Hong Life CalculatorsUnderstanding the salary inflation calculator — concept and principle
A raise only makes you better off if it beats rising prices. This calculator converts an old salary into today's money with the consumer price index (CPI) and shows whether your pay has kept up with inflation, in total and per year.
How it is calculated
- Old salary in today's money = salary then × CPI now ÷ CPI then.
- Real change in pay = (salary now ÷ salary then) ÷ (CPI now ÷ CPI then) − 1.
- Ahead of or behind prices = salary now − old salary in today's money.
- Yearly figures are geometric averages: (1 + total change)^(1 ÷ years) − 1.
The principle
The CPI tracks the price of a fixed basket of goods and services. The ratio of two CPI values tells you how much more the same basket costs now. Scaling the old salary by that ratio gives the amount you would need today to buy what the old salary bought. If your current salary is higher, your real pay has risen; if lower, it has fallen even though the number on your payslip went up.
Worked example
Default inputs: salary then 55,000 USD with CPI 237.017; salary now 68,000 USD with CPI 313.689; 9 years between.
- Prices rose by 313.689 ÷ 237.017 − 1 ≈ 32.3%; average inflation ≈ 3.16% a year.
- Old salary in today's money = 55,000 × 313.689 ÷ 237.017 ≈ 72,792 USD.
- Raise in money terms = 68,000 ÷ 55,000 − 1 ≈ 23.6%.
- Real change = 1.236 ÷ 1.323 − 1 ≈ −6.6%, or −0.75% a year.
- Behind prices by 68,000 − 72,792 = −4,792 USD.
| Salary then (per year) | Real change in your pay |
|---|---|
| 13,750 | 273.7% |
| 27,500 | 86.8% |
| 41,250 | 24.6% |
| 55,000 | -6.6% |
| 68,750 | -25.3% |
| 82,500 | -37.7% |
| 110,000 | -53.3% |
How to read the result
A negative real change means your pay buys less than before. Use the result in salary reviews or when comparing job offers over time. Your personal inflation may differ from the CPI, for example if housing costs rose faster where you live.
Common mistakes
- Mixing CPI series (for example a city index for one year and a national index for the other).
- Using a December value for one year and an annual average for the other.
- Comparing gross pay with prices but forgetting tax changes.
- Treating the CPI as your personal cost of living.
Frequently asked questions
How do I adjust a salary for inflation?
Multiply the old salary by CPI now ÷ CPI then, using the same CPI series for both years.
Where can I find CPI values?
From the national statistics office, such as the US Bureau of Labor Statistics or Statistics Korea.
What does real wage growth mean?
Growth in pay after removing the effect of rising prices.
Sources: US Bureau of Labor Statistics, Consumer Price Index (CPI-U) and CPI Inflation Calculator · 통계청, 소비자물가지수