real wage

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Related to real wage: Money Wage

Real Income

Personal, corporate, or national income after accounting for inflation. Comparing one's real income from year to year shows how much income has grown or shrunk after adjusting for how much the buying power of the money has been affected. Nominal income compares only raw dollar amounts and does not account for inflation. For example, if one's nominal income has grown 10% and the inflation rate is 3%, the real income growth is 7%. Real income is also known as real wages. See also: Real GDP.

Real Wages

The wages that a person earns or that a company pays after adjusting for inflation. For example, if an employee makes $25,000 per year in both Year 1 and Year 2, but the inflation rate is 10%, that $25,000 is only worth 90% of its previous value ($22,500) in Year 2. This is good for the employer, but bad for the employee.

real wage


real income

the MONEY WAGE rate divided by the general PRICE LEVEL of products. Notationally, this is written W/P If wages and prices both rise by, say, 10% from an initial index number of, say, 100, the original ratio of W/P is 100/100 = 1, and the new ratio of 110/110 is also 1. An increase in real wages occurs when wages rise more quickly than prices or prices remain constant. In the latter instance, a rise in wages of 10% would give the ratio 110/100 = 1.1, thus making the wage earner 10% better off because he is capable of purchasing 10% more products with his new wage.

The analysis of real and money wages in relation to employment and output is a continuing central theme within economics although it is generally thought to be real wages that determines the level of employment rather than money wages. See CLASSICAL ECONOMICS, KEYNESIAN ECONOMICS, MONEY ILLUSION.

References in periodicals archive ?
The return of respectable real wage growth is desperately needed, said the foundation, following the UK's six-year pay squeeze.
Some longer-term changes in the economy have likely played a larger role in depressing real wage growth.
TUC Midlands regional secretary Lee Barron said: "Despite growth returning, 2014 was another miserable year for living standards in the West Midlands with real wages falling by over PS1,000 in real terms.
The Index, which comprises four components tax burden, initial unemployment claims, real wages and real home prices decreased to 4.
We argue that three factors have been important drivers of these unprecedented real wage falls.
Within each of these two types of labor, the real wage change overtime in the case of male and female workers within sectors is the subject of our analysis.
Another serious problem with MacKenzie's (2010) argument is that he neglects a broad literature on real wage cyclicality, which casts doubts on his interpretation of the aggregate wage and employment record.
He argues that when labor acts collectively for better terms through democratic mechanisms that influence the regulation of wage rates, hours, work intensity, and other working conditions, it leads to a degree of real wage rigidity, and therefore unemployment.
An analysis by Goldman Sachs shows that, despite real wage gains, the share of labor costs in total manufacturing costs is lower than it was in 2001 - a trend that continued in the first half of 2010.
The objective of this article is to explain this large divergence between median real wage growth and labour productivity growth.
Equation (5) suggests that the demand for labour is a decreasing function of the real wage rate unless [alpha] takes the value one.
This marks the broadest gain in real wages since 2000 when 95% of the workforce experienced real wage gains," Huether said.