Spain's imputed rent trick is masking growing poverty
Imputed rent inflates income figures and averages mislead: the reality is that Spain is getting poorer. The data you don't see.
English · Original discussion in Spanish · Published
The impoverishment that statistics gloss over
Fifty euros no longer fills a shopping trolley the way it did ten or fifteen years ago. The perception is so everyday that you don't need to be an economist to notice that Spain is getting poorer. Yet official statistics keep showing households with rising incomes. The contradiction has a name: imputed rent.
The imputed rent trick
The concept consists of assigning homeowners a fictitious income equal to the average rent in their area. Since 70-80% of Spanish households own their home, average income is artificially inflated. In Germany, where fewer than half of households own their home, the effect is much smaller. That is where headlines come from that compare Spanish income with German income without the figure reflecting the reality of people's pockets.
The average of the chickens
The other problem is the mathematical average: if one person eats two chickens and another eats none, the average says each has eaten one. The same happens with Spain's average income, which hides the concentration of wealth and an inflation that hits low incomes hard. Impoverishment doesn't show up in the average, it shows up in the tail of the distribution.
A quote serves as a closing: "The first cure for a mismanaged nation is currency inflation; the second is war. Both bring temporary wealth; both bring permanent ruin." We are already at the first one.
Fifty euros no longer fills a shopping trolley the way it did ten or fifteen years ago. The perception is so everyday that you don't need to be an economist to notice that Spain is getting poorer. Yet official statistics keep showing households with rising incomes. The contradiction has a name: imputed rent.
The imputed rent trick
The concept consists of assigning homeowners a fictitious income equal to the average rent in their area. Since 70-80% of Spanish households own their home, average income is artificially inflated. In Germany, where fewer than half of households own their home, the effect is much smaller. That is where headlines come from that compare Spanish income with German income without the figure reflecting the reality of people's pockets.
The average of the chickens
The other problem is the mathematical average: if one person eats two chickens and another eats none, the average says each has eaten one. The same happens with Spain's average income, which hides the concentration of wealth and an inflation that hits low incomes hard. Impoverishment doesn't show up in the average, it shows up in the tail of the distribution.
A quote serves as a closing: "The first cure for a mismanaged nation is currency inflation; the second is war. Both bring temporary wealth; both bring permanent ruin." We are already at the first one.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (48 replies).
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