The price paid for the services of labour is called wage. Wages are of two types : 1) Money wage, 2) Real wage. The wage which is expressed in terms of money is called ‘Money wage’. Money wage is also known as, ‘Nominal wage’.
Real wage refers to the quantity of goods and services that can be purchased with the help of money wage. Real wage should include not only money wage but also all the advantages, concessions and facilities which are provided to a worker. Real wage is determined not only by the money wage but also by so many other factors.
Factors Determining Real Wages of Workers
1. Level of Money Wage: Other things remaining the same, higher the money wage rate, higher will be the real wage. As money wage increases, real wage also increases.
2. Price Level: The real wage also depends on the level of prices. A rise in the price level will result in a fall in the real wages. On the other hand, a fall in the price level leads to a rise in the real wages.
3. Purchasing power of money : The real wages are affected by the purchasing power of money. If the purchasing power of money declines, the real wages would also fall and vice-versa.
4. Supplementary income : In certain jobs the labourers may have plenty of opportunities to undertake other remunerative work along with their regular work. A college teacher can earn some extra income through tuition and writing books in addition to his regular income. In such cases the real wages will be high.
5. Nature of employment: Real wages also depend upon the nature of the employment. Some jobs are regular and certain. while other jobs are irregular, temporary and uncertain. In regular or permanent jobs the real wages will be high and vice-versa.
6. Working conditions : The conditions under which the worker performs his duties is an important factor in the determination of real wages. The workers in tea gardens work under very pleasant surroundings. Even though money wages are low, their real wages are high. On the other hand, the real wage of the workers working in coal mines is low.
7. Prospects of promotions: In the jobs where there is hope of promotion the real wages will be low.
8. Other advantages: In some jobs the workers get some other facilities in addition to their money wages. In such causes real wages be high. A railway employee with a monthly salary can have some other facilities like quarters, free traveling, education, medical-aid etc. and so his real wages will be high.
9. Working hours: Short working hours and sufficient leisure Increase the real wages while long working hours with few holidays lower the real wages of a worker.
10. Trade expenses: In some occupations trade expenses will be higher than other occupations. A lawyer has to spend on law books regularly to carry on his profession. His real wage will be low. A Bank Officer need not incurr such trade expenses. Hence his real wages will be high.
