Class XI, Principles of Economics, "Factors Determining Real Wages"

Factors Determining Real Wages

Some of the factors that determine real wages are as follows

1. Purchasing Power of Money

The purchasing power of money has great influence on the real wages. The value of money keeps on changing constantly which varies inversely with the price level. This purchasing power of money influences the calculation how much the worker a worker earns since all the monitory calculation depends on the value of money. The places where the prices are high the real wage will be low and vice versa.

2. Subsidiary Wages

The worker earning other than regular wages have higher real wages. In order to find the real earnings of a worker, we should not only consider his salary but also the extra earning that he may be able to make. A worker may work part time and in such case his real wage will be higher as compared to the worker working only on regular wages.

3. Working Hours and Holidays

Real wages to a great extant depend upon the working hours and holidays. Obviously a worker working for more time and enjoying less holidays will have higher real wages. His income will always be higher and so will be his real wages.

4. Future Prospects

Future prospects means opportunities for the future. A businessman viewing a good prospect for his business in the future will pay higher real wages to his workers so that they can work more willingly to make best use of the opportunities of the future. However a business not having very bright prospect may even offer higher wages.

5. Nature of Work

The occupation which require great amount of skills and whose nature is quite dangerous offers high wages to the labours. The work requiring more physical and mental capabilities should offer high money and benefits to the labours.

6. Expenses

In order to calculate the real wages the expenses must also be considered. The workers incurs certain expenditures which must be deducted in order to get the final figures.