Take the nominal increase, subtract inflation over the same period to get the real change, and only then consider what reaches you after tax. Consumer prices rose about 3.5 per cent in the year to June 2026, 22.9 per cent over five years and 30.3 per cent over seven. A raise below those figures is a real-terms cut, however it was described.
Three numbers, and only one of them means anything
Nominal. The figure in the letter. It is the one everybody quotes and the least informative of the three.
Real. Nominal minus inflation over the same period. This is whether your purchasing power actually moved, and it is the number that answers the question people think they are asking.
Net. What reaches your account after tax and deductions, which is the figure you live on and the one a raise is usually judged by emotionally.
What you are measuring against right now
Consumer prices rose about 3.5 per cent in the twelve months to June 2026. Over five years the cumulative rise is about 22.9 per cent, and over seven about 30.3 per cent.
So a four per cent raise this year is a half-point real gain, and a three per cent raise is a small real cut. A salary unchanged since mid-2019 buys roughly what 77 cents on the dollar bought then — which is what people mean when they say they are working harder for less without being able to point at a pay cut.
Match the periods or the answer is meaningless
A raise effective in March compared against a calendar-year inflation figure is comparing two different windows. Use the twelve months ending closest to your increase.
And use the same index consistently year to year. Switching between measures produces a change that is entirely an artifact of the switch, which is a mistake people make in good faith when a different number happens to be in the news that month.
Why a good raise can still lose ground
Merit budgets are set months in advance against a forecast. When prices rise faster than expected, an increase agreed in good faith arrives worth less than intended, and nobody in the process did anything wrong.
That mechanism explains most of the feeling that pay has stagnated despite regular increases. It also explains why the correction, when it comes, tends to arrive late and as a one-off adjustment rather than as a higher ongoing rate.
The five-year check
Single years are noisy and easy to rationalize. Take your salary five years ago, multiply by 1.229 to put it in today’s money, and compare against what you earn now.
If today’s figure is lower, you have taken a real pay cut across five years of employment, whatever the annual letters said. That calculation takes thirty seconds and it is the single most clarifying thing in this article, which is presumably why so few people do it.
What to do with an uncomfortable answer
The gap does not close through annual reviews, because merit budgets are set as a percentage of current salary and a below-market salary generates below-market increases. Compounding works against you in exactly the way it works for somebody who started higher.
Closing it usually takes a step change: a promotion, a move, or a documented market-adjustment conversation. Those are the mechanisms that exist. Waiting is not one of them, and the arithmetic is the argument to bring.
The comparison to make before you negotiate
Bring the real figure, not the nominal one. “My salary has risen 9 per cent over three years while prices rose 12” is a factual statement about purchasing power that is difficult to wave away.
Pair it with the published range for your occupation in your metro and you have two independent, checkable arguments. Neither depends on how you feel about your workload, which is the ground you want to avoid.
Common questions
How do I calculate a real raise?
Nominal increase minus inflation over the same period. Prices rose about 3.5 per cent in the year to June 2026, so anything below that lost ground.
Which inflation measure should I use?
The headline consumer price index is the standard. What matters most is picking one and staying with it year to year.
Why do the periods matter?
A March raise compared against a calendar-year inflation figure measures different windows and produces a misleading answer.
Why can a good raise still lose ground?
Merit budgets are set months ahead against a forecast. If prices rise faster than expected, the increase arrives worth less than intended.
What is the most useful check?
Compare your salary five years ago against today, remembering prices rose about 22.9 per cent over that span. It shows the trajectory a single year hides.
How much have prices risen?
About 3.5 per cent in the twelve months to June 2026, 22.9 per cent over five years and 30.3 per cent over seven.
What is the quickest way to check my real pay?
Multiply your salary from five years ago by 1.229 to put it in today's money, then compare with what you earn now.
Why can't I close the gap through annual reviews?
Merit budgets are a percentage of current salary, so a below-market salary generates below-market increases. Closing it takes a promotion, a move, or a market adjustment.