Real Wage: 10 factors that determines real wage


Real wage refers to the purchasing power or buying capacity of money wage. It is the amount of necessaries, comforts, and luxuries which the worker can command in return for his remuneration. Thus real wage is expressed in terms of goods and services. It is the amount of goods and services or benefits that a worker enjoys against of his job. The real wage is said to be high when a laborer obtains larger quantity of goods and services with his money income.

Factors determining Real Wage:

(1) Purchasing power of money:-


Purchasing power or value of money determines the real wage. If the purchasing power of money is high purchasing power of money depends on price level. If price is high purchasing power of money falls and real wage declines.

(2) Additional facilities:

Besides money wages, a work gets certain other benefits in his job. If such benefits are more besides his money income, his real income is more. For example a worker gets free housing, free education of his children, free medical service other than his monthly salary. In such a case his real wage is higher.

(3) Extra income:


The extra income of a worker is also taken into consideration in calculating the real wage of a laborer. If a worker earns extra Income in addition to his wage, his real wage will be higher. A school teacher earns as a private tutor and the income he earns is subsidiary to his main income from teacher ship. In such a case his real wage is more.

(4) Condition of work:

The working condition of a laborer also determines his real wage. If the duration of work is less and there is recreational facilities, place of working is well ventilated, well lighted, the real wage will be certainly higher.

(5) Nature of Job:


Real wage also depends on the nature of the job. The real wage is lower if the job is temporary. If the job is permanent, his real wage will be more. A temporary job is more or less insecure. There is possibility of being retrenched. Thus if a worker earns more but his job is temporary, his real Wage is not higher.

(6) Period and expenses of learning a trade:

The period and the money expenditure also determine the real wage. If period of study and training and cost of learning the job are high, the real wage of the worker is said to be falling. Thus the real wage of a clerk in the administration is higher than the real wage of a-doctor.

(7) Nature of work:


The real wages are also determined by the risk and uncertainty involved in the work. If the work is risky, real wage will be lower. For example a captain in submarine always expects danger and risk. He receives higher wages but in spite of his higher wage his real wage is lower.

(8) Future prospects:

The real wage is said to be higher in those jobs where there is possibility of promotion and other future prospects. But where jobs are traditional and static, there is hardly any chance of promoting to higher position, the real wage is said to be lower.

(9) Social prestige:


Those jobs which have higher social prestige ensure a higher real wage. Here the status the job is important. For example a lecturer in non-aided private college gets a very poor salary but as the job is prestigious, his real wage is more.

(10) Timely Payment:

Real wage is also determined by timely payment of wages. If the wage is regular and timely the real wage of the worker is higher although his income is pretty less. But in the jobs where payment of salary is irregular, untimely and untired, real wage is said to be lower.


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