When Is It Better Not to Be in America?

Outside of a few microstates and Norway, the US has the highest per capita income in the world. But that does not mean it is the best place to live in the world, even when measured solely by income. As with many things economic, you've got to dig down into the distribution to get the real story.

If you plan to find yourself in the top half of the income distribution, then the US is certainly the place to be. We treat our rich well. Nobody can deny that. But the story is much different on the bottom half.

Using LIS data, which was featured in the inaugural post of Upshot, I've ranked countries by per capita disposable household PPP income at given percentiles of the overall income distribution. For each column, I've only included countries higher than the US, given the subject matter of the post. The results are as follows:

As you can see, at the 5th percentile, there are 14 countries that are doing better than the US. At the 10th percentile, there are 12 countries. At the 20th, there are 10. At the 30th, there are 6. At the 40th, there are 2. At the 50th percentile, the US is 26 PPP dollars higher than Canada in 2010 (a veritable tie), but as was pointed out at Upshot, Canada has probably moved ahead of the US since then given recent trends.

Of course, disposable income is not a perfect indicator of which countries are using the best economic institutions. For one, different countries have different capacities to produce income, which is why I tend to prefer relative measures among developed countries. Additionally, disposable income fails to capture in-kind benefits, and therefore misses the wonderful free health care, among other things, available in many of the above countries. It also fails to capture differences in leisure time, which is much higher in many of the above countries. Finally (for now), it fails to capture the well-being boosts that comes from simply being in an economically secure environment as well as the increase in social cohesion and trust that is associated with lower inequality and lower social distance.

If you judge a society by how well it treats its top, the US is certainly the best in the world. If you judge a society by how well it treats its bottom, however, the US is trailing behind a good chunk of developed countries, even when you look only narrowly at absolute incomes. The US trails these countries, not for any uncontrollable reason, but because it uses inferior economic institutions that predictably distribute the national income poorly.