Cost-of-Living Adjustment (COLA)
Also called: COLA, cost of living increase, indexation
A COLA is an automatic pay or benefit increase tied to a published inflation index, designed to hold purchasing power flat rather than to reward performance. US Social Security applies one annually based on a variant of CPI; many union contracts and pensions do the same. Two subtleties decide whether it works: which index is used (an index that understates your actual basket erodes you slowly), and whether it's applied before or after other increases.