How middle-ish the middle is

Continuing on from my last post, we hear figures like that given by Chris Dillow that 1.4 billion live on less than $1.25 a day all the time. Our response to this is very often to go oh god how terrible and then when we hear of poverty in the west to go oh but they aren't really poor, bangladesh is poor, by global standards everyone in the west is rich. I think thats not entirely true. Comparing GDP per capita is tricky. Firstly, the 'representative citizen of the world doesn't  look all that far from the western middle class person and looks better off than some of the western poor. The world GDP per capita (PPP) according to the World Bank is $10,500, while GDP per capita in the UK is $35,200. The average citizen of the UK is 3 times richer than the average citizen of the world. That is not a huge multiple. Consider also the fact that the average citizen in Luxemburg, the worlds thrid richest country, but one that is not all that foreign to us, has a GDP per capita of $78,000. In other words that is more than a twice the GDP per capita of the UK.

More over to state the obvious GDP per capita is actually a pretty poor measure of peoples income for a number of reasons. Most significantly, not everyone in an economy earns income (children for example). So for most of us if we think of average income we think of the average wage. So using GDP statistics the obvious way of calulating that would be to measure what the GDP per worker is, this gives us for the UK $72,218.56* however this more than double what mean income actually is $35,471.47**. And as every social science graduate should know median income is a better measure of average income because of the long tail to the right and bias to the left in the distribution of income. So the median income is $28,789.28***; very far from the UK GDP per worker figure $72,218.56 and even closer to the world GDP per capita figure of $10,500.

The point of all this is that it is important not to think of GDP per capita as clear indicators of the average income of workers in those countries and its important not lose sight of the fact that although the is huge differences income between countries, figures like the fact that 1.4 billion live on less than $1.25 a day can often confuse more than they clarify. Income is unequally distributed between countries, yes, but when we look at averages, we find that the average UK worker is not earning many multiples of the average citizen of the world. (I know I'm not comparing like with like here, but thats my point.)

*GDP/Labour Force=2,256,830,000,000/31,250,000=72,218.56

** Mean income at todays exhange rates

*** Median income at todays exhange rates