Question

The local gas station agreed to pay its workers ​$7 an hour in 2018 and ​$10 an hour in 2019. The CPI was 252 in 2018 and 257 in 2019. Calculate the real wage rate in each year. Did these workers really get a pay raise between 2018 and​ 2019?

Answer 1

Real wage rate can be calculated by:

= Nominal wage rate /CPI * 100

2018 real wage rate:

= 7 / 252 * 100

= $2.78

2019 real wage rate:

= 10 / 257 * 100

= $3.89

Did these workers really get a pay raise between 2018 and​ 2019?

YES THEY DID:

= 2019 real wage - 2018 wage rate

= 3.89 - 2.78

= $1.11