How a pay raise is calculated
The headline percentage is the increase divided by your current pay. But inflation quietly eats into it, so the number that matters is the real raise.
Worked example. Going from $50,000 to $54,000 is a $4,000 raise, an 8% increase. If inflation is running at 3%, your real raise is about 5%. If inflation were 8%, the raise would just keep you level in buying-power terms.
Why the real number matters
A raise that matches inflation isn’t really a raise. It just stops you falling behind. When you weigh an offer or a counter, compare the increase to current inflation, not to zero. It also helps to check the raise against your take-home pay, since tax can blunt what actually lands in your account.