Pitfalls

While ratios provide information on the relative size of two variables, it does not provide information on their actual sizes. Similarly, the change in the relative size of two variables by itself does not tell us how the actual sizes of the two variables have changed.

Example 2 – An increase in ratio might not mean an increase in both variables

 

Suppose the ratio of the median wage for occupation A to the median wage for occupation B increased from 1.50 in year 1 to 1.60 in year 2. What are some of the possible changes in the median wages of the two occupations that could have resulted in this change?

The increase in ratio can take place when the median wages for both occupations A and B increased, with A increasing by a larger percentage than B.

 

Increase in Wage Ratio When Median Wage of A

Rose Faster Than Median Wage of B

Another scenario is when the median wage of occupation A increased, but that for occupation B decreased.

 

Increase in Wage Ratio When Median Wage of A Increased and
Median Wage of B Decreased

 

The wage ratio can also increase when the median wage of both occupations A and B decrease, with occupation B decreasing by a larger percentage.

 

Increase in Wage Ratio When Median Wage of A
Decreased Slower Than Median Wage of B

 

Therefore, a change in the ratio across time from 1.50 to 1.60 can result from increases or decreases in the median wages of occupations A and B.