What Does Per Capita Mean?
Per capita is a Latin term that translates into "by head." Per capita means the average per person and is often used in place of per person in statistical observances. The phrase is used in relation to economic data or reporting, but is also applied to almost any other occurrence of population description.
Application of Per Capita
For national economic indicators such as gross domestic product (GDP) or gross national product (GNP), the total is of interest but the per capita basis gives more granular information for anaysis. Determining the per capita of any number is relatively straightforward: divide the total of the number being referenced by the number of people involved. U.S. GDP was $19.49 trillion in 2017 according to the CIA World Factbook and the latest data, and the population is approximately 327 million. That gives a per capita income of around $59,500.
Per capita measures reflect the relative state of a country's population. For example, China is now the second largest economy with a GDP of $16.6 trillion in 2017 - around 40 percent lower than the United States. However, China has far more people than the United States, and so the per capita GDP for China was just $16,600. Thus, using per capita GDP shows that most Chinese citizens are still earning far less than the average American despite the country's aggregate output. Per capita GDP expresses the average income for all the citizens of a particular country or area. Therefore, it can be a misleading number because it includes everyone from infants to senior citizens and fails to account for statistical outliers.
- Per capita is a term used in statistical analysis that means per person.
- When used in the context of gross domestic product, per capita GDP provides more granular data than just aggregate GDP.
- GDP per capita includes all of the population and those who are not contributing to GDP, such as infants; therefore, it can be misleading.
The Difference Between Per Capita and Median Income
In contrast to per capita measures, median numbers, such as those for income, provide an arguably more accurate picture of how much the residents of a particular country or area are likely to earn. Median income is the income level in the very middle of a list of incomes. Exactly half of the people considered earn above the median income figure while the other half earn below that number. Real median household income in the United States for 2017 was $61,372 whereas GDP per capita income was $53,129.
Real World Example
Dan Kopf, a reporter for Quartz, expresses in an article his frustration that The World Bank emphasizes GDP over GDP per capita, which, according to Kopf, prioritizes countries ahead of people. The truth is that the World Bank issues data on total GDP and GDP per capita but, nevertheless, Kopf's complaint illustrates the way that each statistic can provide a conflicting perspective on the economic state of a country and the wealth of its people.
Kopf's point is that a country’s aggregate economic growth, or its overall GDP, is not what matters when the concern is the poverty level of individuals in a country. According to Kopf, "Reporting that the world’s GDP grew by 3% in 2017 ignores the fact that the world’s population is growing by 1.2% every year."
For countries where the population is not increasing rapidly, the difference between GDP per capita growth and total GDP growth is minimal. However, for countries with rapidly growing populations such those in Africa and South Asia, reporting GDP growth can be highly misleading because a country can show GDP growth overall but a decline in per capita growth. Kopf uses Afghanistan as an example. The nation's economy grew by 2.2% overall, but declined by 0.5% on a per capita basis.