Real Wage Growth Calculator

When a Raise Is Actually a Pay Cut

A 3 percent raise in a 5 percent inflation year is a real pay cut of roughly 2 percent. The salary number rose but what it buys fell. This is the 2022-2023 experience for many workers — nominal raises of 3-5 percent while inflation ran 6-9 percent — despite feeling like raises, they reduced real purchasing power.

The Fisher Equation

Real rate = (1 plus nominal rate) divided by (1 plus inflation rate), minus 1. This is the Fisher equation and is the accurate way to compute real returns. A common shortcut — nominal minus inflation — is close but loses accuracy at higher rates. This calculator uses the full Fisher equation.

A worked example

With the defaults: current salary of 60,000, nominal raise of 3, inflation rate of 5. The tool returns -1.90%.

What moves the number most

The result responds to Current Salary, Nominal Raise %, and Inflation Rate. The rate and the time horizon usually dominate — compounding means a small change in either reshapes the final figure more than a similar shift in contribution size.

The formula behind this

Applies the Fisher equation to compute real raise from nominal raise and inflation. New nominal salary is current salary times (1 plus nominal raise). New real salary adjusts nominal back to today's purchasing power.

Reading the real figure

The real value is what your money actually buys, after inflation. That's the real-terms view; the nominal total is just the flattering headline. Pay more attention to the inflation-adjusted result when the horizon is long.