$30/Hour vs 30 Dollars/Hour

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If you're paid hourly, you get the same number of $s every hour. But with inflation you'll get fewer dollars per hour in every paycheck. See How I Use the Word Money to learn the difference between $s and dollars. Let's look at an hourly rate of $30 and annual inflation of 2 percent to see the difference between $s and dollars.

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In the spreadsheet below, under the heading "$1 in dollars" you'll see how 2 percent annual inflation affects $1 for every month for three years. At the start of month 1, $1 contains 1 dollar. At the end of 36 months, $1 contains 0.9422 dollars. Now let's look at $30/hour.

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Under the heading "$30/hour in dollars" you'll see how inflation decreases the dollars in $30 each month. Under the heading "30 dollars/hour in $s" you'll see how the number of $s has to increase each month in order to always be paid 30 dollars/hour. It's not the $s that buy stuff, it's the dollars.

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If you get a raise once a year to cover for inflation, you'd go from $30/hour in year one to $30.60/hour in year two (month 13). But look at what happened to dollars during year one. They went from 30 to 29.4108. You were paid $30/hour all year, but you weren't paid 30 dollars/hour all year. To be paid 30 dollars/hour all year you'd have to get a raise of $0.05 each month.

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Inflation happens all the time. Raises happen usually once per year. You lose dollars all the time between raises. And your raise only catches you up to 30 dollars/hour once per year. It doesn't make up for the dollars you lost the previous year.

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Going from $30/hour in year one to $30.60/hour in year two doesn't make up for the $0.05/hour you lost in month 2, the $0.10/hour you lost in month 3, the $0.15/hour you lost in month 4, all the way to the $0.55/hour you lost in month 12. A once-per-year raise of the rate of inflation doesn't make up for an all-the-time inflation.

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Just a fellow American