Per Capita Income

Per capita income measures the average income earned per person in a defined area. It is calculated by dividing the total income of a population by the total number of people in that population. Policymakers, researchers, and businesses use it as a quick indicator of average economic well‑being and living standards.

How it’s calculated and what’s included

Basic formula: total income ÷ total population.
Income components typically counted: wages and salaries, self‑employment income, interest, dividends, income from estates and trusts, and government cash transfers (for example, Social Security and disability benefits).
Common exclusions: employer‑paid benefits (like health insurance), loans, gifts, in‑kind assistance (food stamps, public housing), capital gains, and tax refunds.
Data collection: statistical agencies collect income information (often for people aged 15 and older) and use those data to estimate total income, which is then averaged across the entire population.

Per capita vs. related measures

Per capita income divides total income across every individual (including children and nonworkers).
Median household income identifies the middle household’s income and is less sensitive to extreme high or low incomes.
GDP per capita measures the value of goods and services produced per person, not directly income received by individuals.

Use cases

Comparing average economic prosperity across regions or countries.
Assessing affordability when combined with housing prices or cost‑of‑living data.
Helping businesses choose locations where average consumer purchasing power is higher.
Ranking subnational areas (for example, counties) by average income.

Limitations and caveats

Income inequality: Per capita income is a mean and can be heavily skewed by very high incomes, masking disparities.
Example: If a small number of very high earners live alongside many low earners, the per capita figure may appear relatively high even though most residents have much less.
Inflation: Nominal per capita income does not account for price changes; real (inflation‑adjusted) figures are needed to assess purchasing‑power changes.
Cost of living and exchange rates: International comparisons can be misleading unless adjusted for purchasing power parity (PPP).
Wealth and savings: Per capita income captures annual income flows, not accumulated wealth or access to savings that support living standards.
Demographics: Populations with many children or nonworking adults will have lower per capita income even if working adults earn the same amounts as those in other populations.
Non‑monetary welfare: Public services, health care quality, working conditions, and hours worked are not reflected in per capita income.

U.S. context (latest available data)

U.S. per capita income: $41,804 (2022).
Median household income: $74,580 (2022).
These figures illustrate how per capita and median household measures can tell different stories: per capita averages across all individuals, while median household income reflects the middle household and reduces the influence of outliers.

International perspective

PPP adjustments are recommended when comparing living standards across countries because they account for differences in price levels.
Example rankings (2022): some small, affluent jurisdictions report very high GDP per capita (e.g., Monaco), while low‑income countries report much lower values.

Bottom line

Per capita income is a useful, simple indicator of average income and a starting point for comparing economic well‑being. Because it is a mean and excludes several important dimensions of welfare (inequality, inflation, cost of living, wealth, and public services), it should be interpreted alongside other measures such as median income, poverty rates, PPP‑adjusted figures, and indicators of non‑monetary welfare.

Sources and further reading

U.S. Census Bureau (income and American Community Survey materials)
U.S. Bureau of Economic Analysis (personal income by area)
World Bank and IMF publications on GDP and purchasing power parity (PPP)

Income Per Capita