What’s the difference between GDP Per Capita & Median Income?



More specifically I’m referring to the US: The Median income is $31,000 but the GDP per capita is $65,000. These are 2 measures of how wealthy an average citizen is, yet they are drastically different numbers. Could someone explain?

In: Economics

Gdp is the average output. It is correlated with the mean income. The mean is much higher than the median because of income inequality. A person making 10mil/year brings the mean way up, but barely effects the median.

There are two reasons for this.

First, GDP and income are different things. Gross Domestic Product is the value of products and services produced in a country. Income is the income people get. There’s gap between the ‘sale’ value of production and people’s income as a result of things like money saved and invested by corporations and governments, going overseas and so-on.

Second, one is a mean and the other a median. If you worked out the mean income it would be higher than the median. That’s because the lower 50% of incomes range from $0-31,000, but the upper 50% go from $31,000 to tens of millions of dollars, or even more.

0, 1, 1, 1, **1**, 1, 1, 11, 19 -> the median, the middle is 1

0+1+1+1+1+1+1+11+19 = 36/9 = **4** -> the mean, the average is 4

The median ignores outliers, the mean doesn’t.

GDP per capita means you take a big number (total value of all goods) and divide by the number of people.

Median income means you look at everyone’s income and then pinpoint the income where half of all people are above it and half are below it. There’s no division here.

So, of course they’re different.

You should look up what a median is. It’s not a division average. And income isn’t GDP. Steve Job’s salary was $1 per year, that’s “income” which is totally different than the value of all the country’s production.

GDP is economic output. Per capita is divided by number of citizens. It’s a measure of productivity/value created.

Median income is the income at which 50% earn more, 50% earn less.

So why are they so different? Much of the output goes to those at the top—CEO and other top executives, shareholders.