Cost of Living Adjustment (COLA) Definition

Cost of living adjustment, known as COLA, represents the amount of monetary change in the cost of living within a particular geographic region during a given calendar year.

Cost of Living Adjustment (COLA) Extended Definition
A COLA identifies the change in the overall cost to maintain a certain standard of living over a calendar year. It comes in the form of a percentage.

The Social Security Administration (SSA) determines the annual COLA by looking at cost-of-living indexes, such as the Consumer’s Pricing Index (CPI). A cost-of-living index shows changes in the prices of products and services.

The SSA uses the COLA percentage to annually adjust the Social Security benefit amounts for recipients. Businesses can use COLA to determine:

Employee raises
Product and service prices

Last Updated By

Rachel Blakely-Gray | Feb 16, 2023

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