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August 08, 2008

Real pay

In today's leaner economic times, people are looking closely at their paychecks. For some, the start of a new fiscal year in July is when pay raises are given. How should we look at our pay raises, especially in light of our ongoing economic challenges?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, first of all, we hope that our listeners do get a pay raise. But even if you get a pay raise, it could actually be a pay cut. Now, how so? Well, if your pay raise is less than the inflation rate. Right now the annual inflation rate is running around 4 percent. So that means that if you get a pay raise of less than 4 percent, you are actually falling behind. Now of course, you are not falling behind as much as if you didn't get a pay raise, but the point here is always compare your increase in pay to what the inflation rate is. We look at that difference as the real pay raise, R-E-A-L. Now what has been happening to most North Carolinians - at least based on the data we have for this year - is their pay raises have not been keeping up with inflation. In fact, they have been falling behind by about one percentage point."

Posted by Dave at August 8, 2008 08:00 AM