Inflation vs. Salary Growth: Are You Gaining or Losing?
Headline raises can hide real declines in purchasing power. Benchmark your salary against inflation to see whether you’re actually moving forward.
How to Compare
- Measure salary change over 12 months.
- Subtract inflation rate for real growth.
- Repeat across multiple years for trend.
Worked Example
Case: Your salary last year was $50,000. This year it increased by 5%. Inflation over the same period was also 5%.
- New salary = $50,000 × 1.05 = $52,500
- Inflation-adjusted required salary = $50,000 × 1.05 = $52,500
- Real growth = 0% → your raise only kept pace with inflation.
Now suppose inflation was 3% instead:
- New salary = $52,500
- Inflation-adjusted required salary = $50,000 × 1.03 = $51,500
- Real growth = +1.9% → you actually gained purchasing power.
Negotiation Tips
- Bring inflation-adjusted figures to reviews.
- Highlight productivity gains and market rates.
- Consider total comp (benefits, equity, perks).