Joseph A. Giacalone

(St. John’s University, USA)

 

 

Abstract: The Cost of Living Adjustment (COLA) for most Social Security payments is based on an index number, the Consumer Price Index. The Consumer Price Index (CPI) is constructed by the United States Bureau of Labor Statistics and comes in several different series. Currently, it is projected that the 2016 Cost of Living Adjustment for Social Security payments will be zero (Franklin, 2015). This will be the third time in recent years that this has happened. Not surprisingly, Social Security recipients and senior citizen organizations are not pleased with this situation. They claim to be experiencing increases in their cost of living yet the numbers do not confirm this. So, what is going on? This paper will examine the way the COLA is calculated. It will evaluate the relevance of the methodology used in comparison with the spending patterns of most Social Security recipients. Consideration will then be given what alternative measures are available or could be constructed. These will include the experimental CPI for Americans 62 and older, the so-called CPI-E.

 

 

Key words: social security; COLAs; CPI-W; CPI-E

 

JEL code: H55