Cost-Of-Living Adjustment

Quick Summary of Cost-Of-Living Adjustment

An annual adjustment in wages to offset a change (usually a loss) in purchasing power, as measured by the Consumer Price Index. The Consumer Price Index is used rather than the Producer Price Index because the purpose is to offset inflation as experienced by the consumer, not the producer.

COLA, or cost-of-living adjustment, is an act of adjusting wages to create economic balance for the changes in the cost of living. A COLA is measured by the Consumer Price Index (CPI or cost-of-living index), which calculates the changes in consumer prices. A COLA takes into account many components, such as the cost of transportation, housing, and utilities. One of the main benefits of a COLA is that it affects millions of people by providing safeguards against inflation and reduced purchasing power. Thus, a COLA is a key bargaining issue in labour and pension contracts, as well as Social Security payments. Since many of these contracts are tied to the changes in consumer prices, a COLA is a highly political issue.

Examples of Cost-Of-Living Adjustment in a sentence

My cost of living adjustment raise was just enough for me to be able to keep up with inflation on my property taxes.

I am hoping we will get another cost of living adjustment through my job, since food prices have gone up so much recently.

I only got a Cost Of Living Adjustment in my pay this year because the company did not make much money. I did not get a raise, in the classical sense.

Synonyms For Cost-Of-Living Adjustment

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