A 4% raise during 5% inflation is a pay cut. Enter your old salary, new salary, and the inflation rate — see what your raise was really worth.
A raise is a claim. Inflation is the audit.
A raise changes the number on your paycheck; inflation changes what that number buys. Whether you got richer depends on both. In a high-inflation year, a raise that sounds generous can leave your groceries, rent, and everything else claiming a bigger share of your pay than before.
The formula
- Nominal raise = (new salary − old salary) ÷ old salary
- Real raise = (1 + nominal raise) ÷ (1 + inflation) − 1
- New salary in last year's dollars = new salary ÷ (1 + inflation)
How to use the result
A positive real raise means your standard of living can actually rise; a negative one means you took a pay cut wearing a raise's clothes. Either way, the number gives you footing: for negotiating, for comparing an outside offer honestly, and for judging — over several years — whether a job is growing your purchasing power or just your nominal salary.
Frequently asked questions
- Where do I find the right inflation number?
- Use your country's official consumer price index over the period between the two salaries — in the US that's the BLS CPI, in the euro area the HICP, and most national statistics offices publish an annual figure. Twelve-month headline CPI is the standard choice for a yearly raise.
- Why not just subtract inflation from my raise percentage?
- Subtraction is close but slightly off, because both changes compound. The precise real change is (1 + raise) ÷ (1 + inflation) − 1. At low single digits the difference is small; at high inflation it becomes visible.
- My raise lost to inflation. What do I do with that?
- Bring the number, not the feeling. 'My compensation fell x% in real terms this year' is a concrete, non-confrontational opening for a compensation conversation — and if the answer is no, it's also the honest baseline for valuing an outside offer.
- Should I check this every year?
- Yes — real pay erodes quietly, one 'solid' 3% raise at a time. A few minutes with this calculator each review cycle tells you whether your purchasing power is actually growing across years, which is the trend that matters.