Suppose you get a 20 percent raise during a year in which the price level rises by 10 percent.?

Answer 1

I know your question didn't mean for this type of answer, but I couldn't resist adding that most people in the real world could never get a 20 percent raise. The typical raise is 3 percent, and that's if you are lucky. A 20 percent raise would be a dream job. A 10 percent per year raise would be a dream job too. This year, my raise was 1/2 percent. Not even 1 percent........which means I'm technically ending the year making less than I started since my raise didn't even keep me above inflation. Since I'm so poor, I think you should vote me best answer to at least make me feel better........LOL

Dearest Kevin, I'm a nurse, so we don't really get promotions. We slave away day after day taking care of sick people and then they repay us by giving us a measly 1/2 percent raise. The only nurses that get promotions is if they decide to leave the bedside and become a manager, but office work is not what I went to school for. I promise you that people like nurses, teachers, firefighters, and police officers will never get a raise of 10-20%. We should, but we don't.

Answer 2

Your question does not give enough information. You have not established the base pay and base price levels to determine if the increases mean anything substantial.

For example if your base pay is $500 dollars a month and your base price level is $600. You are still in the hole at the end of every month even though your pay went up 20%. Your new pay is up to $600, but your price levels are up to $610.

Answer 3

Robin_TN, lots of people have good years in which they get raises of more than 20% -- often in conjunction with, you know, a PROMOTION. This has happened to me several times, but of course I'm a stud. Not too many people start out as VPs and CEOs, you know, they work their way up.

But to answer the question, the result of a 20% raise along with 10% inflation is a increase in REAL income of roughly 10%. This is what is meant by changes in "real wages".