Salary Raise Real Value Calculator

What it is for

Shows whether a pay raise is a real raise once inflation is counted. You enter your current monthly salary, the raise percentage and the expected inflation, and see the new salary, the nominal increase and how much your purchasing power actually grew or shrank.

How it works

The new salary is the current one times one plus the raise percentage. The nominal increase is the difference between them. For the real gain, the tool divides the raise factor by the inflation factor and subtracts 1, instead of just subtracting percentages. If it comes out negative, your pay buys less than before. A negative real result means the raise fell short of inflation, even though the paycheck is bigger.

Worked example

A salary of 5,000, a 6% raise and 4.5% expected inflation. The new salary is 5,300, a nominal increase of 300. After inflation, the real gain is about 1.44%, far below the 6% on paper. If inflation were higher than 6%, the gain would be negative.

Limits and caveats

An estimate that ignores taxes, deductions, benefits and tax-bracket changes, and uses a single inflation rate. The actual effect on your pocket may differ. Treat results as indicative.

Frequently asked questions

How do I know if my raise beat inflation?

Compare the factors: divide one plus the raise by one plus inflation. If the result is above 1, you had a real gain. The calculator does this and shows the real percentage, positive or negative.

Why not just subtract inflation from the raise?

Subtracting gives an approximation that works with small numbers, but the correct math divides the factors. The gap grows at high rates. That is why the tool uses division, which better represents purchasing power.

What inflation should I enter?

Use the price change over the period between your raise and the next one, from an index you follow, or your own estimate. Try more than one value, since small differences change the real gain a lot.