Real wages

Real wages are wages adjusted for inflation, or, equivalently, wages in terms of the amount of goods and services that can be bought. This term is used in contrast to nominal wages or unadjusted wages. Real wages are wages adjusted for inflation, or, equivalently, wages in terms of the amount of goods and services that can be bought. This term is used in contrast to nominal wages or unadjusted wages. Because it has been adjusted to account for changes in the prices of goods and services, real wages provide a clearer representation of an individual's wages in terms of what they can afford to buy with those wages – specifically, in terms of the amount of goods and services that can be bought. However, real wages suffer the disadvantage of not being well defined, since the amount of inflation (which can be calculated based on different combinations of goods and services) is itself not well defined. Hence real wage defined as the total amount of goods and services that can be bought with a wage, is also not defined. This is because changes in the relative prices.