What is real wage and how do you calculate real wage?

I have heard a lot of people say the real wage in US hasn't increased since 1939.

"Real Wage" is one of those political terms I'd always taken to be approximately meaningless. I found a real-wage calculator but I couldn't get it to work. Enter "real wage" into Google and you get that and a few papers that don't answer your question.

From what I saw, though, the real wage is your wage compared against certain necessities. What one has left over when one has met the obligations of working in the first place, (e.g. taxes, transport costs, clothing, lunch, &c.). So if my wage says I earn $100 today, and taxes take $30, I have $70 left. But I spent $5 on lunch, ($65), and bought new shoes because my old ones didn't meet the dress standard ... fuel for the car or money toward my transit pass ... how much is the company spending on me but not giving to me (e.g. insurance policies, employee savings plans, &c). It's kind of like adding up how much money it costs to work in the first place and comparing that to how much you actually get to take home. And, when comparing it to the value of a dollar, there may be some truth to the fact that real wages haven't gone up adequately in the last "X" years. In fact, at 28, one of the ideas that saw the rise of our "liberalism" (e.g. Clinton) was that the Boomers blew it. Some university or another put out a study that said my generation would be the first in America to lose financial ground compared to their predecessors. In other words, the system no longer profited us. Of course, many children of boomers are quite familiar with the oft-repeated refrain that this condition of affairs is, in fact, our own fault. It's an interesting conceptual fight about reality that has the Boomers scared. They know that, because of their actions, most of their children will most likely leave them to starve and suffer in old age. Hell, they shouldn't have tried to teach us such selfishness, and they shouldn't have practiced such selfishness.

But I should get off my soapbox ... if I find real-wage data that is less political and more substantial, I'll cough it up.

But yeah, working hard and consistently used to be enough to own property in the US.

I knew someone who quit school because two jobs wasn't enough to pay for living expenses and school. So she got a third job. She could afford to buy a condo because the monthly payment turned out to be a little lower than the rent she was paying anyway. That was unexpected. Of course, none of her friends have seen her again, and she did eventually land herself in the hospital working too hard.

But yeah ... it is oft-asserted that, in the US at least, we're working harder for less than my grandfather did.

There's also a conspiracy theory that I heard once, severely hung over, at a coffee house in the French Quarter of New Orleans. Something about the US going broke and signing out citizens as collateral (e.g. Social Security #). Never did get the hang of it, but the timing was New Deal era, so if the real wage is a wreck since '39, there might be a reason.

But I couldn't find any real information to address the issue today, so ... yeah.

thanx much,
Tiassa :cool:

Joeman:

"Real wages" is a sloppy term used by economists
which should read "Wages corrected for
average consumer price change" over any particular
chosen dates. The same goes for real
income, real interest rates, and real GDP. Part of
the problem here is that there should be quotation
marks around the word "real" There are no real
"real wages, etc.". It's best to consider it as
being an idiomatic phrase which you can't read
literally.

To figure, for instance, a particular person's
current "real wage" compared to a year ago you
find out first how much the Consumer Price Index
has relatively changed in that same period
(percent or fraction). Then you multiply the
person's current money wage by the reciprocal
of that relative change. This give you the current
"real" wage in terms of the earlier wage. Obviously,
if average prices go up 10% but the wage goes up
less than that, there's been a reduction in
the "real" wage.