Tuesday, 10 December 2013

Mind the gap between data and people’s lives

By Janice Heng, The Straits  Times, 9 Dec 2013

MY SALARY hasn’t increased since 2008!”

“Whose income are they referring to?”

“Can we trust the figures? Not for me, because I AM JOBLESS now, and so is my close friend.”

Such were some of the online responses to news that real median incomes grew 3.9 per cent this year, the most since 2008.

In statistics and speeches, people are often reminded that Singapore’s workers are, on the whole, doing pretty well.

Unemployment is low. Pay is rising, even after taking inflation into account.

But for some, these reminders are at odds with what they see in their daily lives: their own stagnating pay, or their unemployed friends.

The disbelieving reactions above point to a gap which politicians, for one, might want to keep in mind: the difference between headline figures and individual lives.

But citizens, for their part, should also learn that anecdotes do not disprove data.

Official numbers will not always mirror personal experience. But that does not mean the numbers are wrong.

Statistics are often more subtle than they are made out to be.

That rosy income growth figure, for instance, comes with several qualifications.

First, there is the measure chosen: the median, which is the midpoint of a range. Because it is a single point, it does not always reflect changes above and below.

Take a hypothetical economy of seven workers: three earn $1,000, three earn $5,000, and one earns $3,000.

Line them up in order of salary, and in the middle is the one earning $3,000 – which is thus the median pay.

What if the three lowest-earning workers now earn $2,000? It’s a big improvement, and yet the median has not changed.

Another problem is that the median can rise even if wage gains are uneven. If the middle worker’s pay goes up to $4,000, then that is the new median, even though no one else has gained.

So detractors have a point: To many Singaporeans, rising median pay may mean little.

This objection can be addressed, to some extent, by another set of Manpower Ministry figures: annual wage changes.

These are the average wage increases given by firms, the actual pay rises on pay slips. So if many workers do not get pay rises, this will show up in the data.

But even this measure cannot escape the fundamental point that for every average, there are necessarily people who fall below it – and who might thus complain.

Second, there is the issue of real income growth.

Nominal or dollar income growth was actually lower this year. It rose 6.5 per cent to $3,705 in June, a smaller gain than the 7.1 per cent rise last year.

But because inflation was lower too, real income growth – that is, nominal growth net of inflation – was higher.

The problem is that lower inflation may not be felt by everyone.

As economists pointed out, lower inflation this year is largely due to falling certificate of entitlement prices. But that does not affect costs for those without cars.

None of this is to say that macro figures are useless. On the contrary, they are a necessary guide to how the economy and the labour market are doing overall.

But when macro figures are translated into generalisations about people’s lives – such as “Singapore workers earned more this year” – then one can see why those whose experiences do not fit the trend might protest.

Some politicians are careful to acknowledge that not everyone identifies with average numbers.

Acting Manpower Minister Tan Chuan-Jin often notes that unemployment figures may be low, but for every unemployed worker himself, “the rate is 100 per cent”.

This sort of empathy could help soothe the angst of those who find themselves left out of Singapore’s rising wage story.

After all, whenever healthy economic figures are trotted out as proof of progress, there is always the risk of backlash from those who have not benefited.

Some acknowledgement that this group exists, and there are indeed workers who are left behind, might help bridge the gap between individual experience and overall trends.

Unfortunately, such a gap is a fact of life. But instead of slamming official figures, one could consider that even if macro numbers do not fit their experience, that does not mean the numbers are wrong.

School children who score below average in exams do not take that as a sign that the average score must therefore be wrong. In the working world, the same principle should apply.

Unhappiness over being left out of growth is understandable. Irrational denial is not.

Citizens should realise that when it comes to data, the experience of a high-flying graduate who sees his peers earning large sums is no less legitimate than that of the low-wage worker who has not seen a pay rise for years.

Neither is representative.

Both are data points that help form the overall picture.

When the experiences of individuals deviate from macro figures, the rational response is to ask why this is the case, and what can be done to change things.

That, and not blind denial, is a better starting point from which to tackle the problems of those who are left behind.

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