Income per capita
The per capita income (abbreviation PKE ) is an economic indicator that shows the average annual income of the inhabitants of a country . For the calculation, a national product variable such as gross domestic product , gross national income , national income or disposable national income is divided by the population of the country. To determine the real per capita income , the respective inflation rate is adjusted.
The measure is mainly used to be able to compare the economic situation of different countries. In relation to the population, the distribution of income is also decisive.
The per capita income as the arithmetic mean of the sum of all incomes related to the size of the population (heads) must be differentiated from the median income (determined as the median of all incomes, which divides the population in question in half - half earns more than the median income , the other half less), as well as the average income or average household income as the arithmetic mean of all incomes related to the number of incomes or number of households.
Per capita income as an indicator of prosperity
Per capita income has long been one of the most important indicators for measuring a country's prosperity. It shows the average material prosperity and makes it - after currency conversion if necessary - comparable between countries. After adjusting the inflation rate for the per capita income of different years , the economic situation of a country can also be compared in different time periods. However, this average value does not contain any information about how income is distributed within a country. Even a small group of wealthy citizens can significantly increase a country's per capita income. In developing countries in particular, incomes are very unevenly distributed. Although all countries show a certain degree of inequality in income distribution, this is significantly higher in developing countries than in industrialized countries. In particular on the African continent and in South Asia there is an extremely unequal distribution of income. This paints a distorted picture of the quality of life of the people in these countries; The majority of the population is usually far worse off than the per capita income suggests.
The differences between per capita income, median income and average income can be an indication of the strength of the inequality . The PKE is lower than the average income because, on the one hand, one income has to support more than one person on average and, on the other hand, a few very high incomes distort the arithmetic mean of the incomes upwards. In addition, the average income is usually only calculated as that of the dependent employees - the income of the self-employed, freelancers and company profits (which, however, are included in the national income) are excluded. In between, there is the median income, also known as the mean income, which divides the income earners into two halves - one half earns more than the median income, the other half less.
There are other arguments against per capita income as an indicator of prosperity . For example, this unit of measurement only records what can be valued with money; many other factors that are also of value are ignored. Examples include unpaid housework or illegal work . Furthermore, involuntary unemployment, for example, reduces prosperity. On the other hand, a higher preference for leisure time lowers the net national income, but has a positive effect on prosperity. The aspect of environmental pollution is also important. Various economic activities pollute the environment. Spending on repairing this damage will lower wealth. However, the environmental damage itself, which reduces prosperity, is not recorded by the indicator.
All these counter-aspects have led to the fact that per capita income is increasingly being replaced by other indicators of prosperity such as the human development index .
There are a number of factors that can have both positive and negative effects on per capita income. In the case of immigration, z. B. both variables relevant to the PKE, both the size of the national product used and the number of population. If the population rises faster than z. B. the gross national product, then the per capita income falls.
If two countries have the same average labor productivity but a different number of workers, per capita income will be unequal. Assuming the same number of people, the country with the higher proportion of workers will have the higher per capita income. This means that differences in the birth rate and mortality of the population have a direct impact on a country's per capita income.
In the short term, the increase in the birth rate leads to a decrease in per capita income, as in this case the number of employees temporarily falls. In the long term, the newborns in turn increase the number of employees and thus the size of the national product. If the death rate of a country is higher than the birth rate, the population decreases, whereby the per capita income is higher.
Another aspect that has a positive effect on per capita income is the increased working hours. If the number of employees remains the same, there is an increase in the number of jobs. However, this is problematic because the higher the number of hours worked, the lower the productivity of workers. Thus, the number of hours worked is increasing faster than the per capita income. The alternative solution here would be to carry out qualification measures.
Long-term growth in per capita income can only be achieved through constant technical progress. This expands the production possibilities without having to employ more workers. Technical progress is therefore essential for the growth of an economy.
Countries with low technological development, such as Mexico or Romania, have a lower per capita income than countries that are highly industrially developed, such as B. the United States, England and Germany. States that are more agriculturally than industrially developed generally have a lower per capita income and vice versa.
Problems of the international comparison of income
Data on per capita income are available for almost all countries. The problem, however, is that it has to be estimated in some cases because of insufficient or unreliable data. This measure is therefore not as exact as it may seem. But this is not the only reason why an international comparison is difficult. The conversion of the respective currency of a country into a reference currency can lead to distortions of the data. Despite the constant efforts to standardize the calculation bases of the national accounts worldwide, there are still differences between individual countries.
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