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| ==Real Wage== | | ==Real Wage== |
| The term real wages refers to wages that have been adjusted for inflation. This term is used in contrast to nominal wages or unadjusted wages. | | The real wage describes the quantity of goods that the worker gets for a number of hours of labor. the real wage is the nominal wage adjusted to the level of inflation. It determines how much labor workers will want to supply in the economy. |
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| The use of adjusted figures is in undertaking some form of economic analysis. For example, in order to report on the relative economic successes of two nations, real wage figures are much more useful than nominal figures.
| | ==Factors that Influence Real Wage== |
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| If nominal figures are used in an analysis, then statements may be incorrect. A report could state: 'Country A is becoming wealthier each year than Country B because their wage levels are rising by an average of £500 compared to £250 in Country B'. However, the conclusion that this statement draws could be false if the values used are not adjusted for inflation. An inflation rate of 100% in Country A will result in its citizens becoming rapidly poorer than those of Country B where inflation is only 2%. Taking inflation into account, the conclusion is quite different: 'Despite nominal wages in Country A rising faster than those in Country B, real wages are falling significantly as the currency halves in value each year'.
| | ==Income Effect== |
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| The importance of considering real wages also appears when looking at the history of a single country. Looking back over the decades, annual wages were considerably less than they are today. If only nominal wages are considered, the conclusion has to be that people used to be a great deal poorer than today. However, the cost of living was also much lower. In order to have an accurate view of a nation's wealth in any given year, inflation has to be taken into account -- and thus using real wages as the measuring stick.
| | ==Substitution Effect== |
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| Real wages are a useful economic measure, as opposed to nominal wages, which simply show the monetary value of wages in that year.
| | ==Gender Differences== |
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| ==Factors that Influence Real Wage== | | ==Sex based Wage Inequality== |
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| ==Income Effect== | | ==Opportunity Cost of Leisure Time== |
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| ==Substitution Effect==
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Revision as of 02:06, 10 April 2006
Labor Economics
Labour economics seeks to understand the functioning of the market for labour. Labour markets function through the interaction of workers and employers. Labour economics looks at the suppliers of labour services (workers), the demanders of labour services (employers), and attempts to understand the resulting pattern of wages, employment, and income.
It is an important subject because unemployment is a problem that affects the public most directly and severely. Full employment (or reduced unemployment) is a goal of many modern governments.
Real Wage
The real wage describes the quantity of goods that the worker gets for a number of hours of labor. the real wage is the nominal wage adjusted to the level of inflation. It determines how much labor workers will want to supply in the economy.
Factors that Influence Real Wage
Income Effect
Substitution Effect
Gender Differences
Sex based Wage Inequality
Opportunity Cost of Leisure Time
