Income per capita, sometimes referred to as per person income, refers to the income that a nation’s people make. The per capita income refers to the average income earned by a population over a particular period of time. For the U.S. the per capita income refers to GDP.
The Gini Index also compares the distribution of income amongst citizens in a country. A country’s level of development has a great effect on the size of its economy. At the highest levels of development, per capita income may account for nearly 70% of a country’s gross domestic product or GDP. At the other end of the spectrum, developing countries have a per capita income that less than 5% of their GDP.
There are many ways to measure income per capita earning power. Some nations, like the United States, rank the level of income by per capita GDP. Other nations, like China and India, calculate income by the Gross Domestic Product (GDP) and Purchasing Managers Income (PMI). Other countries, including the United Kingdom, use some combination of these measures. If no comparable country measures incomes, a country’s rank in this dimension will be derived from the median income per capita.
China’s economy is growing much faster than any other modern economy at the moment. The gap between rich and poor is wider at the time of this writing. The gap between the two countries’ incomes is also wider at the time of this writing. While the Chinese government has been doing all it can to help improve the quality of life for its people, the future still looks particularly bleak for China’s poor. Given the current state of affairs, the income per capita of China will probably see a slight decrease between now and the end of the upcoming decade.
While income per capita income may be important for development, another equally important dimension is that of economic strength. By this I mean the ability to buy the things needed for daily life. China’s poor have yet to overcome the technical challenges they face. China’s economy cannot support an increase in the purchasing power of its people without reducing the quality of life.
One possible way to improve income per capita without reducing the quality of life is through investment. The types and sizes of investments that can raise incomes per capita during the coming decade and beyond are enormous. China’s relative lack of technical advancement in recent years notwithstanding, the country does have a huge number of companies listed on the New York Stock Exchange. A large portion of these companies are small and still developing. Given the potential magnitude of China’s investment potential, and the likelihood that it will become a major provider of technological advancements in the next decades, it is possible to expect a marked improvement in the income levels received by the typical Chinese citizen.
By contrast, even if China were to dramatically increase its current level of development, it would only begin to provide a basic level of income for most of its people. If India were to increase its income per capita during the coming decade, for instance, it would do so by substantially improving the standards of health and education available to its people. At present, almost all of India’s people live in poverty. Only around 5 percent of Indians are well off. If India were to successfully develop technologically, its standard of living would increase significantly, but it would remain far from the standard enjoyed by China’s population.
Growth by itself will not bring about political prosperity. Individual members of a society have to decide what they want as long as growth prospects exist. If the desire to pursue economic growth exceeds the need to pursue such a goal, that individual could become poor through sheer neglect. The current trends in India, where people are becoming ever poorer by the day, provide no examples of people successfully becoming rich through their own effort. India’s current average income per capita is simply too low.