The real wage

The real wage answers the question “could I afford more or less than last year?”. The nominal wage — the one on the payslip — can rise while purchasing power falls, if prices rise faster. This page's headline figure is exactly the difference between the two: the growth of the net wage with the growth of prices taken out, month by month, against the same month of the previous year.

A negative figure is not a cut in wages: the nominal wage can rise, but more slowly than prices. And conversely, real growth does not mean everybody earns more — the average wage is an arithmetic mean, so more than half of employees earn below it, and the basket inflation is measured against is an average one, with weights fixed two years earlier. A household that spends differently from the average feels a different inflation and therefore a different purchasing power.

The panel below tells the same story as a level rather than a rate: every past wage expressed in the prices of the most recent published month. The last month is, by construction, equal to that month's nominal wage — it is where the recomputation starts. When INS publishes a new month, the whole series is recomputed in its prices, so the historical values change by a few lei; the series is not being revised, it is being expressed in a different measuring unit.

Prices are carried from one month to the next through the index INS publishes against December of the previous year (IPC102B): inside a year it is that month's own value, and from year to year the links are the December ones. The chain thus has one link per year, not twelve. Checked against the annual index INS publishes separately, the two versions of the same price history diverge by 0.004% at the median and by 0.111% at worst, over 295 months — the rounding of the two published decimals. The real growth at the top uses no chain at all: it divides directly by the published annual index, so it carries no chaining error.