Cost Of Living Adjustments Research Articles

The transitional impact of state pension reform

We use an overlapping generations framework to evaluate the transitional impact of state pension reform on public and private workers, extending our analysis to all fifty U.S. states. We consider reducing cost-of-living-adjustments (COLAs) for retirees and reducing benefit accruals for current workers. The magnitude of reform in each state is calibrated to achieve a common policy goal: the elimination of unfunded pension liabilities within twenty years.Although each reform effectively decreases long run taxes by reducing pension liabilities, variation in fiscal and demographic features creates significant differences in state outcomes. Both reforms yield an asymmetry in welfare outcomes, providing gains to private workers through reduced taxes while causing losses to public workers due to reduced pension income. Wage compensation for affected public workers proves to be a valuable policy instrument for achieving better balance. In the aggregate, state level welfare gains are possible for both reforms.

New York state advocates push for increased workforce investments

As New York state legislators and the governor negotiate the 2024 executive state budget, mental health advocates, providers, and the state's entire health services sector continue to ramp up efforts to push for additional workforce funding and enact an 8.5% cost‐of‐living adjustment (COLA) increase in the final budget agreement.

Wildcat Imaginaries

Abstract The demand for a Cost of Living Adjustment (COLA), made by graduate students at the University of California, Santa Cruz (UCSC), culminated in the wildcat strikes of 2019–20 across the University of California system. Graduate students made a seemingly impossible request of the University of California as it currently operates. The impossibility is not financial: a 60 percent increase in wages, in keeping with the COLA demand, is not unreasonable or impossible but remains the bare minimum to bring graduate students out of an intolerable rent burden. The impossibility of the demand therefore resides in the system's resistance to conceiving of students as “workers.” By insisting on graduate students' status as workers, the COLA struggle implicates the university in the production of low-waged and unwaged academic labor. This struggle demonstrates a commonality between students and a whole class of low-waged and precarious workers at the university that includes university staff, lecturers, and service workers. Extreme precarity that triggered the wildcat strike was intensified by police repression of the picket and the unfolding of the COVID-19 pandemic. As they grapple with the questions of university abolition, the authors of this article examine the structural violences of universities at large, while being attentive to the particularities of the UCSC wildcat strike. The authors draw on the wildcat imaginaries that emerged, in both inchoate and more developed formations, during the strike and offered a glimpse of a possible abolitionist future.

New York MH advocates laud investments in proposed budget

New York state advocates and providers say they are pleased with the governor's attentiveness to a long‐overdue cost‐of‐living adjustment (COLA) increase, support of retention and recruitment of the health care workforce, and monitoring and enforcement of Medicaid managed care behavioral health services.

COLA, COVID, and 50/500 Years of Struggle

Abstract This short dispatch reflects on the recent cost-of-living-adjustment (COLA) student movement at the University of California. We outline a short history of student labor activism at the University of California, Berkeley, and juxtapose it with the struggles that have come out of the Department of Ethnic Studies since 1969. We discuss the context of COLA and how the COVID-19 pandemic has affected the aims, goals, and development of the movement from an ethnic studies perspective.

Spillovers from State and Local Pensions to Social Security: Do Benefits for Uncovered Workers Meet Federal Standards?

Federal law allows certain state and local government employees to be excluded from Social Security coverage if they are covered by an employer pension of sufficient generosity. Public sector retirement systems have grown less generous in recent years, and a couple of plans could exhaust their assets in the next decade, putting benefits at risk. If pension sponsors are inattentive to federal generosity requirements when cutting benefits, current and future initiatives to curb costs may conflict with their obligations to the U.S. Social Security Administration (SSA). This project combines data from a variety of sources to assess whether state and local governments are currently satisfying the federal standards and whether the standards continue to provide benefits of equal generosity to Social Security. The paper found that: -Although public plans satisfy the regulations, uncovered state and local government employees do not always receive Social Security-equivalent resources in retirement because the law regulates benefits only at age 67 (rather than lifetime benefits) and allows for long vesting periods. -State and local pensions often set very long vesting periods and are increasingly unlikely to grant full cost-of-living adjustments (COLA) after retirement. Yet, they also allow members to collect full benefits at much younger ages than Social Security. Incorporating vesting, the COLA, and the normal retirement age into a generosity test based on lifetime pension wealth shows that some plans fall short, but this finding is very sensitive to the employment patterns of the uncovered employees. -Additionally, a couple of plans that exclude their members from Social Security could soon exhaust the assets in their trust funds and revert to pay-as-you-go systems, endangering future benefits and putting them in violation of federal generosity standards. The policy implications of the findings are: -Federal generosity standards for state and local pensions could be updated to ensure Social Security-equivalent protections. -Over time, mandatory enrollment of state and local government employees in Social Security would obviate the need for federal monitoring of their pensions.

CHALLENGES OF STRATEGY IMPLEMENTATION AT ADRIAN COMPANY LIMITED KENYA

Purpose: The objectives of the study were to determine strategy implementation practices at Adrian Company Limited Kenya and to establish challenges of strategy implementation at Adrian Company Limited Kenya. Methodology: The study adopted a cases study research design and an interview guide was used to collect data. The respondents of the study were drawn from the top management team, who were drawn from the various departments comprising of human resource manager, project manager, marketing manager, logistics & procurement manager. Other respondents were drawn from the functional level and operational level departments. Data was analyzed using content analysis.Results: Findings indicated that the strategy implementation practices carried out by Adrian co Ltd consisted of the following critical tasks; the management commitment, team appointment, training for all levels, developing an implementation plan, and establishing an internal auditing system. Findings also indicated that that there existed various challenges to strategy implementation at Adrian Co Ltd. These challenges included inadequate resources and manpower for strategy implementation were inadequate, poor compensation as a challenge to strategy implementation, poor training for the current work force, mismatch between strategy and structure and poor bottom up as well as top bottom communication, organization politics, communication and clarity understanding during strategy implementation.Unique contribution to theory, practice and policy: From the discussions and the conclusions, the study recommended that for an efficient and effective strategy implementation process senior management should be involved and committed throughout the process. The management should ensure that the critical strategy implementation tasks were considered during strategy implementation. In addition, the management should address the challenges of strategy implementation. For instance, regular training should be conducted and compensation should be facilitated through cost of living adjustments (COLA).

Time-Varying Degree of Wage Indexation and the New Keynesian Wage Phillips Curve

Cost-of-Living-Adjustment (COLA) coverage figures suggest a time variation in the degree of wage indexation. In spite of this observation, most current literature conveniently assume a constant degree of indexation as this variable is not directly observable. This study intends to empirically measure the time variation in the degree of wage indexation. To this end, we derive a reduced form version of the New Keynesian Wage Phillips Curve under the assumption of a time varying degree of wage indexation. A state space methodology is then employed in estimating this model using data of selected OECD countries. The study subsequently investigates variables influencing the time variation in the degree of wage indexation. Our results consistently suggest a substantial time variation in the degree of wage indexation in all countries considered. The wage indexation estimates obtained for the US bear remarkable similarities with the figures suggested by COLA coverage. It is subsequently shown that variations in trend inflation significantly explain variations in the degree of wage indexation. Finally, there is weak evidence in support of the Gray hypothesis that wage indexation is negatively correlated with the variance of productivity shocks.

COLA cuts in state-local pensions

AbstractAlthough it is often assumed that public workers have greater benefit protections than their private sector counterparts covered by the Employees Retirement Income Security Act of 1974, this paper finds that state and local governments – particularly those with generous cost-of-living adjustments (COLAs), fewer benefit protections, and financial pressures on the plan and the sponsoring government – cut COLAs for current workers and, often, for retirees. In most instances, these cuts were upheld by the courts. While the pace of COLA cuts has slowed, they are likely to reappear if plans come under renewed financial pressures.

How Will Limiting Cost of Living Adjustments Affect the Value of State Pensions?

During the Illinois General Assembly’s January 2013 special session a proposal to limit the so-called Cost of Living Adjustments (COLAs), a component of public employee pensions, was much discussed and debated. Under current pension rules many state workers and retirees have been promised that the pension benefits they receive will rise by 3 percent per year.

A New Social Security ‘Notch’? Bad News for People Born in 1947

This year, Social Security benefits received no Cost- of-Living Adjustment (COLA) for the first time since automatic adjustments were adopted in 1975. While current beneficiaries perceive themselves to be harmed, they were compensated by receiving a higher-than-normal 5.8-percent COLA payment in 2009. However, a quirk in Social Security’s benefit formula will produce lower benefits for new retirees, presenting a stronger case for help. Social Security’s formula for granting COLAs, interacting with a spike in inflation during 2008, could reduce benefits for individuals born in 1947 by around 2.6 percent relative to the average benefits received by the 1930-1946 birth cohorts, costing a typical couple over $12,000 over the course of their retirement. Policymakers should consider adjusting benefits for these individuals and implementing longer-term reforms to reduce the likelihood of future “notches.”

Policy options for state pension systems and their impact on plan liabilities

AbstractWe calculate the present value of state pension liabilities under existing policies and separately under policy changes that would affect pension payouts. If promised payments are viewed as default free, then it is appropriate to use discount rates given by the Treasury yield curve. If plans are frozen at June 2009 levels, then the present value of liabilities would be $4.4 trillion. Under the typical actuarial method of recognizing future service and wage increases, this figure rises to $5.2 trillion. Compared to $1.8 trillion in pension fund assets, the baseline level of unfunded liabilities is therefore around $3 trillion. A 1 percentage point reduction in cost-of-living adjustments (COLAs) would lower total liabilities by 9–11%; implementing actuarially fair early retirement would reduce them by 2–5%; and increasing the retirement age by 1 year would reduce them by 2–4%. Dramatic policy changes, such as the elimination of COLAs or the implementation of Social Security retirement age parameters, would leave liabilities around $1.5 trillion more than plan assets. This suggests that taxpayers will bear the lion's share of the costs associated with the legacy liabilities of state DB pension plans.

Artificially Sweetening the COLA

For the second year in a row, Social Security recipients will not receive a cost-of-living adjustment (COLA) increase to their monthly benefits. Social Security benefits only rise when prices go up; in years with low price inflation, they remain steady. And although low price inflation benefits all consumers, Congress has proposed to give every Social Security beneficiary a $250 check, which could cost taxpayers $15 billion.While it might sound reasonable or fair to give seniors a boost during tough economic times, giving in to such demands would be misguided and undermine the very reason for tying cost-of-living adjustments to the Consumer Price Index (CPI) in the first place - to prevent yearly interest-group lobbying for higher benefit increases and, as the name implies, only provide an adjustment when there’s an actual CPI-measured increase in the cost of living. Providing a COLA or one-time payment beyond what is warranted by an increase in the CPI would actually increase “real” benefits, artificially sweetening the COLA.

Geographic Differences in Housing Prices and the Well-Being of Children and Parents

ABSTRACT:This article contributes to the ongoing discussion about whether the official poverty measure should be adjusted for geographic differences in the cost of living (COL). Part of the support for spatial COL adjustments is the concern that the reduced purchasing power of the poor in higher-priced areas could jeopardize the health and well-being of children and parents. The results of this analysis of the Panel Study of Income Dynamics and its Child Development Supplement do not support this view. We find that children growing up in higher-priced housing markets appear to fare no worse than those in lower-priced markets.

Cook Islands

Cook Islands Jon Tikivanotau M. Jonassen (bio) Issues in the Cook Islands during the period under review highlight controversial government decisions as well as some notable judicial and parliamentary amendments. Government indifference to voter concerns was reflected in conflicts at Aitutaki and Manihiki airports, a drawn out debate over an indoor stadium for the country, the sudden discontinuation of the vaka (district) council, unfair cost-of-living adjustments (COLA), and even a challenge from the traditional leadership in the House of Ariki. This review underlines the growing disconnect between the Cook Islands government and Cook Islanders, and the marginalization of Cook Islands Māori and their paramount chiefs. The loss of one of the greatest sons of the Cook Islands was a sad event for all Cook Islanders. Dr Thomas Robert Alexander Harries Davis KBE (1917–2007), former prime minister of the Cook Islands and a United States Apollo Space Program scientist, passed away on 23 July 2007 (CIN, 24 July 2007, 1, 5). He was a well-known medical doctor, scientist, statesman, author, voyager, and Pacific politician, who played a major role in the formation of the East-West Center's Pacific Islands Development Program in Hawai'i (CIN, 28 July 2007, 5). Hundreds attended his state funeral on 27 July at the Are Kari Oi Nui (CIN, 30 July 2007, 1). Landowners of two outer-island airports were dissatisfied with the government. At one point Manihiki Airport landowners, angry about lease terms, initiated a forced airport closure by spreading debris over the runway to render it unusable (CIN, 5 July 2007, 1). They later agreed to a new lease arrangement for sixty acres of land at an estimated value of NZ$200 per acre (CIN, 1 Feb 2008, 1). (One NZ dollar was the equivalent of US$.69 as of August 2008.) Despite the agreement, a flight to Manihiki was turned back by some disgruntled Manihiki airport landowners (CIN, 14 May 2008, 1). A police patrol boat was required to help keep the peace (CIN, 16 May 2008, 1). Conflict at the Aitutaki airport focused on the desire of local residents to keep the Sabbath holy (CIN, 12 June 2008, 1). About 300 protestors strongly, yet peacefully, expressed their displeasure at government-sponsored efforts to land planes on the island on Sundays (CIN, 23 June 2008, 1). The peaceful demonstration was in contrast to previous occasions when debris was spread on the runway. In recognition of continuing high emotions, the government agreed to a six-month trial period, although expressions of resistance to Sunday [End Page 145] landings continue (CIH, 28 June 2008, 2). The courts were busy this year beginning with what is believed to be the first successful defamation case in the Cook Islands. The case was successfully argued by lawyer Charles Little for William Framhein against property developer Tim Tepaki (CIN, 2 July 2007, 1). The judge awarded NZ$90,000 to Framhein. Prominent businessman Richard Barton was convicted on five charges of willfully filing false income tax returns and fined (CIN, 10 Nov 2007, 1). The American owners of the South Pacific School of Medicine indicated that they plan to take the government to court for reneging on a contract to open a school in the Cook Islands (CIN, 12 June 2008, 1). Meanwhile, Vai Peua, the member of Parliament for Pukapuka Island, criticized the Cook Islands High Court and Justice System for sending criminals to the outer islands to serve out their sentences. He also lashed out at the police for failing to monitor a criminal who shot three people on his island (CIN, 31 July 2007, 1). The tourism industry faced both challenges and opportunities. Cook Islands Tourism Corporation chief executive Chris Wong resigned after pressure from various sectors of the public for alleged financial discrepancies (CIN, 28 July 2007, 1). John Dean was selected to succeed Wong (CIN, 20 Feb 2008, 1) and now faces several major challenges in maintaining tourism as the country's major industry. The Asian Development Bank outlook highlighted the vulnerability of the tourism industry in the Cook Islands, with its inadequate and aging infrastructure. Aggressive approaches by some local operators proved counterproductive. The Rarotonga Beach Resort...

The Impact of the 1972 Social Security Benefit Increase on Household Consumption

This paper examines the consumption response to the 1972 Social Security benefit increase. Nominal benefits were increased by 20 percent while annual cost of living adjustments (COLAs) were contemporaneously implemented and scheduled to begin in less than three years. Taken in isolation, this benefit increase could be viewed as a large and permanent increase in real Social Security benefits. However, the prevailing high rates of inflation that were the impetus for the COLA legislation may have caused households to view the permanent real benefit increase to be substantially less than 20 percent. Using data from the 1972-73 Survey of Consumer Expenditures, the results provide a mixed picture of the consumption impact of the benefit increase. Strictly non-durable consumption increases significantly at the time of the benefit increase. However, this increase does not persist. Furthermore, the likelihood of making any purchases from an array of durable good categories does not change throughout this period.

Using Inflation-Adjusted Dollars in Analyzing Political Developments

• Low inflation is a goal of economic policy and a measure of its success; • Inflation-adjustment for government benefits affects payments to Social Security recipients and some others. The Boskin Commission (discussed below) estimated that by 1983 the Consumer Price Index (CPI) adjustments to Social Security, using what they believed to be a flawed CPI, resulted in $8.76 billion benefit overpayment, 5.55% of total benefits (Boskin Commission Report in Baker 1998, 15); • Inflation-adjustment of federal tax brackets and other elements of the national government income tax affects the amount of national government revenue and of tax payments. A CPI measure that showed lower inflation than the current CPI would change tax brackets and other elements much less and thereby sharply increase federal revenues, with very large cumulative effects; • Cost-of-living adjustments (COLAs) affect the pay of those employees who have automatic price escalators in their contracts, although in recent years evidently fewer than 5% of all private-sector employees have such contracts; • Even relatively low levels of inflation produce, cumulatively, large changes over time. For example, an inflation rate of 2.4% per year, the average during 1998 to 2002, changes price levels about 11% in five years, 21% in 10 years, 38% in 20 years, and 61% in 40 years.

Changes in the Union Wage Premium by Industry

Relying on CPS data, the authors estimate the union wage premium—the amount by which wages of union workers exceeded those of nonunion workers in the same industry conditional on worker characteristics—for 32 industries over the period 1971–99. The dispersion of union premiums across industries narrowed over time as high premiums tended to fall and low premiums to rise. At the aggregate level, the premium drifted lower. When the authors model the union premium as a function of cyclical and structural variables and unmeasured industry characteristics, they find that Cost-of-Living-Adjustment (COLA) clauses reduced the responsiveness of the union premium to economic conditions and that increases in import penetration were strongly associated with rising union premiums. The effect of deregulation was mixed.

Changes in the Union Wage Premium by Industry

Relying on CPS data, the authors estimate the union wage premium - the amount by which wages of union workers exceeded those of nonunion workers in the same industry conditional on worker characteristics - for 32 industries over the period 1971-99. The dispersion of union premiums across industries narrowed over time as high premiums tended to fall and low premiums to rise. At the aggregate level, the premium drifted lower. When the authors model the union premium as a function of cyclical and structural variables and unmeasured industry characteristics, they find that Cost-of-Living-Adjustment (COLA) clauses reduced the responsiveness of the union premium to economic conditions and that increases in import penetration were strongly associated with rising union premiums. The effect of deregulation was mixed.

Un-Cola: Why Have Cost-of-Living Clauses Disappeared from Union Contracts and Will They Return?

1. Introduction One of the major changes in collective bargaining in recent decades has been the gradual elimination of cost-of-living adjustments (COLAs) from union contracts. In 1976, 61% of union workers covered by major collective bargaining contracts had COLA provisions, but by the end of 1995, when the U.S. Bureau of Labor Statistics stopped collecting data on collective bargaining settlements, COLA coverage had fallen to 22%.1 Although the decline in COLA rates has been studied extensively, there is no agreement as to which factors are primarily responsible for this decline. One view attributes the elimination of COLAs, or escalator clauses, to declines in inflationary uncertainty; a second view emphasizes the erosion of union power; yet another view focuses on structural shifts in the U.S. economy. Previous research has not determined the relative importance of these and other hypotheses. Another reason to reassess COLA determination is that the economy has changed since the early research was completed. The bulk of studies to examine COLA incidence statistically have relied on sample periods that end in 1982 or earlier.2 Since then, there have been major changes in union strength, inflationary uncertainty, and other potential determinants of wage indexation, including deregulation of certain industries. In addition, more than 90% of the decline in COLA rates has occurred since 1982. It is worthwhile to determine whether the factors deemed to be important in the early studies are still important. We provide a comparison with previous research, formally assess the contributions of various factors to the erosion of COLA rates, and provide insights as to likely changes in COLA coverage in the future. If inflation picks up, and with it inflationary uncertainty,3 will COLA rates rise to levels not seen since the 1970s? What would be the consequences of a rebound in union power, of further economic deregulation, of likely industrial and demographic shifts in the economy? Once the major causes of past changes in COLA coverage are understood, it becomes possible to project the consequences of changes in key economic variables. Given the concern in macroeconomics with wage indexation and the linkage between wages and prices (Gray 1976; Fischer 1986; Ball and Cecchetti 1991; Schiller 1997), the extent to which COLA coverage responds to economic factors has important implications for the economy. Underlying the empirical analysis is a pooled cross-sectional, time-series model of COLA incidence that accounts for industry fixed effects. To estimate the model, we assemble a panel data set of COLA coverage and an array of characteristics for 32 private-sector industries over a 22-year period. Because COLA clauses are multiyear in nature, the model also recognizes that the percentage of workers covered by COLA clauses in a particular year depends on conditions in both the current year and previous years. Previewing results, we find that the major cause of the decline in COLA coverage has been the reduction in inflationary uncertainty. Second in importance has been the erosion of union power. Both the percentage of the industry's workforce that is unionized and the estimated union wage premium in the industry are highly significant determinants of COLA coverage. But because the union wage premium has remained largely intact in most industries, changes in the premium are much less important than losses in unionization in explaining the overall decline in COLA provisions. Economic deregulation, industrial shifts, and an increased presence of women in the workforce have had modest effects on COLA rates. On the basis of our findings, a rebound in inflationary uncertainty to the levels experienced in the 1970s would raise COLA coverage by 10 percentage points. 2. Background For workers in long-term contracts, COLAs provide at least partial protection from the consequences of unexpected inflation. …