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Real wages

A real wage is the hourly rate of pay adjusted for inflation. Real wages take into account inflation, so show how much purchasing power a pay packet has in a way that’s comparable to previous years. Real wages rise when nominal wages rise faster than the rate of inflation. So for example, if in a given year, nominal wages increase by 4 percent and consumer prices rise by 2 percent, then real wages will have grown by 2 percent.

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