Real and nominal wages: description, similarities and differences

Salary, or, as it is abbreviatedthey say that wages are the most important and costly element of economic resources, since it is the main, and for many, the only source of income.

Under socialism, wages were understooda certain part of the total national income, which in monetary form was relied on for each worker for personal consumption, taking into account the law of distribution of labor. This definition is not one generation "wandered" in the textbooks of political economy.

At the present time of the market economy, the salaryis defined as the payment for labor used by the employer, expressed in monetary terms. At the same time, the very concept of "labor" has a very broad meaning, including both the labor of workers, the creation of material goods, and the work of workers in the creative spheres, spheres of service to the population, and so on.

Modern economic theoristsreal and nominal wages are allocated. Under the first is meant the amount of material and moral benefits that can be purchased for a nominal patch, that is, the purchasing power of a nominal wage. Nominal wages are wages expressed in cash, that is, simply speaking, this is the amount of money that an employee earns during a certain period of working time, or for the work done (also called a piece-bonus salary). For a percentage change in real wages can be traced by estimating the difference between the percentage change in the price level and the percentage change in nominal wages. Nominal wages are correlated with real wages, depending on the level of prices for services and goods. Not always pay at face value is directly proportional to real wages. During economic crises, the currency depreciation often increases the nominal wage, while the inflation level increases, resulting in higher prices for goods and services, as a result of which the real wage decreases.

Salaries are differentiated depending onvarious characteristics, such as the country of residence, region, activities, individuals. Only productive work is used for demand, respectively, than labor productivity is higher, the greater the demand it uses. In this case, with a high demand for labor and high productivity, the average real salary also increases. In economically developed countries, the relationship between real wages per hour and output in that hour is traced. With an increase in worker productivity, his real income can also grow.

Nominal wages directly depend on thelabor market structure. The nominal wage rate is directly proportional to the ratio of the demand for labor in a competitive market to its supply. The more this difference, the employer will have to pay a large salary, so that the employee refused other offers and went to work specifically for him. And, accordingly, on the contrary, if work proposals are exceeded, the employee will be forced to agree with the conditions of the employer, which, accordingly, will reduce the salary in order to reduce the cost of the goods or services produced, thereby increasing the profitability of production. For this reason, it is entrepreneurs who benefit from a low level of wages.

In legal states the lever of counteractionmonopolies of employers are represented by trade unions. In order to maintain the demand for labor, they put forward various requirements: a ban on labor immigration, a reduction in the working day (weeks), restriction of work of minors and women (in some sectors), etc. However, these requirements do not always apply to increasing wages.

Related news

Real and nominal wages: description, similarities and differences Real and nominal wages: description, similarities and differences Real and nominal wages: description, similarities and differences Real and nominal wages: description, similarities and differences Real and nominal wages: description, similarities and differences Real and nominal wages: description, similarities and differences Real and nominal wages: description, similarities and differences Real and nominal wages: description, similarities and differences Real and nominal wages: description, similarities and differences