Inflation is a change in the cost of living. There are two measures of the cost of living that employers may use for pay increases. One is the Consumer Price Index (CPI) reported by the Bureau of Labor Statistics (BLS). The other is the Cost-of-Living Adjustment (COLA) established by the Social Security Administration (SSA).
The CPI is generally considered the best measure for an employee’s cost of living. It reflects changes in the prices of goods and services.
COLA is primarily used for SSA retiree and disability benefits and for students for the earned income exclusion.
Information for international cost-of-living data is found at http://www.state.gov/m/a/als/faq/1827.htm.
Please Note: This material is provided as general information and is not a substitute for legal or other professional advice. Contact the Knowledge Center for more information.
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