2010-11-10 13:52

Percentages considered dangerous: the Clarin story

Short intro for foreign readers: the largest newspaper in Argentina (Clarín) is in a catfight with the government. Therefore, we are treated daily to stories in the newspaper about how everything is terrible and the government is going to eat our children, and stories in the official TV channel about how Clarin wants to implant dancing contests and biased news into our prefrontal lobes.

The family subsidies are a recent policy that can be easily described: if you have a kid and you send him to school, you get a little money ($220). That's because having kids in school is a good thing. This has caused school enrollment to increase a lot in one year, meaning a ton of poor kids are now back in school instead of working in the streets or just staying at home.

Since it's hard for Clarín to go ahead and say that's bad, it has to find an angle. How about saying that inflation (which has been raising) is making the subsidies useless? It's an idea.

Having said that, it's hard to take this story and not say... dudes, you are giving biased journalism a bad name.

Here's the title and intro:

The raise in food prices has eliminated a big part of the family subsidies.

Depending on what indicators you use, the erosion can reach 92%

Taken at face value, that's pure nonsense. In order for that to be right, it wuld mean that the peso has lost 92% of its value and it has lost between 10% and 20% depending on what you compare it with.

What they did instead is take the cost of a basket of basic goods that has raised 36.2% (according to some estimates) and convert that raise into pesos. That's $404. Which is 92% of the family subsidies you get if you have two kids.

What's the problem? Well, of course the problem is that it makes no sense, because it's comparing two unrelated things.

Let's consider two moments in time, at the beginning of the subsidies and one year later. The basked of goods has raised from $712 to $1116.

Let's consider the case where that family only has the subsidies, both parents are unemployed and receive no help at all:

They have gone from covering 62% of their basic needs to covering 40% so they are obviously worse off now than a year ago. But not 92% worse, no matter how you cut it.

A bit more realistic: the family had some income other than the subsidies. Imagine only the mother works cleaning houses part time. That means she makes perhaps $500 discounting travel expenses.

So, a year ago, they made $940 and covered 132% of their basic needs, and now they cover only 84%.

But that ignores that pretty much everyone has had pay raises in the last year, precisely because of inflation. So assume she got a very modest raise: 10%, and she now gets $550.

That means she went from covering 132% to 89%.

Of course without the subsidies they would have gone from 70% to 49%! Try telling that mother that the subsidies have lost 92% of their value, and she'll laugh in your face.

Of course that means they are desperately poor, and yes, their salaries are worth less (if you take those numbers at face value, general inflation was much less than 30%).

But those $440 are something that was not there before. It is not a bad thing, and it is not a useless thing. And most certainly it's not a thing that has lost 92% of its value in a year.

Shame on you Clarín for trying to use "math" to confuse people.


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