How this calculator works
A raise that sounds good in nominal dollars can still leave you with less real purchasing power if inflation ran hot in the same period. This calculator compares your nominal raise (or old and new salary) against an inflation rate you enter, and reports the real, inflation-adjusted change in your buying power.
It shows two numbers for the real raise: the exact figure from the Fisher relation used in economics, and the common shortcut of just subtracting the inflation rate from the raise percentage. At everyday rates the two are close; at high rates, like during a bout of high inflation, they can diverge by several percentage points.
The formulas
Exact (Fisher relation): Real raise % = ((1 + nominal raise) ÷ (1 + inflation) − 1) × 100Naive approximation: Real raise % ≈ Nominal raise % − Inflation %The naive subtraction is only an approximation because it ignores the compounding interaction between the two rates. It is close enough at low single-digit rates but increasingly wrong as either rate rises.
Worked example: 5% raise, 3% inflation
- Nominal raise is 5% (for example, an old salary of $60,000 rising to a new salary of $63,000), and inflation over the same period is 3%.
- Exact real raise = (1.05 ÷ 1.03 − 1) × 100 ≈ 1.942%.
- Naive approximation = 5% − 3% = 2%.
- The two differ by about 0.058 percentage points here — small, but the gap widens sharply at higher rates, such as a 50% raise against 40% inflation (7.14% exact vs. 10% naive).
Frequently asked questions
Why isn't real raise just nominal raise minus inflation?
Subtracting the two rates ignores that inflation also erodes the raise itself, not just your original salary. The exact Fisher relation divides by (1 + inflation) instead of subtracting it, which correctly compounds the two effects. At low rates the difference is tiny; at high rates it is not.
What inflation rate should I use to check whether my raise is a real raise?
Use a rate that matches your situation and timeframe, such as your country's most recently published consumer price index (CPI) change over the period your raise covers. This calculator does not assume or invent a rate — enter the figure you want to test.
Can a raise still be a real pay cut?
Yes. Whenever inflation is higher than your nominal raise, the real raise comes out negative, meaning your salary buys less than it did before, even though the number on your paycheck went up.
Does this work if I only know the new salary, not the raise percentage?
Yes — switch to the "old & new salary" mode and enter both amounts; the calculator derives the nominal raise percentage from them before applying the same real-raise formula.
What counts as a good raise after adjusting for inflation?
A good raise is one where the real, inflation-adjusted percentage — not just the nominal number on your offer letter — is comfortably above zero. A real raise of 0% means your purchasing power hasn't changed at all despite the nominal increase, and a negative real raise means you can afford less than before. In the calculator's own worked example, a 5% nominal raise against 3% inflation works out to a real raise of about 1.942%, meaningfully positive but smaller than the headline 5% figure suggests.