The Bureau of Labor Statistics has a calculator to help you determine your real wage. If inflation is at 9% like it is now, your $20 buys only $18.35 in goods. That means your $20 now only buys you $19.05 in goods. To calculate your real wage with that example, divide your $20 an hour wage by 1.05 (the price level plus 5% inflation). To get that number, you divide the nominal wage by the price level, which is the level of inflation.įor example, assuming the price level is 1 and you make $20 an hour, then your real wage is 20 divided by 1, which equals 20. Real wages are determined by looking at the number of nominal dollars you have and factoring in inflation. The amount you can buy with those dollars is called a real wage. ![]() The number of dollars you make in your job is called a nominal wage. You do this by looking at nominal wages versus real wages. You can see the cost of inflation by looking at the purchasing power of the money you make. Higher inflation means consumers can buy fewer goods with the dollars they have to spend. Housing is the largest component of the consumer basket in the U.S. The basket of goods includes items that are commonly purchased by Americans, and includes housing expenses such as rent and mortgages. The CPI is expressed as a percentage of the difference in the cost of the basket of goods in a set period of time, usually a month or a year. The number is arrived at by using a series of surveys provided by thousands of businesses and consumers across the country, who keep a journal of what they purchase over a certain period. The CPI is obtained by comparing, over time, the cost of a fixed “basket of goods” and services purchased by consumers in the United States. The Bureau of Labor Statistics uses the Consumer Price Index to measure inflation. ![]() Inflation measures how much more or less expensive certain goods and services have become over a certain period, usually a year. So, what is inflation, how is it calculated and how does it affect your wallet? Here’s what we know now about the soaring inflation rates. Gas prices rose 11% in the past month, though prices have decreased in the last week. ![]() The average price of food rose 10.4% over the past year. Food prices helped drive the rate of inflation during the past 12 months - the biggest annual increase since November 1981.
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