Wages are not only direct money payments (i.e. hourly pay, annual salaries, bonuses, commissions, royalties), but also fringe benefits.

Wage rates - the price paid for the use or services of labor per unit of time (per hour, per day etc)

Nominal wage - the amount of money recieved by a worker per unit of time (hour, day, etc.)

Real wage - the amount of goods and services a worker can purchase with his or her nominal wage; the purchasing power of the nominal wage

Example:

• You work a daily shift of 4 hours and receive 5 dollars an hour. That is your wage.

• The 20 dollars that you reveive for your work is the nominal wage

• The amount of books you can buy with that 20 dollars is the real wage. Changes in price of items (in this case, books), change the real wage.

General Level of Wages - The high real wages in the United States and other industrially advanced economies is because the demand for labor in those nations is relatively large compared to the supply of labor.

• Some basic criterion:
• Gender
• Race
• Ethnic Background
• To compare nations:
• The general level of wages is found, ie. the average level of wges that include the wages of everyone from laborers to brain surgeons
  

The Role of Productivity

• The high demand for labor in the United States can be explained by their high productivity of labor:
• Plentiful captial
• Access to abundant natural resources
• Advanced technology
• Labor quality