Income Per Capita: How the U.S. Statistics Are Calculated

4 Ways to Measure Income per Person

income per capita
Income per capita is how much income each person receives on average. Photo: Bounce/Getty Images

Definition: 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 ten 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. (Source: U.S. Census, Per Capita Income)

Current U.S. Statistics and Trends

In 2015, median income per capita was $30,240. That's the highest in U.S. history. In fact, it was more than ten times greater than in 1967, when median per capita income was only $2,464. Of course, that's not taking into account inflation.

A dollar was worth more back then. That $2,464 could buy the same as $14,507 could today. Therefore, per capita income in the U.S. has improved since 1967.

But the earning power per person hasn't grown much in the last 12 years. In 2000, per capita income was $22,851 -- not bad. But that income could purchase what $29,185 could today. Each year during the 2001 recession, earning power declined. It briefly caught up in 2006, hitting $29,396. It then plummeted during the 2008 financial crisis, hitting a low of $27,396 in 2010. (Source: U.S. Census, Table P-1. Total CPS Population and Per Capita Income. Table PINC-1. Total 2014 Selected Characteristics of People 15 and Older.)

This is a similar trend found in measurements of American wealth. Between 2001 and 2011, U.S. median net worth fell from $73,874 in 2000 to $68,828 in 2011. 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's just starting to turn around.

Long-term, there are two major factors at work. First, thank wage pressure from low-paid countries China and India.

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, make greater profits or high salaries.

Another cause of low per capita income is technology. The increasing use of robots and computers has replaced many workers at the factory and even office jobs. Meanwhile, those with the skills to manage the equipment are in high demand and earn more income. For more, see Income Inequality.

Three Other Income Measurements

Median household income is more common in the United States. It tells you the income for an average household, which contains 2.2 people on average. That's why it's higher than income per capita.

Here's more on Average Income Levels in the United States

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.