Learn about the comparison between Money Wages and Real Wages to Labourer.

What the labourer earns by working in a factory or office is called wages. The labourers are generally paid a certain sum of money per day or week, etc. The amount of money paid is called the money wages.

The worker, however, is more interested in the goods and services which he can get with his money wages or otherwise. The amount of goods and services which the labourer actually gets is called his real wages. The standard of living and the prosperity of a labourer depend not on his money wages but on his real wages.

Real wages depend upon the following factors:


1. The Price Level:

The labourer uses his money wages to purchase his requirements. The amount of goods and services that he can get depends on the level of prices.

2. The Extra Earnings:

It is possible for labourers to get extra earnings. For example, waiters in hotels get tips which supplement their wages. Sometimes labourers are given food and lodging either free or at a reduced rate. Such things must be counted as part of their real wages.


Sometimes a labourer has to incur some costs in carrying out his duties. For example, a day labourer has to incur transportation Cost when going to his place of duty. Such cost must be deducted from his money wages when calculating his real earn­ings.

A major problem connected with wages is the apparent discrepancies which often exist in the pay­ments of workers in various occupations. For ex­ample, a worker living in an area where the cost of living is high will find his pay packet of less real value to him than the worker earning the same amount of money but residing in a cheaper area.

Thus it may be necessary to pay higher wages to persons employed in Calcutta than to those in Burdwan or Bandel, al­though the ‘real’ value of the wages of the Calcutta worker, in terms of what the wages will buy, will be no higher.

Wages also differ due to a number of factors. Hence, comparison of wages may thus involve taking into account such factors as subsidized housing, pen­sion rights, family allowances, expense sheet allowan­ces and the use of company cars.


These extra payments will, of necessity, have to be taken into account along with such other factors as security against unemployment, long term promotion prospects and the job-satisfaction of the work itself. All these add up to make ‘real wages’ of a job very different, in many cases from ‘money wages’.