Certified Human Resource Professional (CHRP) Practice Exam

Which of the following describes a "real" wage increase?

1. An increase greater than the cost of living

2. An increase tied to performance

3. An increase provided annually to all employees

4. An increase that affects the compensation structure

The correct answer is: An increase greater than the cost of living

A "real" wage increase refers specifically to an increase in an employee's wage that exceeds inflation and improves their purchasing power. When wages increase at a rate faster than the cost of living, it allows workers to maintain or enhance their standard of living. This means they can buy more goods and services than they could before the wage increase, effectively making them better off in terms of financial resources. The other options, while related to wage increases, do not define "real" wage increases directly. Increases tied to performance can impact individual earnings but do not necessarily reflect changes in the cost of living. Annual increases provided to all employees may not adjust for inflation, meaning that the real value of those increases could be negligible if they do not keep pace with rising costs. Lastly, an increase that affects the compensation structure relates to the broader organizational pay strategy and does not indicate whether individual wages have adjusted to inflation. Therefore, the focus should remain on whether the wage increase gives workers greater purchasing power, which is why an increase greater than the cost of living accurately describes a "real" wage increase.