top half.

The district of Muskoka had a higher percentage of the population (52% or 30,170 persons) in the bottom half of the income distribution compared to Ontario (48% or 6,335,170 persons) and Simcoe County (47% or 221,845 persons).

All areas have high and low income households, however, some areas had a higher proportion of their population in lower income compared to the Canadian and Simcoe Muskoka distributions of after-tax family household income. Eleven out of 27 applicable municipalities in Simcoe Muskoka had greater than 50% of their population in the bottom half of the distribution in 2015. The highest among these included Christian Island 30 (88% or 540 persons), Mnjikaning First Nation 32 (68% or 590 persons), Midland (62% or 10,090 persons), and Orillia (61% or 18,220 persons).

There were three municipalities in Simcoe Muskoka that had 60% or more of their population in the top half of the distribution in 2015. These included Springwater (67% or 12,705 persons), Oro-Medonte (66% or 13,760 persons), and Adjala-Tosorontio (66% or 7,130 persons). In Springwater, 18% (or 3,365 persons) of the population was in the top decile, 15% (or 3,180 persons) in Oro-Medonte, and 13% (or 1,460 persons) in Adjala-Tosorontio.

*Family in this instance refers to a group of two or more persons who live in the same dwelling and are related to each other by blood, marriage, common-law union, adoption or a foster relationship.

As shown in the graph below, according to TaxFiler data, the poorest 10% of persons in Simcoe Muskoka held 4% of Simcoe Muskoka’s total aggregate after-tax income in 2015 while the richest 10% held 21%. The proportion of income held by the richest 10% of the population has decreased since 2010 from 24% to 21% in 2015 while the proportion of income held by the poorest 10% has increased from 2% in 2010 to 4% in 2015 in Simcoe Muskoka.

*Disclaimer: Statistics Canada makes no representation or warranty as to, or validation of, the accuracy of any Postal CodeOM data.

Income inequality is the extent to which income is distributed unevenly among a population.

The Lorenz Curve is a graphical representation that helps us visualize the distribution of wealth in a population.

By dividing households into quintiles or fifths, the Lorenz Curve shows the cumulative percentage of income received (y-axis) by the cumulative percentage of households (x-axis). If income is equally distributed and every household has the same income, the Lorenz Curve would follow along a 45 degree diagonal line exactly. The extent to which the line of the Lorenz curve diverges from the 45 degree diagonal illustrates where there is inequality of income distribution. Points on the Lorenz curve represent statements like "the bottom 20% of all households has 10% of the total income.”

The Gini Coefficient is a way of attaching a number value to the Lorenz Curve. When we take the area between the 45 degree line and the Lorenz Curve divided by the entire area below the 45 degrees, we get a number between zero and one, where a value of zero means that income is equally spread among households and a value of one means that income is unequally distributed.

The Gini Coefficient is estimated for Ontario and Simcoe Muskoka using after tax household income derived from 2016 Census data. Simcoe Muskoka’s Gini Coefficient (0.354) is a bit lower than Ontario’s (0.391), suggesting that when compared to Ontario, income is more equally distributed among Simcoe Muskoka households. Income distribution amongst private households is illustrated in the Lorenz Curve below.

The chart below shows that approximately 50% of households in Simcoe Muskoka and Ontario hold 28% of the overall income. The poorest 12% of households in Simcoe Muskoka hold approximately 2.5% of the income. The wealthiest 14% of households in Simcoe Muskoka hold approximately 31% of the income.

The median share of income is another measure of income inequality. It is the proportion of income held by all private households whose incomes fall below the median household income. As noted in the Lorenz Curve above, a median share of income of 50% would indicate no income disparity. According to the 2016 Census, Simcoe County and the District of Muskoka had a median share of income of approximately 28% and 25%, respectively. This means that households whose income fell below the median income held 28% of the income in Simcoe County and 25% of the income in Muskoka while households with income above the median income held 72% and 75% of the income in Simcoe County and Muskoka, respectively. This is higher than Ontario’s median share of income (24%), indicating slightly less income disparity in Simcoe County and the District of Muskoka than Ontario.