What is Cost of Living Adjustment?
Quick answer
A cost of living adjustment (COLA) is a raise designed to offset inflation so your real purchasing power holds steady.
A cost of living adjustment (COLA) is a raise designed to offset inflation so your real purchasing power holds steady. It's usually distinct from merit increases and is often tied to CPI.
Examples
- A 3.2% COLA matching the prior year's CPI.
- Government employees receiving a statutory annual COLA.
- A company giving a 2% COLA plus a separate merit pool.
Why this matters
RaiseCheck shows the gap between your raise and real inflation so you know whether you got ahead or just broke even.
Read more in our guides
- Raise request email: templates and what to say in writing in 2026
- Average merit increase in 2026: what employers actually budget and what to expect
- What is total compensation? (2026 plain-English guide with worked examples)
Frequently asked questions
What is Cost of Living Adjustment?
A cost of living adjustment (COLA) is a raise designed to offset inflation so your real purchasing power holds steady. It's usually distinct from merit increases and is often tied to CPI.
When does Cost of Living Adjustment matter?
RaiseCheck shows the gap between your raise and real inflation so you know whether you got ahead or just broke even.
What's an example of Cost of Living Adjustment?
A 3.2% COLA matching the prior year's CPI. Government employees receiving a statutory annual COLA. A company giving a 2% COLA plus a separate merit pool.
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