Definition of real salary

The salary is that remuneration, payment, that a person receives periodically, generally, every month, or failing it, every fortnight, from his employer as a result of the provision of a productive activity.

Payment of money that a worker receives as consideration for the work that he performs

Meanwhile, the consideration, in almost all cases, is made through money, that is, although the salary may have a part in kind, it is usually additional and accompanied by an amount of money.

Due to its direct influence on the daily life of the worker, that is, due to the impact that wages have on what that the worker may or may not buy with his salary or what he may have access to in monetary terms, that is, the representation of your standard of living, is that it constitutes one of the aspects of the most relevant working conditions when negotiating an employment contract.

Salary classes

Meanwhile, there are various wage classifications, for example, by the means used for payment (in currency, in kind, mixed), by its satisfactory capacity (family, individual), by its limit (

minimum salary, maximum salary), by reason of who produces the work (personal salary, collective salary and team salary), by the form of payment (per unit of time, per unit of work) and its purchasing power (nominal salary and salary real).

Real salary: the one that represents the amount of goods that the worker can buy, his real purchasing power

The real salary will be the one who represents the amount of goods that the worker will be able to acquire with the volume of money that he receives and therefore represents the purchasing power, your purchasing power, the amount of goods and services that you will be able to achieve from your salary.

Therefore, the replacement of the real value, in a scenario of inflation, does not mean a salary increase.

Meanwhile he nominal salary, on the contrary, is the faithful expression the volume of money allocated to a contract worker; In inflationary economies, if the nominal wage is not updated, it will inevitably suffer evaporation, the worker not being able to cover the economic needs of times in which there was inflation.

So the real wage is the purchasing power of a worker's nominal wage. This will imply what we mentioned, that the variation that a salary shows in nominal matters will always have to consider the inflation of the country in question in order to provide a correct and adequate account of the salary real.

If the nominal net wage increases in a year by twenty percent, but inflation increases above it, by thirty percent cent, suppose, the difference will provide us with a concrete fall in the purchasing power of the worker, that is, he will no longer be able to buy the same amount of goods and services as before, the difference or fall in the purchasing power of the employee being ten percent.

In most nations, real wages tend to grow over time in a progressive and sustained manner, beyond crisis contexts such as recessions.

This occurs especially as a consequence of the increase in productivity which is closely linked to technological development, the arrival of investments and the influence of some economic agents, among others.

Causes of the fall in real wages: inflation

This scenario that we describe results in a higher percentage of the population can access more goods and services, always, of course, in a global consideration, because it is also a reality that there are nations that have shown the fall in workers' real wages, which are surely closely linked to, for example, critical processes such as the inflation.

The methodology to know the level of inflation is the well-known CPI or Consumer Price Index, which implies the variation of the nominal price in the prices of the products that make up the basic basket in relation to an immediately previous period.

Meanwhile, the net salary is the salary that someone receives with all the discounts and increases made, either for tax concepts, which of course subtract, plus what they add, for presenteeism, overtime benefit, between others.

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