Is a 3% raise good? Do the arithmetic

Is a 3% raise good? Every answer you will find to that question is an opinion — someone's sense of what is normal at their company. The useful answer is a sum, and it has only two inputs: what prices did over the same year, and how much of the extra pay you actually keep. Put your own numbers into the raise vs inflation calculator and it does the whole thing; this page explains what it is doing.

Step one: compare it with inflation, properly

A raise is only a raise if it buys more than last year's salary did. So the first comparison is with inflation over the period the raise covers — not a forecast, and not a figure from a different year.

The tempting sum is subtraction: 3% minus 4% inflation, so 1% down. The correct one is (1 + raise) ÷ (1 + inflation) − 1, because the raise is a percentage of your old salary and inflation is a percentage of this year's prices. For a 3% raise, that gives:

• Inflation at 2%: a real rise of 0.98%
• Inflation at 3%: exactly 0% — you are standing still
• Inflation at 4%: a real cut of 0.96%
• Inflation at 5%: a real cut of 1.90%

At these sizes subtraction is close, and nobody needs to lose sleep over the second decimal place. The point of the table is the middle row: a raise equal to inflation is not a raise. It is the same salary, repriced.

Those inflation rates are illustrations, not a statement about any particular year. For the real figure, use the published annual rate for the months your raise covers — the US Bureau of Labor Statistics CPI, or the Office for National Statistics in the UK.

Step two: remember the raise is taxed

Your raise is quoted in gross pay. Your rent comes out of take-home. And the extra pay is taxed at your marginal rate — the rate on the next dollar — which is higher than the average rate on your salary as a whole. So a 3% rise in gross is always a bit less than a 3% rise in what reaches your account.

Here is what the site's tax engine produces for a single filer on $60,000, using the IRS's 2026 federal figures and no 401(k) — federal income tax, Social Security and Medicare only, no state tax:

• Gross goes up $1,800, from $60,000 to $61,800.
• Take-home goes up about $1,446, from $50,390 to $51,836 — a 2.87% rise, not 3%.
• The extra $1,800 was taxed at 19.65%: 12% income tax plus 7.65% Social Security and Medicare.
• If prices also rose 3%, that take-home is worth about $63 a year less than last year's, in today's money.

So the raise that keeps take-home level at 3% inflation, for this person, is about 3.14%. The figure moves with income, because the marginal rate does. Run the same way, it comes out at about 3.20% on $40,000 and about 3.38% on $100,000 for a single filer.

The honest caveat about that second step

Those break-even figures hold the tax brackets exactly where they are today. That is the right question when brackets are frozen — and in that case the effect is often called fiscal drag. It overstates things where brackets rise with prices.

US federal brackets and the standard deduction are adjusted every year: the IRS publishes them as inflation adjustments. Where that happens, the true answer sits closer to plain inflation than the figures above. Read the tax step as the size of the effect in a year the bands do not move, not as a prediction of next year's tax code. This site does not forecast policy.

What is a good raise percentage, then?

The arithmetic gives you a floor, not a target. Below inflation, your pay bought less than last year. At inflation, it bought the same. Above the break-even raise, take-home genuinely grew. Whether the number above that floor is good depends on things no calculator knows: what your work pays elsewhere, what else changed in the package, and what you were expecting. This page does not quote an “average raise”, because a figure like that is only meaningful with a named survey behind it, and your employer's budget is not the survey.

Did my raise keep up with inflation over several years?

This is where small gaps stop being small. Real changes compound, so a run of slightly-below-inflation raises multiplies down rather than adding up.

Take a 3% raise every year against 4% inflation. In one year, $60,000 becomes $61,800 — worth about $59,423 in last year's money, a cut of $577. Repeat it for five years and the salary buys 4.72% less than it did at the start, even though every single letter said “increase”. The calculator runs the years out for exactly this reason.

The same correction applies to savings and investments, not just pay — that is what the real return calculator does. And if you want to see the tax side in more detail, the take-home pay calculator uses the same sourced figures.

Not tax or financial advice. Worked examples use the site's sourced 2026 US federal figures with brackets held at today's values. Inflation rates on this page are illustrations; use the published figure for your own period.