cost-of-living adjustment: meaning, definition, pronunciation and examples
C1Formal, Technical, Business, Financial
Quick answer
What does “cost-of-living adjustment” mean?
A periodic increase in wages or benefits intended to offset the effects of inflation, ensuring purchasing power is maintained.
Audio
Pronunciation
Definition
Meaning and Definition
A periodic increase in wages or benefits intended to offset the effects of inflation, ensuring purchasing power is maintained.
A contractual or policy mechanism, often abbreviated as COLA, used by employers, governments, and pension funds to align payments with changes in a recognized price index, most commonly the Consumer Price Index (CPI).
Dialectal Variation
British vs American Usage
Differences
The term is used identically in both varieties. The concept is equally prevalent, though specific implementation (e.g., linking to RPI vs. CPI) may differ.
Connotations
Neutral/technical in both. May have positive connotations for recipients (financial protection) and neutral/negative for payers (increased cost).
Frequency
Slightly more frequent in American English due to its common use in union contracts and Social Security administration. In UK English, 'inflation-linked increase' or 'index-linked increase' are common alternatives.
Grammar
How to Use “cost-of-living adjustment” in a Sentence
The [union] negotiated a [annual] cost-of-living adjustment.Pensions include a cost-of-living adjustment [linked to inflation].Employees are [entitled to] a cost-of-living adjustment.Vocabulary
Collocations
Examples
Examples of “cost-of-living adjustment” in a Sentence
verb
British English
- The salaries are **cost-of-living adjusted** every April.
- The agreement allows for benefits to be **adjusted for the cost of living** annually.
American English
- Our pay is **COLA'd** each year based on the CPI. (informal/business)
- The contract stipulates that pensions will be **cost-of-living adjusted**.
adjective
British English
- We discussed the **cost-of-living adjustment** clause in detail.
- The union is seeking a higher **cost-of-living-adjustment** rate.
American English
- The **COLA** provision is a key part of the deal.
- They received a **cost-of-living-adjusted** payment.
Usage
Meaning in Context
Business
The new three-year contract includes a 2% annual cost-of-living adjustment.
Academic
The study analysed the impact of cost-of-living adjustments on long-term income inequality.
Everyday
My pension has a small cost-of-living adjustment each year, so it goes up slightly with inflation.
Technical
The COLA is calculated using the percentage increase in the CPI-W from the third quarter of the prior year.
Vocabulary
Synonyms of “cost-of-living adjustment”
Strong
Neutral
Weak
Vocabulary
Antonyms of “cost-of-living adjustment”
Watch out
Common Mistakes When Using “cost-of-living adjustment”
- Using it as a verb (e.g., 'They will cost-of-living adjust our salaries'). Correct: 'They will apply a cost-of-living adjustment.'
- Confusing it with a general 'raise' or 'bonus'. A COLA is specific to inflation compensation.
- Misspelling as 'cost-of-life adjustment'.
FAQ
Frequently Asked Questions
No. A standard raise is typically based on merit, promotion, or company performance. A COLA is an automatic increase based solely on external economic data (inflation) to maintain the real value of income.
Employees under union contracts, government and military personnel, social security recipients, and pensioners often have COLA provisions. It is less common in private-sector, non-unionized jobs.
It is most commonly calculated as a percentage equal to the increase in a designated consumer price index (e.g., CPI-U or CPI-W) over a specific period, often a year.
In theory, if there is deflation (negative inflation), a true COLA could be negative. However, in practice, most contracts and policies specify a 'floor' of 0%, meaning payments do not decrease if the price index falls.
A periodic increase in wages or benefits intended to offset the effects of inflation, ensuring purchasing power is maintained.
Cost-of-living adjustment is usually formal, technical, business, financial in register.
Cost-of-living adjustment: in British English it is pronounced /ˌkɒst əv ˈlɪvɪŋ əˈdʒʌstmənt/, and in American English it is pronounced /ˌkɔːst əv ˈlɪvɪŋ əˈdʒʌstmənt/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “Keeping up with inflation”
- “A built-in hedge against inflation”
Learning
Memory Aids
Mnemonic
Think: COLA. Like the drink, it's a regular 'refresh' for your salary to keep it from going flat due to inflation.
Conceptual Metaphor
INFLATION IS A FORCE ERODING VALUE; A COLA IS A SHIELD OR COUNTERWEIGHT.
Practice
Quiz
What is the primary purpose of a cost-of-living adjustment (COLA)?