Uses
The concepts of absolute and relative change complement each other in helping us understand the extent to which a labour market indicator has changed over time.
Given the same absolute change, the relative change is larger in magnitude if the initial value is at a lower level than if it is higher.
Suppose Alvin and Michael each received a salary increment of $200 in 2012. With the same absolute change of $200, the relative increase in income was higher for Alvin (+10%) compared with Michael (+6.7%). This is because Alvin’s original income ($2,000) was lower than Michael’s income ($3,000). Refer to the following chart.
Income of Alvin and Michael
(Same Absolute Increase)
On the other hand, suppose both men’s income increased by 10% in 2012, that is, the relative change in income is 10% for both. The increase in absolute terms is higher for Michael ($300) than Alvin ($200), as Michael’s income in 2011 ($3,000) is higher than Alvin’s income ($2,000).
Income of Alvin and Michael
(Same Relative Increase)/Absolute%20vs%20Relative%20Change%20Uses%2002.JPG)
Absolute change is more useful for some purposes, while relative change is more useful for others.
For example, agencies whose budgetary requirements are closely linked to the number of participants taking part in their programmes or requiring their assistance may be more interested in the absolute change in the number of participants. An agency in charge of employment assistance, for example, would be interested in understanding the absolute change in number of people who seek job assistance from the agency over different periods in time, allowing it to better forecast its budgetary requirements or work out the additional amount of funds needed to support their future operations.
On the other hand, relative change may be more useful when we want to understand the extent to which a labour market indicator has changed, and the value of the indicator is different across segments of the population.
For example, the land transport & supporting services industry employs more workers than the water transport & supporting services industry, and the absolute change in employment in both industries in 2011 were the same (see table below). The impact of this increase is likely to be greater for the water transport & supporting services industry which had a smaller employment size. This point is more clearly seen by looking at the relative employment change, where the increase for water transport & supporting services (2.9%) is higher than that for land transport & supporting services (1.6%).
Employment Level and Change in Two Industries
