THE per capita income is a calculation used to show the ratio between wealth and number of people. Thus, when we assess the per capita income of a city, for example, we look at the production of wealth and the number of inhabitants. When this calculation refers only to members of a family, we use the term per capita family income.
To understand how the calculation of per capita income works, we first need to understand the concept of Gross National Product, O GNP.
The GNP comprises all the wealth produced plus all the money that comes from abroad minus the money that leaves the place in question, that is, it is the total income of a given place, counting everything that is generated, plus everything that comes in, minus everything that comes out.
Thus, to calculate per capita income, we just divide the GNP value by the number of inhabitants. Easy, right?
To calculate the per capita family income, just divide the income generated by the whole family by the total number of people who are part of it. For this reason, this term is sometimes also called family income.
Although it is important to assess the ratio between wealth and population of a country, state, region or city, per capita income has some limitations. The main one is that of not offering a correct notion of the distribution of this income.
Example: 10 families live on a street. One of them is extremely rich and the others are totally miserable. Certainly, the per capita income of this street will be very high, but it will not show the conditions of misery in which most people live.
For this reason, when we say that the per capita income of a city or country is very high, it does not necessarily mean that the social conditions are the best.
By Rodolfo Alves Pena
Graduated in Geography
