this is a discussion question: i need to explain. would it be better to receive a 5%raise and then an 8% raise or the other way around?

Question

I need to explain which would be better the 5% first then the 8% or the 8% then the 5%

 

 

Answer 1

PLZ read the other answers.

 

If the Pay Rate (per hour, per pay period, or per year) is equal at the start, it will be equal again at the end of the two raises.  But, the discussion question is, "Which is better?"  If all you care about is the starting rate and the ending rate, the two began equal and ended equal.

 

However, both in the short term and the long term, the cumulative amount (not rate) is clearly better in the case of getting the larger increase first.  A great example of this is "What will my Social Security income be when I retire?" (it is calculated on the total lifetime taxes paid, not simply the first year and the last year).

 

You may need to present some example numbers over a period of time so that your argument clearly conveys, "how much better?"

Answer 2

Yes, the final pay rate after both

raises is the same regardless of

which you get first... But;

 

It is better to get the 8% first

so that you get the benefit of 

that extra 3% initially until

the 2nd raise goes into effect.

Your total income will be higher.

Answer 3

The final pay is a compounding of the 2 pay raises.  The order of the compounding makes no difference.

 

If you make an initial salary of R, and then get an 8% raise, you will make 1.08R.  If you then increase it by 5%, you will make

 

1.05(1.08R) = 1.134R

 

If you increase R first by 5% and later by 8%, all you do is reverse the order of the multiplication, giving you the same final answer:

 

1.08(1.05R) = 1.134R

 

So at the point in time when both pay raises are in effect, the salary is the same regardless of the order in which the increases are applied.  But as Dalia pointed out, there is short term gain in receiving the larger increase first. 

Answer 4

In the long run it makes no difference.  If you needed money immediately, you might take the 8%. Otherwise you wind up with the same salary after the second raise.

 

Hope this helps.