What are real wages?

Real wages are how much money you get for your work, compared to how much things cost.

Imagine you have a piggy bank where you save your allowance every week. If your allowance goes up, that’s great, but if the price of candy and toys also goes up, you might not be able to buy as much as before. That’s like what happens with real wages.

• Wages are how much money you earn from your job, like your allowance.
• But if prices go up, say, a candy bar costs twice as much, then even though your wage went up, you can buy less. That’s why we look at real wages, they show what your money actually buys.

Think of real wages like a scale:

• If your wage goes up and prices stay the same, you’re happy, you can buy more stuff.
• But if prices go up faster than your wage, the scale tips, you feel like you're earning less, even though the numbers on paper say otherwise.

So real wages help us see how much power our money really has, not just how much we earn.