A strong economy brings with it an uptick in demand-pull inflation, and eventually, cost-push inflation. The benefits and consequences of inflation could be a blog post series in itself (Look for a new On-Demand next week focused on inflation). As inflation pertains to our students, it is important to bring up the concept of earning a cost of living increase. Simply put, if inflation is 3%, and our students receive a 3% raise, they are earning 3% more nominal dollars but in "real" terms, they did not receive a pay bump.

This is an important lesson we need to reinforce: if your wages or salary aren't keeping up with the inflation rate than you are losing purchasing power. This can be a bit hard to understand, which is why I like the interactive above as a hook for a classroom discussion. The calculator illustrates to students what their inflation-adjusted salary would be based on current inflation rates.

In the example above, if the worker has been at a job for a year and their hourly rate remained constant (reference period salary = current salary) at $9.50 while inflation rose 5% over that year then they have lost ground. To keep up with inflation, their new hourly wage would need to increase to $9.98. 

After having students enter their own hourly wage or a wage you provided as an example, consider asking these discussion questions and using these classroom activities: 

• What is inflation, and how does it impact what we will buy in the future? [ANALYZE: Understanding Inflation]
• How have prices changed over the past 20 years? [DATA CRUNCH: How Have Prices For Consumer Goods Changed Over the Past 20 Years?]
• If you're not happy with what you're being paid, what strategies can you use to find a better job? [LESSON: Finding a Job]

About the Author

Brian Page

Making a difference in the lives of students through financial capability is Brian’s greatest passion. He comes to NGPF after fifteen years of public school teaching where he was the ‘11 Ohio Department of Education recipient of a Milken National Educator Award, the CEE Forbes Award winner, and a Money Magazine/CNN "Money Hero". He served on the working group for President Obama's Advisory Council on Financial Capability. He has private school experience as a Trustee for the Cincinnati Country Day School and was a past Ohio Jump$tart President. Brian holds a BBA and M.Ed. When Brian isn’t working alongside his NGPF teammates he is likely spending time with his wife, three children, and dog; hiking, or watching Ohio State football.

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