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Lecture #9 - Measuring Wage & Causes of Unemployment
How much do you really get from work? - Measuring wage Nominal wage Consumer Price Index (CPI) Real wage
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What much do you really get from work?Nominal wage = the actual amount of money received in payment for work.
US Bureau of Labor Statistics reports the median weekly earning for workers in the US
aged 16 and older.
To measure the change in the purchasing power of wage, we should measure the
change in prices.
Consumer Price Index (CPI) is a metric tracking the total price of a ‘shopping basket’
of goods and services commonly purchased by households
, Real wage differs from the nominal wage since it takes into account changes in prices
across time. Thus, it measures the actual purchasing power that workers have from
their earnings.
If your nominal wage is W per week, and the price of output is P, then you can use your
wage to buy W/P units of output each week.
US Real Wage
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