Statistics can mislead as easily as they can enlighten

French workers are indeed more productive than their American counterparts, but what about all those unemployed French?

from the March 15, 2007 edition

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To see how, suppose that you calculate the average height of people in the room where you now sit and find that it is 5 ft., 6 in. Now suppose a 2-year-old child enters the room. The average height of people in that room suddenly falls. Few of us would make the mistake of concluding that those people were shrinking in size. Some of them might even have grown taller. Yet how often do we hear politicians use statistics in just this specious manner.

The same logic applies to the calculation of average wage rates. Changes in this figure can be caused by changes in the composition of the labor force rather than by changes in the wages of individual workers.

For example, if teenagers, immigrants, and other lower-skilled workers start entering the labor force in larger numbers, they will lower the average wage rate because lower-skilled workers generally are paid lower wages than those paid to higher-skilled workers.

This fall in the average wage rate, however, does not signal that workers' fortunes are declining. In fact, in this case it is evidence of economic health: The economy is sufficiently flexible to provide jobs to workers who haven't yet acquired valuable skills.

A less-flexible economy, such as France's, which makes it difficult for lower-skilled workers to find jobs, will not "suffer" any such fall in its average wage rate. But that fact, surely, is small comfort to the many poor people left unemployed.

Of course, in the other direction, if higher-skilled workers begin entering the labor force in unusually large numbers, they can pull up the average wage rate even if the wages of ordinary workers don't change.

None of this is to suggest that statistics are useless. Quite the contrary, statistics are indispensable to grasp reality better and to distinguish explanations that are correct from explanations that are merely plausible or even downright erroneous. But statistics will assist us in our quest for understanding only if we approach them critically, aware that they can mislead as easily as they can enlighten.

• Donald J. Boudreaux is chairman of the economics department at George Mason University.

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