How is the real wage defined in economic terms?

The real wage is defined in economic terms as the payment to labor measured in units of output. This concept emphasizes the purchasing power of wages rather than just their nominal value in monetary terms. The real wage reflects the amount of goods and services that can be acquired with the earnings from labor, accounting for inflation and changes in the cost of living.

When discussing wages, it's important to distinguish between nominal wages, which are simply the dollar amounts paid (such as what people see on their paychecks), and real wages, which provide a more meaningful assessment of economic well-being by considering the actual purchasing power those wages represent.

This understanding helps to better analyze how wage changes impact standards of living in an economy, compared to simply looking at nominal wage figures that can be misleading if inflation is not taken into account.