Isolated Posts Allowance Indexes (Living Cost Differential Indexes) (LCD)

Detailed information for this survey

Status:

Active

Frequency:

Irregular

Record number:

2321

The purpose of this survey is to collect data used to calculate spatial price indexes that determine the Living Cost Differential allowance level payable, under the Isolated Posts and Government Housing Directive (IPGHD), to Canadian government employees serving at "isolated" locations in Canada.

Data release - The data from this survey are not released by Statistics Canada. They are used by Treasury Board, and published on the National Joint Council (NJC) website (www.njc-cnm.gc.ca).

Description

General information

The Government Allowances Section of the Consumer Prices Division at Statistics Canada, is responsible for the computation of comparative retail prices and living costs, or price index differentials. Price index differential values are used to recommend Living Cost Differential (LCD) levels to the Treasury Board Secretariat (TBS) in their role as National Joint Council (NJC) member, to support the operation of the Isolated Posts and Government Housing Directive (IPGHD), published on the NJC website (https://www.njc-cnm.gc.ca/directive/d4/en). The IPGHD applies to Canadian government employees, serving at approximately 300 locations in Canada that have been designated as "isolated" under this Directive.

The basic policies on which the IPGHD is based, the criteria for determining whether a location is classified as isolated, and the absolute dollar amounts of allowances are the responsibility of TBS acting within the framework of ongoing employer - employee, NJC consultations. Statistics Canada's role is to provide general statistical advice to TBS and the NJC as required, and to support the administration of the LCD Allowance.

Although this information is in the specific context of the IPGHD, it has equal application to parallel provisions of the Queen's Regulations and Orders for The Canadian Forces.

Nature and purpose of LCD indexes

A Living Cost Differential (LCD) Index is a spatial price index. It is, at a given point in time, the expression of the relationship between retail prices of a specific range of products (goods and services) at a particular isolated post, compared to the price of the same range of products in one of seven Canadian "point of comparison" cities (Vancouver, Edmonton, Saskatoon, Winnipeg, Toronto, Montreal or St-John's) as established by the NJC.

The price level at the point of comparison is always expressed as 100; thus an isolated post's price index differential that falls between 130.0 and 134.9 indicates that for the range of products compared, price levels at the isolated post are estimated to be between 30 and 34.9 percent higher than those at the post's point of comparison city.

Following from the above example, an isolated post whose price index differential falls between 130.0 and 134.9 would have an LCD level 4 classification.

The IPGHD currently provides that a post to point of comparison differential must be at least 15 percent before an allowance is payable. This 15 percent threshold was adopted in recognition of significant price differentials existing between non-isolated locations in Canada.

The amount of the allowance is related to the average Canadian family expenditures on the range of products (goods and services) included in the calculation of LCD indexes.

The range of products included in the comparison is limited to the categories outlined in the IPGHD, as set out by the NJC Working Committee on Isolated Posts including:

- food consumed at home,
- food away from home (restaurants),
- household supplies and services (including communications),
- personal care supplies and services,
- non-prescription pharmaceutical products,
- public transportation,
- private vehicle operation and maintenance (including snowmobile and/or boat operation),
- tobacco and alcoholic beverages,
- audio/video supplies and reading material.

Prices are collected for some 250 products from these 9 major categories. Price comparisons for individual items are averaged to reflect their relative importance in the point of comparison.

Several important components of the typical family budget are not included in the LCD measurements. Shelter, fuel and utilities, and vacation trips are included in other provisions of the IPGHD. Home furnishings, education, clothing, savings and investments, and vehicle purchase costs are excluded. Even in the case of those groups which are included, it is sometimes necessary to introduce adjustments at locations where certain items may not be available.

Comparative retail price indexes can only consider prices of products that can be priced and are identifiable with a specific quantity. Thus, physical or environmental factors such as climate, access, and population size, considered in determining whether a post will be classified as isolated, are not elements of LCD indexes. These factors are recognized under the IPGHD's Environment Allowance.

Once established, the price index differential for each isolated post is reviewed at three to four year intervals and remains in effect, unchanged between review periods. Depending on circumstances, some locations may be reviewed more or less frequently than others.

Collection period: Fall and spring

Subjects

  • Prices and price indexes

Data sources and methodology

Target population

The target population for the Living Cost Differential Survey's, Consumer Information Schedule questionnaire is all federal government personnel and agents posted to isolated locations within Canada. The basket of products includes only categories of goods and services as agreed upon by the National Joint Council (NJC) comprised of the Canadian government and its employee associations.

The target population for the Living Cost Differential Survey's Pricing Schedule for Retail Price and Living Cost Surveys at Remote Locations questionnaire is all retail outlets at isolated posts and specified supply sources. Retail outlets in the base city are chosen based on outlets collected in the CPI and the likelihood to find prices for products that match those collected in the isolated post and supply source outlets.

Instrument design

Questionnaires were developed by the Isolated Posts Unit of the Consumer Prices Division based on the basket of products specified by the National Joint Council's Isolated Posts and Government Housing Committee.

Questionnaires are subject to revision when new product weights, reflecting typical family expenditure patterns, are introduced. New products can be added or specifications for product categories modified. Individual specifications may be revised to capture changes to product models or formats based on feedback from data collection and other market intelligence.

Frame

A main contact for each federal department at each isolated post is provided by a departmental contact in the Ottawa/Gatineau head office. The post contacts serve as survey coordinators. They are responsible for identifying respondents in their office and distributing questionnaires to them as well as identifying a resource to collect product prices, if price collection is not scheduled to be carried out by Statistics Canada interviewers.

Retail outlets in each isolated post are identified based on whether responses in the previous survey iteration indicated more than 10% of local purchases were made there or, if a new outlet has opened since the previous survey iteration. In the case of new outlets, either post employees will indicate they shop there on their completed questionnaire or Statistics Canada will request that Statistics Canada price collectors carry out collection based on market intelligence, and the reasonable expectation that post employees will shop there.

Outlets in the base city are a sub-sample of the CPI food outlet sample. Outlets are chosen to maximize the likelihood of finding products in the base city outlet that match those in isolated post and supply source outlets. Typically, one outlet per store name (in the case of chain stores) is chosen based on revenues (from Statistics Canada's Business Register).

When retailer scanner price data is available in a post, supply source, or base city, prices for in-scope products from all stores for that retailer are included.

Sampling

This is a sample survey with a cross-sectional design.

Federal government employees at isolated posts.

Retail stores located in isolated posts, supply sources, and point of comparison (base) cities.

The target population is all federal employees at isolated locations where at least one employee works full time from January to December. If the employee(s) are seasonal, a judgmental sample is derived for the group on the basis of geographical locations within the region.

The sample of retail outlets is a judgmental sample of local retailers frequented by post personnel. Some 250 price specifications are collected from the universe of retail products (goods and services) covering the specific basket of products included in the survey. Some important criteria and considerations for designing the isolated posts basket of products include:
1. The product should be available at all locations. Individual copies of the same pricing questionnaire are used to collect prices for the listed products at each post. Product availability may be a constraint in establishing baskets for north/south price comparisons because of the wide variation in location accessibility, community size, climate, and products stocked.
2. The product should be one commonly purchased by Canadian families and have some significance in their expenditure patterns.
3. The product should be easy to identify and be amenable to a reasonably precise description.

Products are neither included nor excluded on the basis of any moral or social judgments (e.g., alcohol and tobacco). They are included because they represent a significant proportion of reported average household expenditures as reported on Statistics Canada's Survey of Household Spending.

Data sources

Responding to this survey is voluntary.

Data are collected directly from survey respondents and derived from other Statistics Canada surveys.

Data is collected using two paper questionnaires:
1. Consumer Information Schedule (CIS) and
2. Pricing Schedule.

Initial contact is made by sending a letter to head office departmental contacts to identify the number of employees and the contact information for a main contact at each post.

The CIS questionnaire is e-mailed to the main contacts for each department at each post who distributes the questionnaires among their department's employees at the post. Responses provide Statistics Canada with information on the isolated post's retail market and consumer purchasing patterns.

Respondents provide information on products and product groups regularly purchased both at the post (locally) and if not available in local outlets, information on where they are obtaining them (outside purchases).

The Pricing Schedule questionnaire is completed either by personnel at the post (coordinated by the department's contact) or by Statistics Canada interviewers. The Pricing Schedule questionnaire is e-mailed to contacts in posts not scheduled to have data collected by a Statistics Canada interviewer. Survey interviewers carry out collection for stores in selected posts, supply sources, and the base city, using printed copies of the Pricing Schedule questionnaire.

Data is manually captured or loaded electronically in the Aquila processing and estimation system.

Follow-ups with respondents are made by phone and email.

Administrative:
- Telephone rates
- Postal rates
- Cable and satellite rates
- Home insurance rates
- Airline passenger and freight rates
- Automobile insurance and registration rates
- Shipping and freight rates
- Magazine and newspaper subscription rates
- Beer, liquor and wine (provincial prices)
- Retailer-specific scanner data

Retailer-specific scanner data of transaction prices paid by consumers are used for some major retailers. This data is obtained a source of price data for the Consumer Price Index.

Prices for products in the Post Index basket are extracted from the scanner data files.

Derived:
LCD product weights are derived from SHS expenditures.

View the Questionnaire(s) and reporting guide(s).

Error detection

All questionnaires are reviewed for completeness. Follow up by e-mail or telephone is carried out to obtain missing information or to resolve inconsistent responses.

Conversions are applied to ensure that all post and point of comparison prices are comparable in quantity or container size and, as much as possible, for identical brands.

All captured data is verified to ensure accuracy of input. Outlier detection is carried out using both automated and manual procedures.

Data on all Consumer Information Schedules are brought together to form average post buying patterns Ratios of products purchased locally to those "imported" from other non-local retailers are calculated. Freight, packing, handling and other charges, if applicable, are added to the supplier's base price to establish the final "landed cost" to the employee in the case of imported items.

A comparative price index is then computed beginning at the individual item, and building up through commodity groupings to a composite number. The index calculation is reviewed for coherence, taking into consideration any clarifying comments from individual respondents, alternative price data from other posts in the general area, and any other reliable information.

Analysis of survey results is carried out at several stages of estimation. Product aggregate indexes by category are compared to regional post indexes. The final LCD indexes are compared to those of the previous survey.

Imputation

When an exact comparison is not possible, the price of a similar product can be used as a proxy. Donor imputation from nearby posts is used for missing prices. Conversion factors are applied when exact size comparison is not possible.

Estimation

Estimates are calculated at five main levels:
1. Weighted average product prices in the point of comparison (base city)
2. Weighted average product prices at the post
3. Local relatives and indexes
4. Import relatives and indexes
5. Combined indexes (post index)

A weighted average base price is calculated for each product in the post's point of comparison (base) city, as identified in the Isolated Posts and Government Housing Directive, Appendix H. The retail outlet's market share in the base city is used to weight product prices in the average base price calculation.

Responses from all individual Consumer Information Schedules (CIS) are combined to create the post's purchasing pattern and a ratio of local purchases to 'imported' goods. Freight, packing, handling and other charges (if applicable) are added to the supplier's base price to establish the final 'landed cost' to the employee in the case of 'imported' items.

Post prices are weighted by the relative importance of each retail outlet or product source for the post. The relative importance is derived from the Consumer Information Schedule (CIS) where post employees indicate the percentage of purchases normally made in local outlets and the percentage from other, outside post locations (sum to 100%) for each product or product group.

Each product's weighted average post price is compared to the point of comparison's weighted average price, expressed as a ratio. For example a ratio of 2.0 for a particular product indicates that the post price from that source is twice that of the point of comparison price.

Each product group price ratio is assigned a weight, or relative importance, based on expenditure data from the Survey of Household Spending (SHS). Once weighed, the results are aggregated to produce the post's Living Cost Differential Index.

The weights, or relative importance of the LCD basket of products, are derived from the most recent data from the Survey of Household Spending (SHS) (SDDS 3508). Special tabulations of expenditures are provided for a subset of SHS respondents: Canadian families of 2 or more in large southern metropolitan centres. The price differentials (ratios) between the isolated post and the point of comparison are weighted based on the SHS reported expenditures for products in the point of comparison.

Post index differentials represent a "best estimate" of the percentage by which prices for a specific range of products (goods and services) at an isolated location differ from those for the same items at the point of comparison.

Quality evaluation

All captured data is checked for input accuracy. Details for priced products are validated to ensure the same quantities, sizes, or weights and, as far as possible, identical brands were priced in the point of comparison city as in the post.

The data are reviewed for outliers using both automated and manual procedures. Detailed analysis is carried out to produce product category aggregates. The validity of differences between the previous Living Cost Differential Index and the results of the survey are analyzed.

Disclosure control

Statistics Canada is prohibited by law from releasing any information it collects that could identify any person, business, or organization, unless consent has been given by the respondent or as permitted by the Statistics Act. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.

Revisions and seasonal adjustment

This methodology does not apply to this statistical program.

Data accuracy

So as not to mislead users and to avoid implying a degree of accuracy that cannot be achieved when creating estimates comparing prices in isolated communities and large metropolitan centers, the Living Cost Differential Indexes calculated by Statistics Canada are not published. Rather, there are 16 LCD levels, reflecting 5-point ranges of the price index differential, to which isolated posts are classified (IPGHD Appendix H) as indicated in the additional documentation included at the end of this section.

Software used:
Aquila, in-house data capture, processing, and index calculation and estimation system.

Timeliness:
Survey results, LCD levels, are typically delivered to the Treasury Board Secretariat about 12 months after all data has been collected. Treasury Board submits the LCD levels for approval by the National Joint Council's Isolated Posts and Government Housing Committee. After approval, classification levels (Appendix A) are amended and published by the NJC on their website.

Response rates:
Statistical reliability is more difficult to assess for spatial price indexes than other statistical series due to their complex nature and statistical issues with estimating composite price change.

Living Cost Differential surveys are issued to isolated posts using a non-probability sampling method. The population of federal public servants at any given isolated post may vary considerably depending on the post's location or availability of employees to complete a survey of local prices.

Sampling error for Living Cost Differential Indexes are difficult to quantify because, generally, product and outlet samples are based on judgemental rather than probability sampling methods.

Non-sampling error:
Errors can occur in price collection and editing, when response errors occur, or when manual substitutions are required for similar products not available at an isolated post or in a point of comparison (base city).

Non-response bias:
Accuracy is optimized for higher levels of geographic (spatial) comparisons when a larger sample of product prices is collected and a greater number of questionnaires are completed.

Coverage error:
Response quotas are used to mitigate coverage error. Isolated Post employees are mandated to have as many employees at the post complete the survey questionnaires as possible in an effort to capture a large segment of the population of public servants at a given location. When Statistics Canada is unable to measure the LCD index by reason of the lack of survey response by employees, the National Joint Council, on the recommendation of the Isolated Posts and Government Housing Committee, may recommend the reduction or deletion of the applicable LCD index.

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