Pitfalls

In analysing relative change, note that indicators with extremely low values have a greater tendency to produce large relative change, even when the absolute change is small in value.

For example, if an industry employs 20 workers in year 1, but only 10 workers in year 2, the relative change in employment is -50%.

If we solely look at the relative change, we may be drawn into concluding that there has been a large decrease in employment in the industry, and hence a significant amount of additional resources will be needed to help those affected. This is however not the case given that the decrease in number of workers in this industry is small.
 
In short, an indicator with a large absolute change may not necessarily have a large relative change, and vice versa. Hence in analysing relative change figures for different groups, it would be useful to also look at the absolute change or the initial value from which the changes were computed, to reach a more balanced conclusion on how the indicators have changed over time.
 
 

Absolute vs relative change for data in percentages

Sometimes, we come across statements like the following:
 
The unemployment rate increased by 0.2% from 2.0% to 2.2%
 
The concept of absolute and relative change has been confused in the statement above, as the increase in unemployment rate of “0.2” is actually an absolute change (2.2 – 2.0) and should be expressed in percentage points (%-points) rather than percent (%). To derive the relative change, we need to divide the absolute change by the unemployment rate in the earlier time point and multiply it by 100, i.e.