Tuesday, February 6, 2007

rent, lies, and statistics

A news story yesterday said "Renters will dig deeper in 2007" (USA Today headline). While the story speaks of higher rents, and they appear to be rising, the story also shows how statistics can be used to mislead and possibly create a story where there really is none.

The story states that rents will rise 5% in 2007. It also says that they will have risen 14% over the 3 years from the end of 2004 until the end of 2007. Note that a 14% rise is around 4-5% per year.

Apparently to show how this will hurt people, the story goes on to say that wages will rise "4%, adjusted for inflation" over a similar period.

Notice the first impression a reader will get -- 14% rent increase, 4% wage increase. Yet that's not what it says. The wage increase is adjusted for inflation, the rent increase apparently is not. Looking at inflation numbers -- the consumer price index, inflation in 2005 and 2006 was 3.4% and 2.5%. Assuming 3% inflation in 2007 (about where it's been the last 10 years), the numbers total to about 9% inflation for 3 years.

Now compare the numbers. The wage increase is 9% (inflation) plus 4% (real increase), or about 13%. Rents will rise 14%. A 1% difference, not very significant.

So the news story is actually a non-story. Rather than renters digging deeper, it appears that for the last 3 years rents have roughly matched in inflation.

This provides a perfect example of the maxim, "there are lies, damn lies, and statistics".

1 comment:

Asta said...

People should read this.