International Disposable Income
Which of the following nations has the highest average real household income, including the government benefits they receive minus the taxes they pay?
Correct Answer
In 2021, the U.S. ranked first among 29 developed nations in average real household income. This measure is called "disposable income," and unlike the common understanding of the term, it is a very broad measure of nations' standards of living. Per the Organization for Economic Cooperation and Development: "Disposable income, as a concept, is closer to the idea of income as generally understood in economics, than is either national income or gross domestic product." This is because it accounts for all forms of income from the private sector and government, including non-cash income like healthcare benefits, housing, and food. Importantly, it also subtracts out taxes, since households cannot use income that governments have taken from them. Adjusted for purchasing power parity so that apples, smartphones, etc. are counted the same in all countries, the average household disposable income in the U.S. is 41% higher than in Norway, 60% higher than in Canada, and 69% higher than in Sweden.
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