Per Capita

What Is Per Capita?

Per capita is a Latin term that translates to "by head." Per capita means the average per person and is often used in place of "per person" in statistical observances. The phrase is used with economic data or reporting but is also applied to almost any other occurrence of population description.

Understanding Per Capita

Per capita is a term primarily used in economics and statistics to determine how certain metrics apply to a population. It is most often used in reference to metrics of a country and how that metric applies to the population of that country. The most common uses of per capita are gross domestic product (GDP) per capita and income per capita. To calculate per capita, one would take the statistical number and divide it by the population being analyzed.

For example, U.S. gross domestic product (GDP) was $19.49 trillion in 2017 according to the CIA World Factbook (the latest information available from the CIA). The United States' population in the same period was approximately 326 million. That results in a GDP per capita of $59,800.

In economic analysis, per capita is used as an apples to apples comparison between countries, as all countries have different populations. For example, China is now the second-largest economy with a GDP of $12.01 trillion in 2017 — around 40% lower than the United States'. However, China has far more people than the United States, and so the per capita GDP for China is just $16,700. Thus, using per capita GDP shows that most Chinese citizens are still earning far less than the average American despite the country's aggregate output.

For national economic indicators, such as gross domestic product (GDP) or gross national product (GNP), the total figure is certainly of interest. However, the per capita basis will give the analyst more granular information.

Per Capita vs. Median

In contrast to per capita measures, median numbers, such as those for income, provide an arguably more accurate picture of how much the residents of a particular country or area are likely to earn.

The median income is the income level in the very middle of a list of incomes. Exactly half of the people considered earn above the median income figure while the other half earn below that number. Real median household income in the United States from 2014-2018 was $60,293 whereas per capita income was $32,621.

Per capita expresses the average number for all of the citizens of a particular country or area. Therefore, it can be a misleading number because it includes everyone from infants to senior citizens, and fails to account for statistical outliers. The median income in this instance will take into account any outliers.

Per Capita and Poverty

The World Bank issues data on total GDP and GDP per capita but each statistic can provide a conflicting perspective on the economic state of a country and the wealth of its people.

According to some economists, a country’s aggregate economic growth, or its overall GDP, is not what matters when the concern is the poverty level of individuals in a country. For example, if an outlet reports that the world's GDP grew by 3%, it may sound like great news, but it would fail to take into consideration that the world's population grew by 1.5%, making the GDP number less impressive.

For countries where the population is not increasing rapidly, the difference between GDP per capita growth and total GDP growth is minimal. However, for countries with rapidly growing populations such as those in Africa and South Asia, reporting GDP growth can be highly misleading because a country can show GDP growth overall but a decline in per capita growth. Afghanistan has been used as an example where in 2013 the nation's economy grew by 2.8% overall but declined by 0.7% on a per capita basis.