Raise vs Inflation Calculator
See whether your pay raise actually beat inflation, how it compares to the market rate, and what your new salary is really worth in last year's money.
When to use this tool:
- Check if your annual raise beat inflation
- Build a data-backed case for a pay rise
- Compare your salary against the market rate
How it's Calculated
- Nominal Raise = (New Salary − Previous Salary) / Previous Salary.
- Real Raise = ((New / Previous) ÷ (1 + Inflation)) − 1. This strips out inflation to show your true purchasing-power change.
- New Salary in Last Year's Money = New Salary ÷ (1 + Inflation).
- Market Gap = Market Rate − New Salary, shown only when a benchmark is entered.
Key Assumptions
Defaults are example inputs. See methodology and corrections for how to check results, or report an issue.
- Inflation is entered as your local annual CPI figure for the relevant period.
- Comparisons use gross (pre-tax) salary so tax-bracket effects are excluded.
- Market rate is your own estimate from sites like Levels.fyi, Glassdoor, or recruiter data; enter 0 to ignore it.
Actionable Insights
- A 4% raise during 5% inflation is a real-terms pay cut of roughly 1% — your money buys less than before despite a bigger number on the payslip.
- If your real raise is positive but you sit well below the market rate, the raise is mostly cosmetic; the bigger lever is renegotiating to the benchmark or moving roles.
- Compounding works both ways: a base that lags inflation two years running quietly erodes ~8-10% of your real income before you notice.
Frequently Asked Questions
Use the headline annual CPI for your country over the period the raise covers. Use your national statistics office and match the comparison period. A household budget can differ from headline CPI.
Because prices rose faster than your pay. If inflation is higher than your nominal raise percentage, your purchasing power fell even though your salary number went up.
It keeps you flat in real terms — you are standing still, not progressing. For career growth you generally want a real raise of 1-3% on top of inflation, more if you are still below market.
A positive gap means the typical pay for your role is higher than your new salary, so you have a data-backed case for a further increase. A negative gap means you are already paid above the benchmark.
Use base salary for the cleanest comparison, since bonuses are variable. If your bonus is reliable and contractual, you can include it in both the old and new figures consistently.
If your raise pace stays at the nominal percentage and inflation stays at the rate you entered, multiply the real-raise factor each year. A persistent negative real raise compounds into a serious income loss over 3-5 years.
Yes — promotions usually come with a step-change in market rate. Re-benchmark against the higher role rather than your old one, or the market gap will look better than it really is.
Worked Example: The 4% Raise That Was a Pay Cut
Maria earned $80,000 and received a 4% raise to $83,200. It felt like progress — until inflation that year ran at 5.5%.
- Nominal raise: +4.0%
- Real raise: ((83,200 / 80,000) ÷ 1.055) − 1 = −1.4%
- New salary in last year's money: $83,200 ÷ 1.055 ≈ $78,862 — less buying power than her old $80,000.
Despite a bigger paycheck, Maria can afford less than the year before. This is why "I got a raise" and "I got ahead" are not the same statement.
Worked Example: Beating Inflation but Trailing the Market
James moved from $95,000 to $103,000 (an 8.4% raise) while inflation was 3%. His real raise is a healthy +5.2%. But the market rate for his role is $120,000.
- Market gap: $120,000 − $103,000 = $17,000 underpaid
James got a genuinely good raise and is still $17k below market. Both facts are true at once — which is exactly the case to bring to his next review.
The Two Numbers That Matter
Real Raise
Answers "did I get ahead?" Aim for positive. Anything below zero means you took a quiet pay cut this year.
Market Gap
Answers "am I paid fairly?" A large positive gap is your strongest negotiating lever — far stronger than inflation alone.