Income Per Capita, With Calculations, Statistics, and Trends
Four Ways to Measure Income per Person
Income per capita is the total income of an area divided by its population. There are four different methods of measuring income depending on the source. Here are the most common.
U.S. Per Capita Income
The U.S. Census surveys per capita income every 10 years. It provides a revised estimate every September. The Census calculates it by taking the total income for the previous year for everyone 15 years and older. It then provides the median average of that data. The median is the point where 50 percent of all individuals are above, and 50 percent are below.
What does the Census include? First, earned income, including wages, salaries, and any self-employment income. It does not include employer health care contributions, borrowed money, gifts or inheritance, insurance payments, and money received from relatives living in the same house.
Second, investment income including interest, dividends, rentals, royalties, and income from estates and trusts. Capital gains and money received for selling your home are not included.
Third, government transfer payments are counted as income. That includes Social Security or Railroad Retirement, Supplemental Security Income, public assistance or welfare, and retirement, survivor or disability pensions. It does not include food stamps, public housing subsidies or medical care. It also doesn't count tax refunds.
Current U.S. Statistics and Trends
In 2016, median income per capita was $33,205. That's the highest in U.S. history. In fact, it was more than 10 times greater than in 1967, when median per capita income was only $2,464.
That's not taking into account inflation. A dollar was worth more back then. That $2,464 could buy the same as $15,487 could today. Even when accounting for inflation, U.S. per capita earning power has improved since 1967.
The recession slowed earning power considerably. In 2006, the income per person was $31,370 (in 2016 dollars, to offset inflation). That dropped to $29,236 by 2010. It didn't regain the 2006 level until 2015, when it hit $32,053. These figures are taken from "Table P-1. Total CPS Population and Per Capita Income," produced by the U.S. Census.
This is a similar trend found in measurements of American wealth. Between 2000 and 2011, U.S. median net worth fell from $73,874 to $68,828. But that loss wasn't distributed evenly. Wealth decreased for most Americans, but increased for those in the top 40 percent.
Why hasn't earning power improved? During the Great Recession, unemployment meant too many people couldn't find work to get the wages. That didn't turn around until 2015, when earning power returned to 2006 levels.
Long-term, there are two major factors at work. First, wage pressure from low-paid countries China and India put downward pressure on wages around the world. Global companies outsource jobs to these countries, which allows them to pay U.S. workers less. The result? Greater income inequality. Those whose jobs can be outsourced receive low wages. Those at the top, like the CEOs, high-level managers, and owners of the companies, are relatively immune to wage compression.
Another cause of low per capita income is technology. The increasing use of robots and computers has replaced many workers at manufacturing and even office jobs. Meanwhile, those with the skills to manage the equipment are in high demand and earn more income.
Three Other Income Measurements
Median household income is more common in the United States. It tells you the income per household, which contains 2.2 people on average. That's why it's higher than income per capita.
GDP per capita is another measure of income. It takes the total gross domestic product of a country and divides it by the number of people. It's equal to the income earned by all residents and businesses in a country. It doesn't matter if they are citizens or foreigners, as long as they are within the geographic boundaries. It doesn't include income they earned from foreign investments. For example, if a company exports and sells products overseas, GDP doesn't include that income. To compare GDP per capita across years, you need to remove the effects of inflation.
That gives you real GDP per capita.
Gross national product measures all the income earned by a country's citizens and businesses, regardless of where they made it. For example, if a company exports and sells products overseas, it does include that income. It doesn't count any income earned in the United States by foreign residents or businesses. It excludes products manufactured in the United States by overseas companies. In 1993, the World Bank replaced GNP with Gross National Income. It provides GNI per capita for each country.