Among the most sought-after macroeconomic indicators is the average income of a citizen of the country. It can be calculated on the basis of a variety of indicators: salary, entrepreneurial income, compensation under civil contracts and other cash receipts. What is the significance of the corresponding indicator in practice? What are the approaches to its calculus?
What are the methods for determining average income?
The average income of a citizen can be determined using different methods. First of all, it is worth analyzing, due to what resources they are formed. This may be revenue from a business, payments under civil law contracts or a salary - compensation for a person’s labor under a contract. If you consider only one source of income, the result can be much lower than when considering all three indicators at once. Sometimes, income from the rental of real estate and other assets is taken into account, in some cases, resources located abroad and bringing additional income to a person.
But in practice, when calculating the average income of citizens, they pay attention, as a rule, only to the salary of a person. This is primarily due to the fact that relatively few people in the country have a business or work part-time through civil law contracts. On the basis of salary, it is customary to determine the average income in Russia.
Another criterion for calculating the indicator in question is the distribution of earnings. The fact is that in a family of 4 people, relatively speaking, only two people can work. Their average income can be considered as a result of dividing the total amount of labor compensation, calculated only on themselves or on all family members.
Thus, the main methods for determining average income are as follows:
- calculation of an indicator taking into account only salary;
- determination of average income when considering revenue from a business, civil law contracts, other sources of financial income;
- calculation of the indicator subject to the distribution of income only to working family members;
- determination of average income in the distribution of financial income to all family members.
The most common in economic science is probably the first approach in combination with the third. So, the average income in Russia is considered to be based on indicators of the salaries of citizens and their distribution to the working population. We study how these numbers can be determined.
How is the average income of citizens of the Russian Federation considered?
The main source of income for Russians is salary. There are 2 main parameters for determining its average value. Firstly, it can be an application of a formula with arithmetic mean. That is, the total salary of all working citizens of the Russian Federation for a month or a year is taken and divided by their total number. Secondly, the average income of Russians can be determined on the basis of median indicators of their earnings. This method involves determining a salary that exceeds that which 50% of citizens of the Russian Federation have, and at the same time is lower than other 50% of the country's inhabitants.
If we consider the first indicator, the average income of the population of Russia is about 32,000 rubles - according to the results of 2015. In turn, the median salary of Russians is much lower - about 22,000 rubles. There are, of course, more complex schemes for determining the earnings of citizens.
Some experts apply to the relevant indicators the criteria that are characteristic of an economic analysis of the profitability of commercial enterprises. It may involve the determination of figures reflecting average, marginal, or total income.What are their features?
Under the average income, it is customary to understand the revenue that comes from the sale of 1 unit of goods. By analogy with this approach, the average income of a citizen can be understood as cash receipts from 1 place of work. It can be calculated if, for example, a person has several employers. If he earns 30,000 rubles in the first company, 40,000 in the second, and 80,000 in the third, then his average income will be 50,000.
Under marginal revenue economists understand the increase in the total amount of cash receipts at the time the company begins to release additional units of goods. By analogy with this approach, a person’s marginal earnings can be calculated as the amount that he can earn by signing another fourth contract. The total revenue is the one that the citizen receives in the form of actual cash receipts from all employers.
Average and real salary
Average incomes can be calculated in nominal or real terms based on the purchasing power of a person’s salary. The growth of a citizen’s earnings does not always mean that he will be able to afford to buy more goods. In this case, 2 indicators are compared - the size of the salary and current prices. In dynamics, the first indicator is most often correlated with the official inflation rate. In some cases, when calculating a citizen’s real earnings, the national currency rate is also considered. For what purpose?
Income in foreign currency
Incomes of the population can be measured both in national currency, and in foreign. In this case, their purchasing power can be calculated based on a comparison with the salaries of citizens of other countries. This approach is justified in a limited number of cases. For example, when it comes to considering a person’s visa application. If his salary is significantly lower than that paid to the citizens of the country of visit, then the immigration authorities of the state may consider that the traveler is a potential migrant and, possibly, they will refuse him a visa.
But even consular posts seek to assess the income of visa applicants, mainly based on the purchasing power of his salary within his own country. So, the average Russian salary in the Russian Federation, as we noted above, is about 32,000 rubles. In terms of purchasing power, in general, it is comparable to the earnings of residents of Eastern Europe, although in terms of euros it is noticeably inferior to the indicators of most states in this region.
Income by category of population
Calculus population income can be carried out in correlation with various categories of citizens. What does it mean? There is, for example, middle-class income, but there is a salary that is not received by the most affluent categories of citizens. Both indicators will vary significantly.
The practical significance of the classification of income in relation to categories of the population may consist in the acquisition by the state of information that can subsequently be used to determine priorities in socio-economic, tax policy. It can be noted that in solving such problems the state can take into account not only the earnings of citizens, but also their ownership of certain assets. For example, real estate. At a sufficiently high cost, higher tax rates may be established by law.
Income and living wage
Among those economic indicators which can be considered by the authorities when determining priorities in financial policy, along with the average salary and other similar indicators, there is a living wage. What is its significance for economic authorities? First of all, it is an average indicator, but reflecting the basic set of needs of a citizen.One of the criteria for the success of a state’s socio-economic policy is the creation of conditions so that citizens can earn significantly more than the subsistence level. Even if a person’s income is below the national average, he should nevertheless make up an amount that substantially exceeds that which corresponds to the amount of basic, minimum necessary expenses.
The size cost of living It is also important from the point of view of the state's study of the economic opportunities of citizens creating families. What is this expressed in? The situation in which not all family members are working is quite standard. In this case, whatever the income of those citizens who have a salary, one way or another, it will be distributed to everyone. And the fact that his earnings can be significantly higher than the same 32,000 rubles - the average family income is quite close to the cost of living. In order to minimize the possible social consequences of reducing the amount of disposable funds per family member, the state can initiate various support measures for certain categories of citizens. First of all, those who have children.
Revenues and Consumer Basket
Another economic indicator that is often taken into consideration along with such an indicator as the average salary of citizens is the cost of the consumer basket. This indicator is part of the formula for determining the cost of living. Its size is determined based on the minimum set of goods in the structure of the corresponding basket. As in the case of considering the subsistence minimum figures, for the state those indicators that reflect the size of the consumer basket are of great economic importance. The task of the authorities is to create conditions under which citizens will be able to purchase those goods that form the grocery basket, even with the most modest salary.
Dynamics of income of citizens of the Russian Federation
The average income level is an indicator that, from an economic point of view, is most often most useful when tracking over time. As we noted above, it is considered, as a rule, in correlation with inflation - this is necessary to identify the citizen’s real purchasing power. Sometimes, the size of a person’s salary in terms of any foreign currency can also be taken into account in dynamics. What is the average income Russian citizens have in the last few years? How much has he grown in reality?
There are several main periods that reflect the statistics of income of citizens of the Russian Federation. The first is from the beginning of the 2000s until the crisis of 2008-2009. The average income of Russians in this period grew at a significant pace: both in nominal and in real terms. That is, despite the fact that prices were rising, salaries, as a rule, confidently overtook them. The average total income in families allowed citizens to take loans from banks at very decent interest rates and not overpay for them based on the growth of real income.
After the crisis of 2008-2009, a small recovery period was observed in the Russian economy - until about the end of 2010, when the salaries of citizens did not increase or their growth was significantly lower than in the pre-crisis period. Later, the economy of the Russian Federation again began to grow rapidly, as well as the earnings of citizens.
In 2014, due to the deteriorating foreign policy situation and falling oil prices, a crisis reappeared in the national economy of the Russian Federation. Its consequence was a significant decrease in the real purchasing power of citizens' salaries. Now, in 2016, in Russia the average income is 32,000 rubles. And this is slightly more than, for example, at the beginning of 2014 and 2015, but in purchasing power it is about 10% lower than a few years ago. This is due to many factors - the rise in price of imported goods, the impossibility of Russian enterprises due to the crisis, it is enough to index wages, the presence of a deficit in some segments of trade. What will be the dynamics of the income of Russians in the future depends on how successful the policy of the government of the Russian Federation to counter the crisis will be.
Why are average salaries for the state and private businesses needed?
The state is interested in the majority of citizens having incomes above the average - this contributes not only to stability in the social environment, but also stimulates demand in the economy and increases turnover in the consumer segments. Business is best developed where there are solvent customers. Private enterprises are among the main players in the modern economy; they are employers and taxpayers. And the task of the authorities is to help create the conditions for the successful development of businesses.
Of course, there are those areas of financial management for which the state is to a certain extent responsible. It is, first of all, about pension provision, accrual of salaries to employees of the public sector. To successfully solve problems in this area, the country will undoubtedly need statistics that reflect the average income of citizens.
The corresponding indicator may also be useful for many non-state actors. First of all, these are banks. For them, the average salary of citizens in a country in a particular region or city can be useful from the point of view of creating a business model that calculates how much loans can be issued to one or another group of citizens, while analyzing the size of attracted deposits.
The average salary is a significant indicator when calculating the prospects for investments in trading and service businesses. Any entrepreneur will prefer to work in the region where the solvent population lives. To assess the prospects of business in a particular city, indicators that reflect the average salary of its residents, as well as those that may indicate the existence of other incomes for citizens, for example, statistics of entrepreneurial activity of the population, can be useful to him.
Summary
So, the calculation of average incomes by salary and other indicators is carried out by researchers and experts in order to obtain statistics that are useful not only from the point of view of science, but also of practical importance from the point of view of use by the authorities that are responsible for the economic development of the country. The presence of figures reflecting the ability of citizens of the state to purchase goods within the framework of the subsistence level and the consumer basket allows the authorities to prioritize socio-economic and tax policies. If a significant part of citizens does not have enough income to provide for themselves or the needs of their family, in which not everyone works, the state implements measures of social support.
