Cost of Living Adjustment Contract Language Considerations and Examples


Unions have employed a number of approaches using the Consumer Price Index (CPI) to provide cost-of-living adjustments for members. These include:

  • A specified across-the-board increase plus an additional CPI-based increase.
  • A CPI-based increase, with minimum and maximum bounds or limits.
  • A CPI-based increase bounded only at the maximum, or only at the minimum.
  • An increase based solely on the full CPI.
  • An adjustment based on a percentage of the CPI rather than the full CPI increase.
  • A CPI-based trigger for a wage reopener.

In most cases, it is advisable to include a minimum limit to any CPI-based cost-of-living adjustment. While the cost of living is rising rapidly at the current time, we have experienced several years in recent decades where the CPI grew very little, and one year in which it declined. Employers usually insist on a maximum limit to wage increases tied to CPI, especially when the union seeks a minimum limit.

In addition, the U.S. Bureau of Labor Statistics (BLS) publishes guidance on a number of considerations when constructing a CPI escalator clause. BLS’s advice should guide the choice of index when a union develops its escalator clause language.

CPI Advice from BLS

BLS publishes advice on the proper use of CPI in escalator clauses, available here: The guidance explains how to calculate the percentage change in the CPI over a period but does not include recommended contract language. The following items of advice are particularly worth noting, however.

Use U.S. City Average Index Rather Than Metro Area Indexes – BLS notes that the U.S. City Average nationwide index is more accurate and less volatile than the metropolitan area indexes because of its larger sample size. As a result, BLS recommends that “users adopt the U.S. City Average CPI for use in escalator clauses.” That said, many labor contracts have customarily used a metro area index.

CPI-U vs. CPI-W – BLS states that the CPI-U, the index for all urban consumers, covers 93% of U.S. consumers and is based on the spending of all urban families. The CPI-W is based on the expenditures of families where more than half of income comes from clerical work or hourly-wage occupations. CPI-W covers 29% of U.S. consumers. Over the long term, the two indexes show similar movements, but in any given year or short series of years, the changes may diverge. CPI-W is most often used in blue-collar cost of living escalators, but most other escalation clauses use CPI-U.

Use a Non-Seasonally Adjusted Index – BLS publishes both seasonally adjusted and non-seasonally adjusted CPI indexes. Seasonally adjusted figures adjust the actual measured change in prices to account for the estimated effects of market changes that occur around the same time of each year. Seasonally adjusted figures are intended for economic analysis. The adjustment introduces estimates about seasonal variation into the price-change measurement, and those adjustments themselves are subject to revision up to five years after their original release. For these reasons, BLS states that it is “inappropriate” to use seasonally adjusted data in escalation clauses.

Contract Language Examples

Across-the-Board Plus CPI With Minimum and Maximum Limits

WA C2 L21 Seattle City Light Supervisors

Effective January 6, 2021, wages will be increased by 1% plus 100% of the annual average growth rate of the bi-monthly Seattle-Tacoma-Bellevue Area Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the period June 2018 through June 2019 to the period June 2019 through June 2020, minimum 1.5%, maximum 4% and shall be determined after the June 2019 through June 2020 CPI-W is released.

CPI With Minimum and Maximum Limits

OR C75 L189 City of Portland

Effective July 1, 2019, Schedule “A” wage rates will be revised as follows: Salary rates for classifications in Schedule “A” for the period July 1, 2019 to June 30, 2020 are to be increased by one hundred percent (100%) of the annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (as measured by the annual change in the index between the 2nd Half 2017 and the 2nd Half 2018) for the Portland-Salem, OR-WA, published by the Bureau of Labor Statistics, U.S. Department of Labor.

IA C61 L3949 City of Audobon

Effective July 1st of each year of this agreement all wages will be increased by the Midwest Urban Consumer Price Index (CPI) prior calendar years annual average, however, this increase shall be no less than 2% and no more than 3%.

Both parties agree to reopen negotiations of this article in order to review for market adjustment comparisons as needed.

CA C57 L1 Central Contra Costa County Sanitation District

Effective August 18, 2018, employees’ wages shall be adjusted by 3.75%. Effective April 18, 2019, April 18, 2020, and April 18, 2021, employees’ wages shall be adjusted by the change in the Consumer Price Index (CPI) for all Urban Consumers (San Francisco/Oakland/San Jose) during the most recently completed February to February time period prior to the applicable April. If the applicable CPI is less than 2%, then the salary increase will be 2%. If the applicable CPI is greater than 3.75%, then the salary increase will be 3.75%.

CA C36 L3339 City of West Hollywood

Effective July 1, 2009, the salaries for employees covered by this Agreement shall be increased by the percentage increase based on the April 2008 – April 2009 Consumer Price Index – All Urban Consumers – Los Angeles/Riverside/Orange County, with a minimum increase of 2.5% and a maximum increase of 4.0%.

NH C93 L572 City of Dover

Effective the beginning of the first full pay period immediately following July 1, 2019, all members of the Union shall receive a cost of living adjustment of at least two percent (2%) and not greater than four percent (4%) based on the Boston-Brockton-Nashua area Consumer Price Index (CPI-U) year-end average for the twelve month period ending December 31, 2018, as used in the City’s Tax Cap calculation. Such adjustment shall be applied to the previously adjusted Appendix B Step Plan Wage Schedule.

WA C2 L21 City of Seattle

Effective January 1, 2014, the wages of all job titles represented by the Coalition of City Unions signatory to this Memorandum of Understanding (MOU) shall be increased by 100% of the annual average growth rate of the bi-monthly Seattle- Tacoma-Bremerton Area Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the period August 2011 through June 2012 to the period August 2012 through June 2013, provided however, that said percentage increase shall not be less than zero.

CPI With Maximum Limit Only

OK L2406 Oklahoma City General Unit

Sec. 22.1 The Parties agree to use CPI-W (south region) to determine the appropriate adjustment of wages, not to exceed the City’s General Fund Revenue growth and subject to the City’s ability to pay the adjustment. February, 2018 is the ending period that will be used for purposes of contract negotiation discussions in FY 17-18 for wage adjustment consideration for contract year 18-19.

CPI With Minimum Limit Only

MI C25 L1852 City of Marquette

Note: provision is frozen

    1. COLA shall remain frozen and Article 31 B. will not be implemented during the term of this contract.
    2. It is further agreed between the parties that in the event the cost of living during either of the fiscal years exceeds the percentage of wage increase for the given year as more particularly stated above, then, in that event, the wage increase for the particular fiscal year shall be the percentage increase in the cost of living as published by the United States Government and known as the Consumer Price Index-National.

In the event that the cost of living in any fiscal year exceeds the wage increase granted by the City and agreed upon between the parties in accordance with the Agreement, the increased wages based on the Consumer Price Index shall be paid quarterly and shall be based on a formula that a one point increase in the Consumer Price Index shall equal Five ($5.00) Dollars per month in wages. For computation purposes, the May Consumer Price Index will be used as a starting point for each fiscal year.

MO C61 L3311 Daniel Boone Regional Library

First contract proposal only

Effective January 1, 2023, all salary ranges (minimum and maximum) and each step within each salary range will increase by 5% or current CPI, whichever is greater. This increase will also apply to all bargaining unit members beyond the maximum of their salary range.

Increase Based Solely on CPI

MT C9 L3526 Red Lodge City

Each employee will receive a COLA on July 1st of each year starting in 2009. The COLA will be based upon the current Consumer Price Index-Urban (CPI-U), reported annually by the Research and Analysis Bureau, Work Force Services Division, Montana Department of Labor and Industry (444-2430).

Adjustment of a Percentage of CPI

NY L1000-836 Town of Walkill

Effective January 1, 2015 all hourly wages and salary schedule shall be increased by 2% over December 31, 2014 wages….

 CPI Adjustment

Effective January 1, 2015 and each January 1st thereafter, in addition to the Salary increase as per Article Ill, Section 1, hourly wages and salary Schedules shall be increased by 50% of the Consumer Price Index in excess of the annual rate of increase of 2% published in September of the year prior to the effective date.

The Consumer Price Index will be based on the average of the current New York Metropolitan area revised Urban Wage Earner and Clerical Worker Index and the current United States Revised Urban Wage Earner and Clerical Worker Index published by the U.S. Bureau of Labor Statistics. The annual rate of increase shall be determined based on the yearly change from September to September of the applicable years.

WA C2 L1262 Longview Police Department

7.1.1 January 1, 2012 all salaries shall be increased by 2.70%

7.1.2 January 1, 2013 all salaries shall be increased by a percentage equal to 90% of the Portland Consumer Price Index (CPIMW”) for the period of July 2011 to July 2012 provided the percentage of adjustment shall be no less than 2.0% and no more than 3.5%.

7.1.3 January 1, 2014 all salaries shall be increased by a percentage equal to 100% of the Portland Consumer Price Index (CPI “W”) for the period of July 2012 to July 2013, provided the percentage of adjustment shall be no less than 2.0% and no more than 3.5%.

CPI Trigger for Wage Reopener

CA C36 L619 City of Cerritos

In order to reopen the MOU for negotiations of a cost of living increase of up to 3% for fiscal year 2013-2014, the Consumer Price Index (CPI) Los Angeles-Riverside-Orange County for ail urban consumers average for January and February 2013 must be at least 1%. If the CPI for January and February of 2013 is at least 1% the City and the Union shall begin meeting and conferring by no later than April 15, 2013 regarding salaries provided in the MOU. The meet and confer process for salaries provided in the MOU shall be completed by no later than May 15, 2013, unless both parties agree in writing to extend the period to meet and confer to a specific date certain. The parties may agree to increase salaries up to 3%, subject to the approval of the City Council.

Nothing contained herein guarantees the employees covered by the MOU will receive any increase in salaries for fiscal year 2013-2014 and the foregoing is not a formula for the increase of salaries in accordance with increases in the CPI. The City and the Union agree not to discuss any other salary issues, including but not limited to reclassification of positions during the meeting and confer discussion relating to salaries only.