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07 Aug 2015

Average Income around the World

Measuring average income around the world is an interesting exercise, with different systems and scales used to compare global pay packets. According to one leading economist, the global median income is just US$1,225 a year, with almost half of the world's wealthiest people living in the United States. This number does not tell the entire story, however, with the cost of living much cheaper in some parts of the world than others. According to a separate study by the United Nations' International Labour Organization (ILO), the world's average salary is a little less than US$18,000 a year when analysed in terms of relative spending power.

According to Branko Milanovic, a leading World Bank economist, the global median salary is US$1,225. In an extraordinary statistic that sheds light on the extent of wealth inequality, personal income of just US$34,000 after tax is enough to be in the world's richest one percentile. While the Occupy movement focuses on the richest one percent of people in developed nations, many of us are part of the one percent when income is analysed in global terms. Global inequality is a huge problem, with the poorest five percent of Americans earning the same as the richest five percent of Indians.

The richest one percent of the world include roughly 60 million people, with 29 million living in the United States; four million living in Germany; three million each living in France, Italy, and the United Kingdom; two million each living in Canada, South Korea, Japan, and Brazil; and ten million from other nations including Switzerland, Spain, Australia, and the Netherlands. Despite the rise of the middle-class, the proportion of the world's wealthiest people living in China, India, Russia, and Africa is insignificant.   

When global income is analysed in terms of real spending power, the world's average income rises significantly to almost US$18,000. In order to get this figure, the ILO account for the fact that some places are much cheaper to live in than others. According to ILO economist Patrick Belser, "If someone in China takes their salary of 1,500 yuan per month and they go to the bank, they will actually get $200... But this is not what we use to compute this global average, because what is important here is what people are able to buy with these 1,500 yuan, and this is where we compare to the purchasing power of the US dollars and find that it is actually equivalent to around $400."

US$18,000 a year is still not much, however, being less than half the average salary in the UK, the United States, Australia, and New Zealand among other countries. According to OECD statistics, Switzerland has the highest disposable income in the world at $48,414, followed by Ireland at $48,073, Luxemburg at $47,716, the United States at $45,582, and Australia at $42,617. Tajikistan has the lowest income at $2,700, with the income in Poland very close to the global average at just under $18,000.