Salary Inflation Calculator - are you really able to spend more?

The formula

inflation factor = CPI(end year) ÷ CPI(start year)
break-even salary = old salary × inflation factor
real change % = (new salary ÷ break-even salary − 1) × 100

The break-even figure is the number worth internalising. Over 5 years from 2020 to 2025, US consumer prices rose 24.4%, so a salary of $60,000 in 2020 needed to reach $74,636 by 2025 just to stand still. Anything below that is a real-terms pay cut, however it was described at the time. This is why a "3% raise" in a year of 5% inflation is a 2% reduction in what you can actually buy.

Nominal figures can be misleading

Salaries are both negotiated and remembered in nominal terms. This is exactly why companies can benefit from inflation. It is an effective way to reduce real pay without visibly cutting the number on the paycheck. An employee's salary goes up while their purchasing power might decrease. While this might not be very noticeable over a year's period, it can create a real gap over a longer period. The salary inflation calculator allows you to see if a gap has been created, and what it looks like.

The same math cuts the other way when raises outrun prices, and it's worth checking that too. If your raise was higher than inflation, you actually gained in purchasing power. This would indicate that your raise was really a raise, and not a pay cut in disguise.

What is considered to be a good raise?

There is no general answer here, but there is a floor. If your raise is below the inflation rate, it is a (small) pay cut rather than a raise. If your raise clears inflation by 1 or 2 percent, it may reflect a promotion or a market correction. Therefore a raise that clears inflation by a few points is generally considered to be a good raise. One that is below or equal to inflation is generally considered stagnation or worse. Use this calculator to see how your salary evolved compared to inflation so that you have some negotiating leverage.

The limitations

CPI is an average number, so it represents the average household. This uses average inflation. Rent and healthcare rise faster than that, so if you spend a lot on either, the real hit is bigger. While it is not custom tailored to your situation, it does give an indication of the average. If you calculate over multiple years, the calculator shows the annual average and not per year. If you want to see the trend, it's best to run each year separately.

Citing this data

The inflation factor is provided by the Bureau of Labor Statistics. They publish CPI-U annual averages that we use in the salary inflation calculator. If you are citing a salary inflation figure in an article, negotiation or anywhere else, mention the BLS as your source. The calculator only does the division for you.