If there were no rich and poor, and everyone had an equal share of the world's total pay packet, how much would they earn?
The total value of world income is closing in on $70 trillion (£43.9tn) per year, and there are seven billion people in the world, so the average income is heading towards $10,000 (£6,273) per person per year. Easy.
But not everyone has a job and some of those seven billion are children. So another question you could ask is: "What is the world's average wage?"
First, they work out the total wage bill for every country in the world. To do that they get the average salary from each office for national statistics, and multiply that amount by the number of earners in each country.
In this way, they are able to give more weight to countries which have more workers in them. The average salary in China has more influence on the world average than the average salary in New Zealand, where many fewer people live.
Once they have the total wage bill for each country, they add them all together and divide by the total number of earners in the world.
That gives you the answer - the world's average salary is $1,480 (£928) a month, which is just less than $18,000 (£11,291) a year.
But these dollars are not normal US dollars. The economists use specially adjusted exchange rates - the average salary is calculated in Purchasing Power Parity (PPP) dollars. One PPP dollar is equal to $1 spent in the US.
Essentially, the PPP dollar takes into account the fact that it is cheaper to live in some countries than others. The idea is that we don't care how many actual dollars somebody is paid in, say, China, but we care about what sort of stuff those dollars can buy.
"If someone in China takes their salary of 1,500 yuan per month and they go to the bank, they will actually get $200," ILO economist Patrick Belser explains.
Another way of putting it is that the conversion to PPP dollars expresses how much it would cost you in the US to get the equivalent goods and services you can buy with your salary locally.
But calculating the world's average salary is still an exercise worth doing, according to Belser.
"It certainly tells you something about the state of worldwide economic development, I would say. We always use Gross Domestic Product (GDP) as the reference, but I think we also have a whole lot of trouble understanding exactly what is the meaning of GDP, whereas wages are a much more obvious indicator of the quality of life.
The total value of world income is closing in on $70 trillion (£43.9tn) per year, and there are seven billion people in the world, so the average income is heading towards $10,000 (£6,273) per person per year. Easy.
But not everyone has a job and some of those seven billion are children. So another question you could ask is: "What is the world's average wage?"
First, they work out the total wage bill for every country in the world. To do that they get the average salary from each office for national statistics, and multiply that amount by the number of earners in each country.
In this way, they are able to give more weight to countries which have more workers in them. The average salary in China has more influence on the world average than the average salary in New Zealand, where many fewer people live.
Once they have the total wage bill for each country, they add them all together and divide by the total number of earners in the world.
That gives you the answer - the world's average salary is $1,480 (£928) a month, which is just less than $18,000 (£11,291) a year.
But these dollars are not normal US dollars. The economists use specially adjusted exchange rates - the average salary is calculated in Purchasing Power Parity (PPP) dollars. One PPP dollar is equal to $1 spent in the US.
Essentially, the PPP dollar takes into account the fact that it is cheaper to live in some countries than others. The idea is that we don't care how many actual dollars somebody is paid in, say, China, but we care about what sort of stuff those dollars can buy.
"If someone in China takes their salary of 1,500 yuan per month and they go to the bank, they will actually get $200," ILO economist Patrick Belser explains.
Another way of putting it is that the conversion to PPP dollars expresses how much it would cost you in the US to get the equivalent goods and services you can buy with your salary locally.
But calculating the world's average salary is still an exercise worth doing, according to Belser.
"It certainly tells you something about the state of worldwide economic development, I would say. We always use Gross Domestic Product (GDP) as the reference, but I think we also have a whole lot of trouble understanding exactly what is the meaning of GDP, whereas wages are a much more obvious indicator of the quality of life.
No comments:
Post a Comment