Why would you ever turn down a raise in salary?
"I don't know of a situation where rejecting a raise would make sense. Often, one can be in a phaseout of some benefit, so that even though you're in a certain tax bracket, the impact of the next $100 is greater than the bracket rate alone. Taxation of social security benefits is one such anomaly. It can be high, but never over 100%. Update - The Affordable Care Act contains such an anomaly - go to the Kaiser Foundation site, and see the benefit a family of three might receive. A credit for up to $4631 toward their health care insurance cost. But, increase the income to above $78120 Modified Adjusted Gross Income (MAGI) and the benefit drops to zero. The fact that the next dollar of income will cost you $4631 in the lost credit is an example of a step-function in the tax code. I'd still not turn down the raise, but I'd ask that it be deposited to my 401(k). And when reconciling my taxes each April, I'd use an IRA in case I still went over a bit. Consider, it's April, and your MAGI is $80,120. Even if you don't have to cash to deposit to the IRA, you borrow it, from a 24% credit card if need be. Because the $2000 IRA will trigger not just $300 less Federal tax, but a $4631 health care credit.  Note - the above example will apply to a limited, specific group who are funding their own health care expense and paying above a certain percent of income. It's not a criticism of ACA, just a mathematical observation appropriate to this question. For those in this situation, a close look at their projected MAGI is in order.  Another example - the deduction for college tuition and fees.  This is another ""step function."" Go a dollar over the threshold, $130K joint, and the deduction drops from $4000 to $2000. You can claim that a $2000 deduction is a difference of 'only' $500 in tax due, but the result is a quick spike in the marginal rate. For those right at this number, it would be worth it to increase their 401(k) deduction to get back under this limit." "I probably wouldn't turn down a raise, but there are some circumstances in which you might hesitate. Having a disproportionately high salary for your type of role or the value you are providing to the company makes you an attractive layoff target in an economic downturn. I've heard anecdotally of lots of corporate lawyers getting laid off because they were getting raises every year, and ended up with such ridiculous salaries that when the economy went south, the company basically asked ""why are we paying these people so much?"" Same thing happens in lots of places - Circuit City lays off the experienced, highly-paid salespeople and brings in cheap-o high school students (that didn't work out well for them, but they did it anyway). Still, even knowing that, I'd accept the pay raise. You're making more money the whole time you're employed, and prior salary is the biggest predictor of the salary you can negotiate at a new position." "My answer has nothing to do with tax brackets or mathematics (I'm taking advantage of the leeway your question allowed), but rather it has to do with career goals and promotion.  Large companies often have large ""Policies & Procedures"" booklets to go with them.  One policy that sometimes exists which would make it a bad idea to accept a raise is: Employee cannot be given more than one   salary increase in a 12-month period This means that if you accept a standard-of-living or merit increase of say, 2% or 3% in April, and then you apply for a job that would otherwise warrant a pay grade increase, you may be forced to wait until the following year to get bumped to the proper pay grade. Of course, this totally depends on the company, but it would be advisable to check your company's H.R. policy on that, if you're considering a move (even a lateral one) in the future." If you have children in a university institution, then your annual salary is reported via financial aid forms. The small raise could be the difference between full tuition covered and only half tuition covered. I had a colleague turn down a raise once because he believed that female colleagues were already being paid well below his salary and it was unfair to further increase this gap. For very public figures raises are often declined as a form of leadership: showing that management is willing to forgo bonuses and salary increases as a form of solidarity with the employee population.  Some leaders forgo a salary altogether (or take a $1/year salary). I would turn down a 20% raise in salary without thinking, if they would offer that I can have a 4 day work week. I even take a 10% cut for this! Here in Germany there is a special case. I am studying (and working a little on the side) and still receiving child benefits from the state which is like 190€/m. Because I am getting this I don't have to pay tuition which is 1k/y. If my side income would get over the boundary (which is like 9k/y) I would lose those benefits (~3.3k) and would have to pay insurance myself (I dont know how much that would be. 50-100/m I guess.) So getting a raise from 8k to 10k sounds nice as it is a 25% raise, but it actually means getting less. I once turned down a raise because I didn't agree with the employee review that supposedly substantiated the raise.  I felt the review to be superficial and incomplete.   Then I refused to sign it, or take the accompanying raise, due to that fact. In the UK, recent changes to pension taxation mean that from April 2011, people earning between £150,000 and £180,000 total and making large pension contributions (>£50,000 or so) will pay a marginal tax rate on additional salary of >100%. This is because pension contributions normally attract tax relief at the highest marginal rate - i.e. 40% if the gross salary is above about £40,000, and 50% for salaries above £150,000. But after April 2011, the rate of relief will be tapered down for gross salaries above £150,000, reaching 20% for a gross salary of £180,000. So for example if you earn £175,000 and make a contribution of £50,000, then an additional £1,000 in salary will incur £500 of direct tax, and also lead to a 1% reduction in tax relief (from 25% to 24%), costing another £500. Once you factor in National Insurance of another 1% or so, the net effect of the pay rise is negative. In the UK, the government has recently announced that Child Benefit will no longer be paid to those who earn over £44k. This means that if you currently earn £43,999, and your employer offers you a raise of £10 per annum to £44,009, then you could be over £1k worse off as a result. The only valid reason from a financial point of view is if the raise is a promotion or comes with conditions that are unacceptable to you. You may not want added supervisory responsibilties, for example. You need to use discretion when refusing advancement though, at places where I have worked, declining a raise or promotion is seen as a career killer for some circumstances. At least with US tax law where you only pay taxes at the higher rate for the income above the minimum for that tax bracket, you will always wind up ahead taking the raise if you are simply concerned with after tax (FICA) income.  For example, assume you were making $8,350 (the top end of the 10% bracket in the US), and got a $100 raise, you would be taxed roughly as follows: After Tax Income Before Raise: $8,350 x (100% - 10%) After Tax Income After Raise: $8,350 x (100%-10%) +  $100 x (100%-15%) You can easily see that the second number is always higher than the first as long as the raise is a positive amount (obviously). I recently was offered $1/hr raise. I turned it down because 1.)I had been looking for other jobs and the extra $150 per month wasn't enough money to keep me from exploring other options so it would look bad to take a raise and leave a month later. You never want to burn bridges. 2.) Raises aren't given out everyday. The business I work for is having financial troubles and the $1/hr was probably the best they could do at the time. If business picks up and they can afford to give me more money they won't do it because the record will show that I just got a raise.  One good extra is that your boss will be flabergasted that you just turned down a raise and you may gain a lot of respect from your superiors. Don't confuse strategically turning down a raise and letting others sway your opinion because they don't wanna cough up the cash. Sometimes it's not entirely about take-home pay.  A pay raise can affect other things like: These things need to be considered since they also affect quality of life. There is currently a bill in Washington that will change the limit for salaried employees receiving overtime pay. It will be raised to $50400. I work 4 hours of overtime each week, which if the bill is passed, equates to an additional $7800 annually. If my company raises my salary to just above the limit then they would not have to pay the overtime. That would only be a raise of approx. $3000. Why would I want to take the raise, and still have to work the overtime, when I can choose to not take the raise and possibly not have to work it any longer. I would rather have the time off, but if I'm going to have to work it, then I'll take the more than double overtime pay. There are some student loan repayment programs and the like where, if a raise would bump you past a certain threshold, you become ineligible and are suddenly left holding the whole bag, or alternately the payoff for having your loans forgiven/repaid drops considerably. It can make financial sense to avoid crossing those thresholds. "This would never apply for tax ""brackets"". It's not as though making an extra dollar will put you into an entire separate bracket, the IRS isn't that bad. They bump up the ""brackets"" every $50, so you will never turn down a raise because it would cause you to lose income. However if your raise would preclude you from contributing to your IRA because it pushes you over $110,000 then yes, you could turn it down or explain to your boss that it would need to be just a little bit higher to cover your IRA contribution loss." "One ""economic reason"" to turn down a raise is if your company gives bonuses based on performance reviews. When you get a raise in salary, your boss usually expects a better performance from you. That being said, if you get the raise, and your performance review is worse, you might get a smaller annual income." "In Australia there are cases for the argument. 1) We have laws against unfair dismissal that do not apply above certain thresholds. Your position is more secure with the lower salary. 2) Tax benefits for families are unfairly structured such that take home pay may actually be less, again due to a threshold. This tends to benefit charities as people need to shed the taxable income if a repayment of benefits would otherwise be triggered. 3) You do not want to ""just cross"" a tax bracket in a year where levies are being raised for natural disasters or budget shortfall. In this case a raise could be deferred ?" It would make sense to refuse a raise when it pushes your effective marginal 'tax' (including reduced benefits) above 100%.  The working poor (family of 4, 20K-40K in the US) often face marginal rates above 100% when you consider the phase out of various government benefits (EITC, insurance, housing,etc.)  You can see the research here and here. Jurisdictions will vary but I can imagine calculation methods for child support where the raise could become significant in the present with long future ramifications as well, even if the job is temporary or the parent wanted to step away from working full-time to attend school. The timing of the raise might coincide with disclosure of income to an ex-spouse or to the court related and it might be preferable to postpone the increase. Of course the court would probably frown on declining the raise for only these reasons. If it found out it might impute the higher income anyway. And I'm not suggesting that people dodge responsibility for their kids. We've all seen those cases where child support is not particularly equitable between the two parties and/or the kids do not necessarily benefit by the transfer of money. I wouldn't blame a parent for thoughtfully and unselfishly considering this type of second-order effect and consulting an attorney as with so many other financial implications of divorce. Regardless of personal moral objections it's certainly an answer to the question in technical terms that somebody somewhere has taken into account. I recently rejected an offer at a different firm that would have provided a 14k yearly increase. The reason for the rejection was because I would have had to give up two work from home days, my commute would have been about an hour and half each way, I would have lost about 14 extra days of PTO and holiday pay, and the new company didn't match anything for 401k.
The problem with this is that it really only works in a small firm where everyone knows everyone else. Once it gets bigger and all the managers don't know all the workers it becomes a matter of who can BS the skill level of their favorites better in the yearly review. Then the resentment isn't about normally unknown salaries, it's about whether other employee's levels are legitimate.  Don't get me wrong, opening up the conversation and trying to make it more objective is good, but this isn't some sort of common sense, one size fits all panacea. "The real question is what can you NOT do!  If you track all your monetary actions, you know everything about your monetary situation.  That means you have the tools to ask and answer ""what if"" questions, such as: ""If I get a 10% raise, could I take longer vacations?""  You could calculate how much you spend per day on vacation and then consider the amount of your raise and how much of it you'd need to allocate to vacations to, say, be able to take a two-week vacation instead of a one-week vacation. ""How much more would I have to earn to move to this nicer apartment?""  This may seem like a simple question, but a surprising number of people can't answer it in a reliable way, because they don't have a clear understanding of how much money they make and how much of it they can afford to spend on housing.  If you find you have lots of spare income, maybe you can move to the nicer place right away; if not, at least you can get a sense of how much more money you'd need to make it happen. ""If I started taking the bus to work, how much would I save?""  You can look at how much you spend on gas and compare that to the price of a bus pass.  By separating out categories like gas, repairs, and car insurance, you can also calculate different scenarios, like if you still kept your car but only used it for occasional trips, versus if you sold the car and used only public transportation. ""If I want to take a trip to Tahiti, what can I cut back on to save the money?""  Using your table you can pencil out scenarios like ""Suppose I stop eating out for lunch at work and just bring my lunch, how long would I have to do that to save enough to pay for a plane ticket?"" These are just a few random examples.  The general idea is that with a record of hard numbers, you can start to consider potential tradeoffs in an objective way --- that is, you can ask ""how much in category X would I have to give up to gain this thing I want in category Y?"" The real trick in making use of your data is not so much ""what"" you can do, but ""how"" exactly to do it.  You may have to become more of a spreadsheet wizard to really delve into these questions.  Also, if you have programming expertise, you can even use something like Python to do calculations that might be laborious in a spreadsheet." This was absolutely true for me. I'm retired now. Until my last company I always got about 5% raise. When I skipped jobs the raise was usually enormous. I went:   19K 25K 30K 35K 50K 75K 85k 75K (last job sucked and this one was stupid simple at first) New company gave me steady raises to $125K and I got to do awesome work and was in complete control.   There is no way I would have gone from 19K to 125K at the same firm. All hearsay and a bad memory, but if I remember correctly, when you dig deep the reason he raised salaries was to help fight some lawsuits against his ex wife and/or ex business partner. These raises effectively made the company make nothing while he was fighting lawsuits. Then it eventually turned into publicity and more clients for his payment processing company. "And that is my point: without specific dollar amounts...this is USELESS information.    The problem with this crap information is that some crappy operation will find a reason to pay themselves more for being a ""good boss"" thinking that will make up for any raises.   I'd take a better boss over a 5-cent an hour raise (and yes, I worked at McDonalds when raises were 0-5-10 cents an hour...and yeah, I would have liked a better boss for 5 cents).    However, for an annual job that pays $500/hr I'll gladly work in horrid conditions with a horrible boss doing awful things." Not necessarily.  You only need to raise prices to maintain current profit margins.  Assuming you aren't living on a paper thin profit margin, you can give your employees a raise and suffer a lower profit margin.  Now, that could have other negative consequences on your stock value and shareholders might be upset, but that is a different discussion. Microsoft doesn't do salary negotiations...  The way the salary structure works at Microsoft is similar to how it works in many other huge companies. You have a rank/level/title (eg. developer, Senior developer, Principal developer, and upwards) and your salary is based solely on that. For example, every new college hire starts at a certain rank (whether foreign or not) and every new college hire starts at the same level of pay. When you get a promotion you get a new title and a corresponding pay increase. You can't negotiate for bonuses or salary increases, it's set in stone for everyone.  This is for engineering positions, obviously sales/marketing/etc. all have different structures. its not that hard to figure out  Please explain how arbitrarily raising employee wages would raise demand. What kind of 'demand' do you even speak of? Did you mean [Labor Demand](http://en.wikipedia.org/wiki/Labor_demand) ---I think what you talking about is [Consumer Confidence](http://en.wikipedia.org/wiki/Consumer_confidence). Please enlighten me. I had a similar decision to make. I got offered a modest salary near Philly, or a better salary plus a nice bonus in New York. I chose New York. I'm loving it so far but who knows what will happen. I'm actually saving a lot of money as I automatically have it deduct from my paycheck and disperse into several savings accounts. I guess it's different for everyone and you have to consider your situation before applying a blanket advice This is bad statistics. If you look at people who jumped ship, of course you're going to see bigger increases in salary because you're not counting those that looked for a new job and didn't find a better offer. They stayed put.  People are complacent but companies are, too. Employers aren't putting a lot of effort into firing bad employees as soon as they can. So there are employees that aren't jumping ship and could be paid more but there are also employees that should be kicked off the ship and paid less, but aren't.  All that said, staying put is easier than moving and there's a price for it. If you're willing to move around, you might do better. Might not. If you only look around at the ones that did move, of course it's going to look like they did better! Recent MBA grad here.  I would much rather work at a job that makes me happy than a job that pays more.  With that said, I'm feeling pressure to earn a fairly high salary to pay off all the student loans.  I will probably spend a few years trying to find a balance between happiness and salary and then completely forget about salary after my loans are paid off. "Many in management seem to live in an alternate reality from those who work for a living. When IBM shunted some techs into another company they put them on probation for a year (even though they were high performers - some with 25+ years at IBM = no job security) and cut their pay 25%.  The next time they went to move workers the first question was ""how much is the pay cut this time"". Management's reply, ""No pay cut because we found when we did it before it negatively affected morale.""   I thought: ""No kidding. They had to actually cut people's pay 25% to figure that out? What planet DO they live on?""" &gt; but since that's impossible (due to the bureaucracy) in most jobs  Huh? Dude, asking for a raise is never impossible. Go to your manager and make a well thought-out case. This is how it's done. It's not magic. Very rarely, in any professional environment, will anyone just hand you a raise because they think you're a nice guy. Keeping your head down and nose to the grindstone will not get you noticed.   Obviously, going elsewhere to get that higher salary should also be an option. I did it once too. But in the situation you describe, you'd be crazy not to go demand a bigger slice of the pie. My doubt is whether Govt./Reserve Bank of India gives any explicit incentives to banks to offer cheaper home loans ? Currently NO. In the past Loan against GOLD was considered priority sector lending [Loans to poor and agriculture etc]. Every Bank need to lead around 25% to priority sector. Hence quite a few Banks gave loans relatively cheaper to todays rate rather than giving it as Farm loan that almost never get recovered. It is no longer the case now as Loan against GOLD is not considered priority lending. If it were just demand/supply, I feel that gold loans should have been cheaper  It is demand and supply. There are quite a few reasons for this; No, you can't do this indefinitely. For one, you can't just take money out as home equity with no strings attached. The cash out is done as a loan (often a HELOC) or second mortgage and you have to make payments. The lender will always make sure you are able to afford the payments. At some point, you won't qualify for the loan because of insufficient income or too many previous liens on the property. While home values often go up, there's no guarantee. And your examples are more than a bit optimistic.