Alternate definition: In legal matters, per capita has a very precise definition. It means to divide an estate equally among all living beneficiaries. This is as opposed to “per stirpes.” That means to divide the estate between the branches of the family, regardless of the number of people in each branch.
Per capita is often used to compare the economic indicators of countries with different population sizes. The most commonly measured indicators that use per capita are gross domestic product (GDP) and income.
How Do You Calculate Per Capita?
To get per capita, divide a statistical measurement for an organization by that organization’s population. So, if 1,000 apples are together owned by 10 people, we can say there are 100 apples per capita.
How Does Per Capita Work?
Seeing how per capita calculations clarify GDP data can help demonstrate how this type of measurement works. GDP measures everything produced within a country’s borders with a dollar figure. It’s essentially a measure of the size of a country’s economy, and it’s usually reported for a quarter or a year. Since countries have many differences, economists will alter the raw GDP data to better compare countries. They remove the effects of exchange rates between currencies with purchasing power parity, which estimates the U.S. dollar value of a nation’s local goods and services. They use real GDP to remove the effects of inflation or deflation. Another tool to better compare GDP is to use a per capita measurement. GDP per capita is a country’s GDP divided by its population. The United States is the world’s second-largest economy after China. It’s also the world’s third most populous country, with some 334 million people living in the U.S. in 2021. To get a rough sense of the U.S. GDP per capita, divide the U.S. GDP of $22 trillion by its population of 334 million, and you get about $66,000.
Gross National Income Per Capita
Another common use for per capita measurements is the gross national income per capita. This figure represents GDP plus income earned by residents from foreign investments divided by the population. It includes income from dividends and interest earned overseas. The World Bank defines this as all income earned by a country’s residents and businesses, no matter where the person is working or the business is located. In 2017, the U.S. GNI per capita was $60,990.
The Census Bureau’s Income Per Capita Measurement
The U.S. Census Bureau calculates its own income per capita measurement. This figure includes earned income, but not benefits. It includes investment income, but not capital gains from selling a home. It also counts government payments, such as Social Security, welfare, and government pensions. It does not include food stamps, Medicare/Medicaid benefits, or tax refunds. Because of these differences, it typically produces a much lower number. In 2019, the Census Bureau measured an income per capita of just over $34,000.
Limitations of Per Capita
While per capita can help provide helpful context about a lot of data, it isn’t the best way to look at all types of information. When looking at U.S. income per person, for example, the median income is a more accurate reflection of average Americans’ actual incomes because it accounts for income inequality that per capita income can hide. The median is the point where half the people earn more and half earn less. It’s a more useful number because it adjusts for the relatively few extremely wealthy people whose income skews the average upward.
