Work hours & pay
Cost of living raise calculator
Enter your salary and the inflation rate to see the raise that keeps your buying power, then compare it with the raise you actually got.
Use a recent inflation figure such as the annual CPI change. A negative shortfall means your actual raise more than covered inflation.
How much raise keeps up with inflation
A cost-of-living raise restores the buying power that rising prices take away. The amount is salary × inflation rate, and the salary that holds its value is current salary × (1 + inflation ÷ 100). Whether a raise is a real gain depends on how it compares with inflation: real change = (1 + raise ÷ 100) ÷ (1 + inflation ÷ 100) − 1, expressed as a percentage.
With the defaults, a $50,000 salary and 3.2% inflation need a raise of $50,000 × 0.032 = $1,600 just to stand still, lifting the salary to $51,600, about $133 more a month. A 2% raise gives only $1,000, leaving a $600 shortfall, and the real-terms change is (1.02 ÷ 1.032) − 1 = −1.2%, so despite a bigger paycheck you can buy slightly less than before.
| Inflation | Raise needed | New salary | Per month |
|---|---|---|---|
| 2% | $1,000 | $51,000 | $83.33 |
| 3% | $1,500 | $51,500 | $125.00 |
| 4% | $2,000 | $52,000 | $166.67 |
| 5% | $2,500 | $52,500 | $208.33 |
| 6% | $3,000 | $53,000 | $250.00 |
Cost-of-living versus a real raise
A cost-of-living adjustment, or COLA, keeps you level; it is not a reward for performance. A merit raise is the part on top that genuinely improves your position, so a 5% raise in a 3% inflation year is really a 2% merit raise plus a 3% adjustment. When you negotiate, it is worth naming the two parts separately, because an employer who frames an inflation match as a generous raise is, in real terms, offering nothing extra.
Inflation figures vary by what you buy. The headline consumer price index, published monthly by the US Bureau of Labor Statistics, is a national average; your personal rate can be higher if rent or energy dominate your budget. Social Security in the United States applies an annual COLA tied to a specific price index, which is why it changes each year. Use a figure that reflects your own costs, remember this is a gross calculation before tax, and treat a raise that merely matches inflation as holding ground rather than gaining it.
Frequently asked questions
What is a fair cost-of-living raise?
A raise that at least matches the inflation rate over the period. If prices rose 3.2%, a 3.2% raise keeps your buying power flat; anything less is a real-terms pay cut.
Is a cost-of-living raise the same as a merit raise?
No. A cost-of-living adjustment only offsets inflation, while a merit raise rewards performance on top of it. A 5% raise in a 3% inflation year is a 2% real merit raise.
How do I know if my raise beat inflation?
Divide (1 + your raise) by (1 + inflation) and subtract 1. A positive result means your buying power grew; a negative one means it shrank despite the larger paycheck.