Why It Still Feels Like Recession To 95% Of America

[hfojvt]

35. nominal looks at a number

like $10.

"real" looks at - what that $10 would buy. $10 in 1970 buys more than $10 in 1990 which buys more than $10 in 2010.

So making $10 an hour in 1970 is not the same as making $10 in 1990. And even beyond that an average person might say "my income has gone up because I made $10.69 an hour in 2002 and I made $14.34 an hour last year." But the $14.34 is not the same measure as what the $10.69 was - those are nominal dollars, not real dollars.

And there are many ways to convert from nominal to real. Depending on the baseline. I could convert 2012 dollars to 2002 dollars. In which case $14.34 becomes $11.24.

Or I could convert 2002 dollars to 2012 dollars. In which case $10.69 becomes $13.64.

Or I could convert both values to, say, 2000 dollars. In which case $10.69 becomes $10.23 and $14.34 becomes $10.76.

So I could have any number of baselines, which would be noted as 2002 = 100, or 2012 = 100 or 2000 = 100, in the three examples I gave.

But no matter what baseline I use, my real wages only went up 5.1% whereas my nominal wages went up by 34%.

I get those numbers from the BLS http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=100&year1=2002&year2=2012