Percentage Points — Definition, Formula & Examples
Percentage points measure the arithmetic difference between two percentages. If a rate goes from 30% to 45%, it increased by 15 percentage points — not 15%.
A percentage point is a unit equal to one hundredth in the context of comparing two percentage values. The difference between two percentages, expressed in percentage points, is computed by simple subtraction of the two values without dividing by the original.
How It Works
When you subtract one percentage from another, the result is measured in percentage points. Saying "5 percentage points" means the raw difference between two percentages is 5. Saying "5 percent" would mean a relative change — 5% of the original value. For example, going from 20% to 25% is an increase of 5 percentage points, but it is actually a 25% relative increase (because 5 is 25% of 20).
Worked Example
Problem: A store's sales tax rises from 6% to 9%. Describe the change in percentage points and as a percent increase.
Find the difference in percentage points: Subtract the old percentage from the new one.
Find the percent increase: Divide the change by the original value and multiply by 100.
Answer: The tax rose by 3 percentage points, which is a 50% increase relative to the original rate.
Why It Matters
News reports about elections, interest rates, and statistics use "percentage points" constantly. Confusing percentage points with percentages can make a change sound much smaller or larger than it really is. Getting this distinction right is essential in data literacy and any course involving statistics.
Common Mistakes
Mistake: Saying a jump from 10% to 15% is a "5% increase."
Correction: It is a 5 percentage point increase. The percent increase is actually 50%, because 5 is half of 10. Use "percentage points" when describing the raw difference between two percentages.