What is the world average salary?

Summary

Podcast Summary: More or Less – "What is the World Average Salary?"

BBC Radio 4, March 23, 2012
Host: Tim Harford | Producer: Ruth Alexander

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Overview

This episode of More or Less tackles the surprisingly complex question: "What is the world average salary?" The hosts break down how economists estimate global average salaries, examine the challenges inherent in these calculations, and contextualize the figures against different measures of wealth and living standards. The episode also briefly investigates which countries have the largest military forces, considering not just manpower but spending and capability.

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Key Discussion Points & Insights

1. Defining and Calculating the World Average Salary

• Listener Question
  Kicked off by a listener’s question on global income equality and the world’s average income versus wage.

  • Tim Harford (00:32): “If there was perfect income equality worldwide and everybody earned the same amount of money, and how much would they earn? And how does that compare to the current situation?”

• Average Income Calculation

  • Total world income: Nearly $70 trillion/year.
  • Earth’s population: 7 billion.
  • Global average income (not wage): About $10,000/person/year

• Not Everyone Earns Wages
  Many of the 7 billion are not wage earners (e.g., children, pensioners, the unemployed):

  • Ruth Alexander (01:11): “Not everyone has a job. Some of those 7 billion are children. So another question you could ask is, what is the world's average wage? And that is more tricky to answer.”

2. Methodology Behind the Global Average Wage

• ILO Economists’ Approach

  • Compiled average salary data from national statistics for every country.
  • Multiplied average wage by number of earners to create a total wage bill.
  • Weighted countries by the number of wage earners (e.g., China’s average wage counts more than New Zealand’s).
    • Tim Harford (02:00): “You're giving more weight to countries which have more workers in them.”
  • Summed global wage bills, then divided by the total number of earners.

• Result: The Global Average Salary

  • $1,480/month or just under $18,000/year (in "PPP dollars", adjusted for purchasing power).
    • Tim Harford (02:18): “Ruth, drumroll please. $1,480 a month, just less than $18,000 a year.”

• PPP Dollars Explained

  • Comparison uses Purchasing Power Parity dollars, which reflect what salaries can buy in local economies, not market exchange rates.
    • Tim Harford (02:35): “We don't care how many actual dollars somebody's paid in, say, China. We care about what sort of stuff those dollars can buy.”

3. Contextualizing the Figures

• Salary Comparisons Across Nations (03:18):

  • UK/US average: over $3,000/month ($37,000/year).
  • Bulgaria: half the world average.
  • Poland: about equal to the global average.
  • Lowest: Tajikistan ($2,700/year).
  • Highest: Luxembourg ($48,000/year).

• Surprising Disparities

  • Ruth Alexander (03:51): “…$1,480 a month, or 18,000 a year, actually seems surprisingly high… Only the other week we discovered that more than a third of the world's population lives on less than $2 a day.”
  • The difference arises from what’s counted (wages vs. whole population, inclusion of self-employed, etc.).

4. Why the Discrepancy Between Wage and Poverty Numbers?

• Data Challenges

  • Incomplete data for some large countries (e.g., Nigeria).
  • Wage averages exclude non-wage earners (children, pensioners, stay-at-home parents) and the self-employed.
    • Tim Harford (04:47): “The self-employed are also not included in this calculation. And that means a lot of people's earned incomes haven't been captured here.”
  • In developed countries, ~90% of workers are employees; in South Asia, only ~25%.
    • Tim Harford (04:55): "In developed countries, about 90% of working people are paid employees. But that figure is lower in many developing countries…"

• What the Number Means

  • Patrick Belzer, ILO (05:19):

    “It tells you something about the quality of life of middle classes. …gives you an idea of how they live, of how often they can go out, of what they can buy, what kind of rents they can afford. …That’s the interesting thing compared to GDP per capita, which is much more abstract.”

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Memorable Quotes

• On complexity:
  • Tim Harford (01:39):

    “Let’s spend some time appreciating the difficulty of the Herculean task the ILO boffins set themselves.”

• On PPP Dollars:
  • Tim Harford (02:35):

    “The economists use specially adjusted exchange rates, which take into account the fact that it's cheaper to live in some countries than in others.”

• On usefulness:
  • Patrick Belzer (05:19):

    “It tells you something about the quality of life of middle classes. …That's the interesting thing compared to GDP per capita…”

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World’s Largest Military Forces (06:00–08:46)

• Top 5 by Manpower (06:07):

  1. China: 2.3 million
  2. USA: 1.6 million
  3. India: 1.3 million
  4. North Korea: 1.2 million
  5. Russia: ~1 million

• Reliability Issues:

  • Henry Boyd, International Institute for Strategic Studies (06:40):

    “Some, particularly those with conscript based armies, can have trouble actually achieving that in practice… very difficult to achieve more than a rough estimate…”

• “Strongest” Military Power?

  • Capability is more than personnel: technology, training, funding also count.
    • Henry Boyd (07:22):

      “The Chinese military has made startling improvements… however, it still remains some way behind leaders in the field, such as the United States or European countries in key areas in terms of equipment quality…”

• Top 5 by Proportion of National Income on Defense (08:10):

  1. Saudi Arabia: 8% of GDP
  2. Oman
  3. Israel
  4. Yemen
  5. USA: 4% of GDP

• Largest in Africa:

  • Manpower: Egypt (440,000)
  • Spending: Algeria (>$5 billion/year)

• Humorous Close:

  • Tim Harford (08:44): “We could find out who's the strongest easily.”
  • Ruth Alexander (08:44): “How?”
  • Tim Harford (08:44): “Just start a war.”
  • Ruth Alexander (08:46): “I don't think World War Three is a good idea, actually, Tim.”

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Timestamps for Key Segments

• Average global income calculation: 00:32–01:11
• ILO wage methodology explained: 01:23–02:18
• World average salary revealed: 02:18–02:33
• PPP dollars and their significance: 02:35–02:58
• Salary comparisons by country: 03:18–03:51
• Limits of wage data: 04:10–05:10
• Patrick Belzer on utility of wage statistics: 05:19–05:41
• Top militaries by manpower discussion: 06:00–06:32
• Reliability of military data: 06:40–07:02
• Top militaries by defense budget & Africa's biggest military: 08:10–08:58

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Conclusion

This episode demystifies the concept of "world average salary," revealing not only the headline figure ($18,000/year in PPP dollars) but also unpacking its significance, limits, and the methodological headaches behind such a calculation. The hosts illustrate the importance of understanding who counts as a wage earner and the distinction between pay, purchasing power, and everyday reality. The show also provides a data-driven (and lightly comic) look at the world’s military forces, always returning to More or Less’ central mission: bringing rigor and context to the numbers that frame our lives.

Transcript

[A]

There are dozens of different podcasts now available from the BBC, including news, documentaries, science, business, arts and sport. For details of them all, go to bbcworldservice.com podcasts

[B]

this is more Or Less the programme in which the numbers always add up. We make an edition of the programme for BBC Radio 4, but this episode was broadcast on on the World Service. Hello and welcome to More or Less on the BBC World Service. We're your weekly guide to the numbers in the news and in life. And I'm Tim Harford. This week, we rank the world's top military forces. But first, we answer this question from a listener. Kartik. People have been complaining recently about income inequality. If there was perfect income equality worldwide and everybody earned the same amount of money, and how much would they earn? And how does that compare to the current situation? Well, the total value of world income is closing in on $70 trillion per year. And there are 7 billion people in the world, so the average income is heading towards $10,000 per person per year, easy.

[C]

But not everyone has a job. Some of those 7 billion are children. So another question you could ask is, what is the world's average wage? And that is more tricky to answer.

[B]

Ruth Alexander's here.

[C]

Yes, hello. Some economists at the United Nations International Labour Organisation have been trying to answer exactly this question. They have an answer, but they've never gone public with this information until now.

[B]

But before we release this figure into the world, let's spend some time appreciating the difficulty of the Herculean task the ILO boffins set themselves.

[C]

First, they worked out the total wage bill for every country in the world. To do that, they got the average salary from each for national statistics, and multiplied that amount by the number of earners in each country, which is important

[B]

because it means you're giving 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.

[C]

So once you have the total wage bill for each country, you add them all together and divide by the total number of earners in the world.

[B]

So the world's average salary is. Ruth, drumroll please. $1,480 a month, just less than $18,000 a year.

[C]

But we need to have a word about these dollars.

[B]

They're not normal dollars. The economists use specially adjusted exchange rates, which take into account the fact that it's cheaper to live in some countries than in others. What we're talking about here are PPP dollars Purchasing power, parity dollars. The idea is that we don't care how many actual dollars somebody's paid in, say, China. We care about what sort of stuff those dollars can buy.

[C]

If someone in China took their salary of 1500 yuan to the bank, they'd get US$200, but 1500 yuan would be equal to 400 PPP dollars. But let's put the world's average PPP salary $1480 a month, almost $18,000 a year.

[B]

In context, it's less than half the average salary of the UK and the United States, where average monthly earnings are just over $3,000 a month, or around $37,000 a year. It's twice the average salary of Bulgaria, and it's the same as the average salary in Poland. The country at the bottom of the average earnings league is Tajikistan, where the average wage is about $2,700 a year. And the country out on top is Luxembourg, with average earnings of 30, $48,000 a year.

[C]

But I think $1,480 a month, or 18,000 a year, actually seems surprisingly high. That's $75 a day for a 20 day working month. Only the other week we discovered that more than a third of the world's population lives on less than $2 a day.

[B]

So you might ask how these two views of global incomes can possibly add up.

[C]

Part of the problem is that the economists at the ILO have had to rely on seriously patchy statistics. I said a moment ago that they'd worked out the total wage bill for every country in the world, but that's not quite true because there's some missing data. They don't have the numbers for a country as big as Nigeria, for example.

[B]

And the ILO is also asking a very different question. If you focus on average salary, you're excluding pensioners, children, stay at home, parents, huge numbers of people who appear in the poverty statistics, but not in the calculations for the average wage.

[C]

And the self employed are also not included in this calculation. And that means a lot of people's earned incomes haven't been captured here.

[B]

A huge number, in fact. In developed countries, about 90% of working people are paid employees. But that figure is lower in many developing countries. In South Asia, where many people are self employed or independent farmers, just 25% of workers are salaried.

[C]

But the economist at the ILO who's been working all this out, Patrick Belzer, he says despite the gaps, this is still an exercise worth doing.

[D]

It tells you something about the quality of life of middle classes. It tells you where most of the people are at the end of the month, and it gives you an idea of how they live, of how often they can go out, of what they can buy, what kind of rents they can afford. And that's the interesting thing compared to GDP per capita, which is a much more abstract notion.

[B]

Patrick Belzer of the United Nations International Labor Organization, inspired by a round up last week of the world's top 10 employers, Sam Potagorma in Malawi emailed us to help me get the facts about which are the top five military forces in the world based on conventional abilities?

[C]

We love questions like this. They seem like they should be easy to answer, but when you start trying, you realise they're not.

[B]

Well, here is arguably the definitive list, and it's based on manpower. China is the clear leader, with almost 2.3 million people in its People's Liberation Army. The USA is second with a force of 1.6 million. Then it's India, not far behind with 1.3 million. North Korea is fourth with 1.2 million, and Russia fifth with a staff of about 1 million people.

[C]

These are figures compiled by the International Institute for Strategic Studies, but they're not cut and dried. According to one of its research analysts,

[E]

Henry Boyd, many armed forces have a theoretical establishment. They are funded for each particular year. But some, particularly those with conscript based armies, can have trouble actually achieving that in practice. And it can be very difficult to achieve more than a rough estimate of exactly how many men they have at any particular time, given the complexities the administration required.

[C]

Plus, Sam wanted to know about conventional abilities. And even if we could be 100% sure about the number of people in each military force, that's not necessarily the best measure of capability. China is the clear top dog in terms of the number of recruits. But Henry Boyd says it's not necessarily the world's strongest military power.

[E]

The Chinese military has made startling improvements in its equipment levels in the last few years. However, it still remains some way behind leaders in the field, such as the United States or European countries in key areas in terms of equipment quality. Its sheer size makes it difficult to equip it to a common standard. Some units remain in possession of obsolete equipment dating back to the Cold War,

[C]

and training within the Chinese army isn't to the standard of the US military either. So while China's military force is much bigger than that of the United States in terms of manpower, the US spends eight times as much on defense $740 billion compared to $90 billion the third biggest spender is the UK, followed by France and then Japan.

[B]

So what if we were to rank the world's armed powers by the proportion of national income that they spend on defense?

[C]

Then the top five looks different again. Saudi Arabia is first, with 8% of gross domestic products spent on defence, followed by Oman, Israel, Yemen and the US, which spends 4% of its income on its military. And before you ask, Henry won't say which is the world's strongest military power. It's just too difficult to analyse, he said, because even if country A has more of exactly the same quality equipment than country B, the that equipment might be better suited to the situation and aims of country B than country A.

[B]

We could find out who's the strongest easily.

[C]

How?

[B]

Just start a war.

[C]

I don't think World War three is a good idea, actually, Tim.

[B]

Ok, just one more question, then. There are no African countries in any of these top five lists. Which is the biggest African military force by manpower?

[C]

It's Egypt, with a staff of about 440,000 people. And by dollars worth of spending, it's Algeria, which spends in excess of $5 billion a year.

[B]

Thank you, Ruth. If there's a statistical claim you want us to investigate, please email us at more or lessbc.co.uk and of course, you can download our podcast via our website, bbcworldservice.com moreorless until next week. Goodbye. More or Less was presented by me, Tim Harford, the Financial Times undercover economist. The producer was Ruth Alexander and the editor, Richard Varden.

[A]

Thank you for downloading from the BBC. For details of our complete range of podcasts and our terms of use, go to bbcworldservice.com podcasts.