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Simple English definitions for legal terms
real wages
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A quick definition of real wages:
Real wages refer to the amount of money a person earns for their work, taking into account the cost of living. This means that real wages are adjusted for inflation, so that people can see how much their money is actually worth. For example, if someone earns $10 an hour and the cost of living goes up by 2%, their real wage would be $9.80 an hour. Real wages are important because they show how much purchasing power people have and whether their income is keeping up with the cost of living.
A more thorough explanation:
Definition: Real wages refer to the wages that an employee receives in terms of their purchasing power, after adjusting for inflation. It is the actual amount of goods and services that an employee can buy with their wages.
Example: If an employee earns $20 per hour and the inflation rate is 2%, their real wage would be $19.60 per hour. This means that they can buy less with their wages due to the increase in prices caused by inflation.
The example illustrates that real wages take into account the impact of inflation on the purchasing power of an employee's wages. It shows that even if an employee's nominal wage (the amount they earn in dollars) remains the same, their real wage (the amount they can buy with their wages) can decrease due to inflation.