Relative Wealth by Country

Finance
Relative Wealth by Country

Wealth is usually measured and compared throughout the world using various measures. The easiest is to compare median Net Worth’s and GDP per capita to understand the basic state of a country’s finances and how the average Joe is doing. In this post I will look at the relative wealth of each country on the list, how easy it is to grow it and what can be done with it locally. This is a very high-level analysis and I am sure any statistician worth his salt will have a field day shooting holes through it. But in the end the information is insightful and at the least interesting to look at if you want to compare your country to others.

The Methodology

If you do not care and want to skip to the good stuff, skip this paragraph. The information I gathered comes from three different sources namely: Credit Suisse Global Wealth Report 2017Expatistan Cost of Living Index and Gallup Worldwide Median Household Income. I wanted to use median’s as far as possible in order to compare the same indices, the samples are large enough and the fact that 1% of the world’s population owns half the wealth would otherwise skew the figures. The problem was getting median income figures, the ones I used are old (aggregated 2006 -2012). I used a ratio assuming that income relations have not drastically changed between countries.

The cost of living index (CoL) I used is in relation to the centre of this specific sample, which in this case is Czech Republic. I did the same for incomes meaning Czech Republic’s median income is 100. Therefore, in this case Canada’s median income is 180 meaning the median income in Canada is 80% more than in Czech Republic. The inverse is also true where in Mexico the median income is 51% of the Czech Republic’s which will make it around 28% of Canada’s.

Only three ratios were calculated from this data to keep it simple and they are:

Income to Cost of Living: This illustrates how much more or less the income in a country is compared to the cost of living in that country. Both ratios used for the calculation is in comparison to Czech Republic therefore Czech Republic’s value is 100% and purely the barometer. Anything above 100% signals income is high in comparison to specific cost of living and therefore it should be easier to safe money after living expenses. Anything below 100% indicates the opposite.

Median Wealth in Relation to Cost of Living: The description is self-explanatory, basically it states the median wealth taking the cost of living in the specific country into consideration. That means what is your wealth worth if you spend it to live in the country you reside in (almost like local buying power).

Median Wealth as a percentage of Mean Wealth: In all countries analysed the mean wealth is larger than the median wealth. This is natural as the super-rich is far richer than the super-poor is poor. Also, your net worth can only be that negative before regulation, society and banks won’t allow it to go further. While there is no cap on the amount of wealth you can accumulate. This measure shows the difference between the average Joe and the super-rich in a specific country. It does not accurately state inequality as the stats do not show the size of the middle class in relation to the population of each country.

So, what does it say?

I have marked some key figures in green for best and orange for worst. There is some interesting reading, some of my takeaways are mentioned below.

  • Scoring consistently in the bottom 3 is Indonesia. Even though the cost of living is low it does not make up for the low income in comparison to cost of living. This affects the median wealth in relation to CoL which is only $ 2423 (up adjusted for the low CoL). The median wealth as a percentage of mean wealth also indicates that the wealth distribution is probably very skew towards the poor. Although the average Joe in India is the second poorest on this list, there seem to be a better wealth distribution. In both these cases the large population size has an impact.
  • Korea (South Korea) and Taiwan does not come out in the top or bottom 3 on any score except one. Income to cost of living, although they are not the richest they should be able to save a large portion of their income quite easily (22% and 29% higher income than CoL respectively).
  • South Africa, my home has surprised me by scoring very low on median income (23% of Czech Republic) especially when compared to cost of living. This just reaffirms the 2 worlds South Africa have within itself and that the middle class needs to urgently expand.
  • Thailand has lower median wealth than India if adjusted for the cost of living.
  • Even with a high cost of living Belgium, Australia and Switzerland has the highest median wealth. A bonus to this is in Australia income to cost of living is 4% higher while in Belgium it seems everyone is quite wealthy with a median wealth as a percentage of mean wealth of 58% (top 3). All three these countries have populations below 25 million people.
  • Looking at the median wealth as a percentage of mean wealth the United States and Sweden surprisingly score in the bottom 3 (14% and 17% respectively). These are not poor developing countries but the mean wealth is very high. This can only mean one thing, the super-rich are really super-rich, like in Iron Man multiplied by Batman rich. Both these countries score in the same league as Indonesia. On the good side Hungary and Italy score high which can point to a healthy middle class or in general less super-rich people. This is impressive for Italy where the median wealth per adult is $ 124 636 more than double the United States. What this can also illustrate is that some countries are very averse to debt, inflating their median wealth.

Feeling content yet?

What is natural as a human is to compare although that is usually the path to unhappiness. But looking at these figures you should be able to always see a bright side. Either on where you are within the context of your country or internationally. In some cases, you would just be happy by winning the birth lottery by being born where you are. The key is to focus on these bright sides and count your blessings. Also remember the countries analysed here are the ones with publicly available information. In my day job we do business in the Democratic Republic of Congo and Malawi. If I were to display those figures it would make India look like Switzerland.

What is your takeaways from this post?

Always grow your wealth for tomorrow while being content with your wealth today.

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