What is a cost of living raise?

A cost of living raise is an increase in income that correlates with the rise in the cost of living.

A cost of living raise may also be referred to as a cost of living adjustment (COLA) or cost of living increase.

This raise is most often applied in terms of benefits, salaries and wages and may be implemented by companies and the government.

The most common instance of cost of living adjustments is the increase of Social Security benefits applied by the government each year

Additionally, some organizations may incorporate an annual salary adjustment into the compensation plan to account for the yearly rise in the cost of living.

However, many companies base their raises on merit and contribution rather than a rising cost of living. This is typically because most companies must only award raises to those workers who are productive and contribute to the overall profitability of the business to remain profitable.