Question

Should Social Security and other government benefits be tied to a COLA?

Answer 1

Cost of living adjustment (COLA) is adjustment in wages, salaries and other statutory benefits of the employees to match with rising consumer price index (CPI) over a period. COLA was first introduced in USA by Federal government in 1975 to provide social security benefits such as pension, gratuity, medicare to millions of Americans. Social security cost of living adjustment in 8.0% in 1975 and social security benefits has been increased to 2.0 in 2017. The Federal Government also plans to raise social security COLA to 2.0% in 2018, that will benefits over 66 million social security beneficiaries.

For effective compensation, Federal government should add both social security benefits and other government benefits such as statutory benefits such as paid leaves, medical leaves etc. to Cost of Living Adjustment (COLA). COLA is directly related to wages and salaries of the employees. Linking wages and salaries of workers directly with COLA will benefits persons engaged in contractual jobs, individuals relocating to other place , where consumer price index (CPI) is comparatively higher than previous job location. Social security benefits include insurance coverage, pensions, gratuity and other benefits to people retired from US military services, workers engaged in government and private services. Furthermore, US government also provide social security coverage to all legal residents of United States.

Social security benefits when linked up COLA helps Armed Veterans, old age persons, disabled persons and others who are entitled to receive certain benefits from the government applicable from time to time. Unlike private companies, government works on the basis of no-profit, no-loss and henceforth, it uses COLA to cope with rising inflation rate. The basic policy of the government is to implement COLA when CPI goes up but hold up COLA implementation when CPI remains more or less stagnant over a period of time.