Countries use various measures to gauge their wealth. Below we outline the top 10 countries based on disposable income per capita, identifying how much money a person has available to spend on goods and services after paying their taxes.
Money per capita can refer to income per capita, money supply per capita, gross domestic product (GDP) per capita, or even net worth per capita. Income per capita can refer to discretionary income per capita or disposable income per capita, for example.
- Disposable income per capita is one way to measure a country’s wealth. This refers to the average person’s income available for spending and saving after taxes have been paid.
- The United States had $53,122 in disposable income per capita in 2018, the largest of any nation.
- Other countries with high disposable income per capita figures included Luxembourg, Switzerland, Germany and Australia.
Disposable Income Per Capita Defined
Disposable income measures how much income is left over after a person pays income taxes. It is the money available for spending and savings after subtracting taxes from gross income. Think of disposable income as your earnings minus necessary expenses such as your mortgage payment, groceries and health insurance, but less the taxes you paid.
Income minus these expenses and taxes is known as discretionary income, i.e. income that is available for entertainment and other expenses not necessary for survival. Per capita simply means average per person. Thus, disposable income per capita for a country is calculated by adding all the gross income for the country minus taxes and dividing the sum by the country’s population.
This differs from purchasing power parity (PPP), which is another measure of a country’s wealth. PPP is used to compare prices for goods across countries, with the Big Mac Index being one of the most famous examples of PPP.
The following disposable income per capita figures for the top 10 countries are from the Organisation for Economic Co-operation and Development (OECD) as of 2020. Disposable income per capita is specifically the household net-adjusted disposable income per capita according to the OECD and all amounts listed are in U.S. dollars.
1. United States
The United States, with its 329.5 million people from 2020 per World Bank, tops the list with a disposable income per capita measure of $54,854, as of 2019. The country’s GDP came in at $20.89 trillion in 2020—the largest GDP on our list and world’s largest economy. Key sectors in the U.S. include financial services, professional and business services, manufacturing and health care.
The small country of Luxembourg, with an estimated population of about 632,000 people in 2020 per World Bank, had $49,860 in disposable income per capita that year. The European country nestled between Germany, France and Belgium had $74 billion in GDP in 2020. For context, the U.S. dwarfs Luxembourg in GDP at about 300 times its size. Much of Luxembourg’s economic success stems from banking, where the country has grown into a global financial center.
Switzerland had $43,035 in disposable income per capita in 2020. Its GDP was $619.6 billion and population 8.6 million in 2020. The country has a stable market economy, favorable taxation laws, strong financial and tourism sectors, and a skilled workforce. Switzerland’s main exports are pharmaceuticals, gold, watches and jewelry.
Germany commands $42,433 in disposable income per capita in 2020. Germany is home to approximately 83.2 million people in 2020 and is a major exporter, notably of cars, being home to major car brands such as Volkswagen, Daimler and BMW. Germany is also a major exporter of chemicals and has a GDP of $4.56 trillion in 2020.
Australia’s disposable income per capita was $42,547 in 2020. Australia had a GDP of $1.43 trillion and a population of 25.7 million people in 2020. The country is rich with natural resources, which is reflected in one of the primary engines of its economy—mining.
Norway had $40,742 in disposable income per capita in 2020. With a population of 5.4 million people and a GDP of $337 billion in 2020, Norway makes its way with a natural resource-driven economy focused on oil, fisheries and metals. Norway’s sovereign wealth fund is worth just over $1.15 trillion and is funded largely by the country’s oil industry.
The European country of Austria had $38,726 in disposable income per capita in 2020. The country had 8.9 million people and a $497 billion GDP in 2020. Over the years, the country’s shift toward privatization, i.e. less regulation, has improved the economy. Much of the country’s economic growth is driven by the energy industry, where renewable energy accounts for about 30% of gross domestic consumption.
Belgium, another European country, makes the top 10 list of countries based on $37,925 in disposable income per capita in 2020. Belgium had a population of 11.6 million and a GDP of $613 billion in 2020. The country is world-renowned for its chocolate shops and factories. Given its location, Belgium’s economic strong suit is exporting, notably vehicles and medicine.
The Netherlands had $38,552 in disposable income per capita and a GDP of $1 trillion in 2020. Its population was 17.4 million in 2020 and much of its recent success has come about due to natural gas discoveries. Refined petroleum is its largest export category.
Canada finishes the list with $37,202 in disposable income per capita in 2020. The country had a GDP of $1.77 trillion and a population of 38 million in 2020. The discovery of oil sands in Alberta has propelled the nation’s economy and the country is one of the largest oil producers in the world. Other top exports include cars, gold and vehicle parts.
What Drives Higher Average Incomes?
Disposable income, again, is different from discretionary income. Disposable income refers to the money remaining after taxes. Thus, changing spending habits do not impact disposable income. Instead, higher wages or reducing taxes are key to boosting disposable income.
The key aspects of generating a higher disposable income per capita include a few factors. Ways to increase a country’s income per capita can include lowering its population while keeping the income the same. However, that may be tough to maintain, or do, as the trend for most countries is a rising population. Government policies are generally an easier way to boost income per capita, as governments can enact various policies. Others may include boosting the hours worked by employees, government investment, and more training or education for workers.
An easier way to increase income per capita is to increase the aggregate number of hours worked. That is, more employees going from part-time to full-time means more income per person. This also goes hand-in-hand with lowering unemployment; more employed people will raise the income per capita.
Investing in technology can help make processes more efficient and boost income potential. More specifically, the allocation of resources in a more effective way can boost income per capita. Government spending, such as on infrastructure and defense, will also boost incomes. As mentioned above, government policies, such as tax programs and subsidies can also boost income per capita.
Better, or more educated, workers can boost incomes. Workers able to do more complex tasks boosts overall incomes. These workers can also implement more productive ways of doing tasks, which can reduce needed hours worked or allow employees to work on more complicated tasks for higher pay.