Skip to content

Querulous Question #1

June 8, 2009

All the brouhaha about financial game playing and our perilous financial system has brought a question to my mind:  why do we talk about wages with percentages?

%

If someone, A, making $20,000. gets a 5% raise, that’s $1000.00 dollars and they now make

$21,000.


If someone, B, making $200,000. gets the same percentage, 5%, they get $10,000, and now make

$210,000.


Both get 5%, which sounds equal, but, in fact, A got 10% of what B got, and B got %1000 of what A received, or half of A’s salary.

In plain language,

B received $9000. more than A.


So a year later they each get a 5% raise again.

A started at $21,000. this time and got $1050. which gave A a total of

$22,050.


B started at $210,000. this time and got $10,500. which gave B

$220,500.


This time

B received $9,450. more than A,

that is, at the same percentage rate,

the actual difference in money increases by $450.

and each time they get another 5% raise, the difference will increase.

The rich get richer, faster.

Here’s my refined Querulous Question #1:

Why do we use percentages to talk about wage increases when that only increases the disparity every time? B gets increasingly more than A, so the difference between their wages keeps increasing. Why don’t we just say what the actual numbers are?

I’d really like to know if it’s just habit and convenience or if there’s an actual, communication-based reason for this.

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: