Economy Gap between GDP per capita and actual salaries

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Maciamo

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GDP per capita is often used as a proxy to determine how much people earn in average in a country. In many cases it can be a relatively good approximation, but sometimes it's completely wrong. This is because the Gross Domestic Product (GDP) is a measure of all the money produced in a country (at least what is officially declared => see shadow economies), which includes not only what employees earn, but also what companies and self-employed people earn.

In countries that are very attractive to foreign corporations like Ireland or Luxembourg, corporate earnings are many times higher than what they redistribute to their workers as wages. Actually, in the case of Ireland, all American tech giants have their European HQ in the country, but most of their earnings are not generated in Ireland but across the EU. This is what skews the Irish GDP and artificially inflates it way above the real salaries. That's why the Irish GDP per capita is 50% higher than the actual average annual wages. For Luxembourg, which is host to Amazon EU and many banks, the gap is even bigger, at 56%.

In contrast, some countries have higher annual wages than their GDP per capita suggest. In fact that's the case of most developed countries, with Iceland and Canada coming on top.

The table below summarises all this (data for 2020). Countries are ranked by the difference of amount between annual wages and GDP per capita.

[TABLE="class: outer_border, width: 800"]
[TR]
[TD="align: center"]Country[/TD]
[TD="align: center"]Monthly Wages[/TD]
[TD="align: center"]Annual wages[/TD]
[TD="align: center"]GDP per capita[/TD]
[TD="align: center"]Wages - GDP per capita[/TD]
[TD="align: center"]GDP/wages ratio[/TD]
[/TR]
[TR]
[TD]Iceland[/TD]
[TD="align: center"]5,863[/TD]
[TD="align: center"]70,350[/TD]
[TD="align: center"]59,634[/TD]
[TD="align: center"]10,716[/TD]
[TD="align: center"]84.77[/TD]
[/TR]
[TR]
[TD]Canada[/TD]
[TD="align: center"]4,490[/TD]
[TD="align: center"]53,876[/TD]
[TD="align: center"]43,278[/TD]
[TD="align: center"]10,598[/TD]
[TD="align: center"]80.33[/TD]
[/TR]
[TR]
[TD]Denmark[/TD]
[TD="align: center"]5,701[/TD]
[TD="align: center"]68,413[/TD]
[TD="align: center"]60,494[/TD]
[TD="align: center"]7,919[/TD]
[TD="align: center"]88.42[/TD]
[/TR]
[TR]
[TD]Belgium[/TD]
[TD="align: center"]4,353[/TD]
[TD="align: center"]52,232[/TD]
[TD="align: center"]44,529[/TD]
[TD="align: center"]7,703[/TD]
[TD="align: center"]85.25[/TD]
[/TR]
[TR]
[TD]United Kingdom[/TD]
[TD="align: center"]3,953[/TD]
[TD="align: center"]47,432[/TD]
[TD="align: center"]40,406[/TD]
[TD="align: center"]7,026[/TD]
[TD="align: center"]85.19[/TD]
[/TR]
[TR]
[TD]United States[/TD]
[TD="align: center"]5,783[/TD]
[TD="align: center"]69,391[/TD]
[TD="align: center"]63,416[/TD]
[TD="align: center"]5,975[/TD]
[TD="align: center"]91.39[/TD]
[/TR]
[TR]
[TD]Switzerland[/TD]
[TD="align: center"]7,713[/TD]
[TD="align: center"]92,552[/TD]
[TD="align: center"]86,849[/TD]
[TD="align: center"]5,703[/TD]
[TD="align: center"]93.84[/TD]
[/TR]
[TR]
[TD]Netherlands[/TD]
[TD="align: center"]4,765[/TD]
[TD="align: center"]57,178[/TD]
[TD="align: center"]52,248[/TD]
[TD="align: center"]4,930[/TD]
[TD="align: center"]91.38[/TD]
[/TR]
[TR]
[TD]Slovenia[/TD]
[TD="align: center"]2,495[/TD]
[TD="align: center"]29,936[/TD]
[TD="align: center"]25,211[/TD]
[TD="align: center"]4,725[/TD]
[TD="align: center"]84.22[/TD]
[/TR]
[TR]
[TD]France[/TD]
[TD="align: center"]3,616[/TD]
[TD="align: center"]43,394[/TD]
[TD="align: center"]39,907[/TD]
[TD="align: center"]3,487[/TD]
[TD="align: center"]91.96[/TD]
[/TR]
[TR]
[TD]Spain[/TD]
[TD="align: center"]2,520[/TD]
[TD="align: center"]30,242[/TD]
[TD="align: center"]27,132[/TD]
[TD="align: center"]3,110[/TD]
[TD="align: center"]89.72[/TD]
[/TR]
[TR]
[TD]Austria[/TD]
[TD="align: center"]4,254[/TD]
[TD="align: center"]51,042[/TD]
[TD="align: center"]48,154[/TD]
[TD="align: center"]2,888[/TD]
[TD="align: center"]94.34[/TD]
[/TR]
[TR]
[TD]Germany[/TD]
[TD="align: center"]4,045[/TD]
[TD="align: center"]48,540[/TD]
[TD="align: center"]45,733[/TD]
[TD="align: center"]2,807[/TD]
[TD="align: center"]94.22[/TD]
[/TR]
[TR]
[TD]Croatia[/TD]
[TD="align: center"]1,393[/TD]
[TD="align: center"]16,715[/TD]
[TD="align: center"]14,072[/TD]
[TD="align: center"]2,643[/TD]
[TD="align: center"]84.19[/TD]
[/TR]
[TR]
[TD]Greece[/TD]
[TD="align: center"]1,624[/TD]
[TD="align: center"]19,486[/TD]
[TD="align: center"]17,670[/TD]
[TD="align: center"]1,816[/TD]
[TD="align: center"]90.68[/TD]
[/TR]
[TR]
[TD]Japan[/TD]
[TD="align: center"]3,447[/TD]
[TD="align: center"]41,360[/TD]
[TD="align: center"]40,146[/TD]
[TD="align: center"]1,214[/TD]
[TD="align: center"]97.06[/TD]
[/TR]
[TR]
[TD]Italy[/TD]
[TD="align: center"]2,659[/TD]
[TD="align: center"]31,906[/TD]
[TD="align: center"]31,288[/TD]
[TD="align: center"]618[/TD]
[TD="align: center"]98.06[/TD]
[/TR]
[TR]
[TD]Poland[/TD]
[TD="align: center"]1,343[/TD]
[TD="align: center"]16,114[/TD]
[TD="align: center"]15,654[/TD]
[TD="align: center"]460[/TD]
[TD="align: center"]97.15[/TD]
[/TR]
[TR]
[TD]Cyprus[/TD]
[TD="align: center"]2,286[/TD]
[TD="align: center"]27,433[/TD]
[TD="align: center"]27,054[/TD]
[TD="align: center"]379[/TD]
[TD="align: center"]98.62[/TD]
[/TR]
[TR]
[TD]Finland[/TD]
[TD="align: center"]4,062[/TD]
[TD="align: center"]48,740[/TD]
[TD="align: center"]48,981[/TD]
[TD="align: center"]-241[/TD]
[TD="align: center"]100.49[/TD]
[/TR]
[TR]
[TD]Lithuania[/TD]
[TD="align: center"]1,628[/TD]
[TD="align: center"]19,538[/TD]
[TD="align: center"]19,917[/TD]
[TD="align: center"]-379[/TD]
[TD="align: center"]101.94[/TD]
[/TR]
[TR]
[TD]Portugal[/TD]
[TD="align: center"]1,758[/TD]
[TD="align: center"]21,094[/TD]
[TD="align: center"]22,489[/TD]
[TD="align: center"]-1,395[/TD]
[TD="align: center"]106.62[/TD]
[/TR]
[TR]
[TD]Slovakia[/TD]
[TD="align: center"]1,451[/TD]
[TD="align: center"]17,407[/TD]
[TD="align: center"]19,071[/TD]
[TD="align: center"]-1,664[/TD]
[TD="align: center"]109.56[/TD]
[/TR]
[TR]
[TD]Latvia[/TD]
[TD="align: center"]1,303[/TD]
[TD="align: center"]15,631[/TD]
[TD="align: center"]17,560[/TD]
[TD="align: center"]-1,929[/TD]
[TD="align: center"]112.34[/TD]
[/TR]
[TR]
[TD]Hungary[/TD]
[TD="align: center"]1,139[/TD]
[TD="align: center"]13,667[/TD]
[TD="align: center"]15,820[/TD]
[TD="align: center"]-2,153[/TD]
[TD="align: center"]115.75[/TD]
[/TR]
[TR]
[TD]Sweden[/TD]
[TD="align: center"]4,064[/TD]
[TD="align: center"]48,762[/TD]
[TD="align: center"]51,796[/TD]
[TD="align: center"]-3,034[/TD]
[TD="align: center"]106.22[/TD]
[/TR]
[TR]
[TD]Israel[/TD]
[TD="align: center"]3,352[/TD]
[TD="align: center"]40,220[/TD]
[TD="align: center"]43,689[/TD]
[TD="align: center"]-3,469[/TD]
[TD="align: center"]108.62[/TD]
[/TR]
[TR]
[TD]Estonia[/TD]
[TD="align: center"]1,650[/TD]
[TD="align: center"]19,802[/TD]
[TD="align: center"]23,330[/TD]
[TD="align: center"]-3,528[/TD]
[TD="align: center"]117.81[/TD]
[/TR]
[TR]
[TD]Czech Republic[/TD]
[TD="align: center"]1,572[/TD]
[TD="align: center"]18,869[/TD]
[TD="align: center"]22,579[/TD]
[TD="align: center"]-3,710[/TD]
[TD="align: center"]119.66[/TD]
[/TR]
[TR]
[TD]Norway[/TD]
[TD="align: center"]5,248[/TD]
[TD="align: center"]62,970[/TD]
[TD="align: center"]67,176[/TD]
[TD="align: center"]-4,206[/TD]
[TD="align: center"]106.68[/TD]
[/TR]
[TR]
[TD]Ireland[/TD]
[TD="align: center"]4,682[/TD]
[TD="align: center"]56,179[/TD]
[TD="align: center"]83,850[/TD]
[TD="align: center"]-27,671[/TD]
[TD="align: center"]149.25[/TD]
[/TR]
[TR]
[TD]Luxembourg[/TD]
[TD="align: center"]6,229[/TD]
[TD="align: center"]74,746[/TD]
[TD="align: center"]116,921[/TD]
[TD="align: center"]-42,175[/TD]
[TD="align: center"]156.43[/TD]
[/TR]
[/TABLE]

Sources

 
Could it been related to Gini Index?
For example, if GDP-Income difference is higher, so the material conditions are very different between individuals, so resources are restrict by some portions of the society and than the inequality is higher, so Higher Gini.
Could you make a map about Gini-Index?(With 20s decade source). Your maps are very useful.
 
felipesc500 said:
Could it been related to Gini Index?
For example, if GDP-Income difference is higher, so the material conditions are very different between individuals, so resources are restrict by some portions of the society and than the inequality is higher, so Higher Gini.
Could you make a map about Gini-Index?(With 20s decade source). Your maps are very useful.
Click to expand...

I am pretty sure that there is no correlation between the Gini index and the gap between average salary and GDP per capita. For instance, Ireland and Denmark have almost identical Gini coefficients, but have opposite gaps (GDP per capita much higher than average salary in Ireland, but the reverse is true in Denmark).
 
What did you suggest that could be the explanation, besides different material distribution conditions? More productive population than inactive?
 
This Twitter thread confirms that Irish people haven't become richer than British people despite their GDP per capita shooting up in the stratosphere.

 
The Economist published an article explaining how the Irish GDP is artificially inflated and proposes a new measurement that better reflects the reality. Buy those calculations the adjusted Irish GNI should be about half of the Irish GDP.
 
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