Want a COLA or a Pay Raise?

If you could choose between getting an annual cost of living adjustment (like federal retirees) or an annual pay raise (like federal workers) which would you pick?

Hint: This is a loaded question.

The answer, of course, is: It depends!

It depends upon the size of the employee pay raise compared to the size of the retiree COLA.

Most of the time, thanks to years of low inflation, feds have gotten the better end of the bargain. The percentage pay raises have usually been bigger than the percentage of the annual COLA.

This year (2009) was an exception: Workers retired under the CSRS retirement plan got a COLA worth 5.8 percent in January. That reflected 12-months of inflation through September, 2008. The 5.8 percent increase for retirees was their biggest since 1982. Feds retired under the newer FERS retirement plan (if they are 62 or older) got 4.8 percent.

Both the CSRS and the FERS adjustments for retirees were bigger, as a percentage increase, than the raises that active duty white collar feds received. Those outside of various merit and NSPS pay plans got a basic 2.9 percent raise, with locality adjustment add-ons on a city-by-city basis. Feds in the Washington-Baltimore got a total raise of 4.78 percent.

Next year’s federal pay raise will be based in part on private sector wage gains (or declines) and on what Congress and the White House decide. Some people believe the Obama administration, as part of a belt-tightening program, may take a hard look at the 2010 federal pay hike.

Retiree COLAs are protected by law, but inflation for the months of October, November and December of 2008 has been flat. The cost of living has actually dropped. If that continues retirees would not get a raise next January.

A new study by the Congressional Research Service shows that, over a long period of time, salaries tend to go up faster than the cost of living. “Because COLAs for retirees do not reflect increases in the productivity of people who are still in the work force, COLAs do not make retirees financially better off. COLAs merely protect retirees from becoming financially worse-off as prices rise over time.” Except this year, of course when the COLA was higher than the pay raise!

CRS said that at the end of 2008 prices measured by the CPI (which determines retiree COLAs) were 473 percent higher than in 1969 and that as of January, federal retirement benefits have risen by 496 percent during the same period. During the same period, CRS says, “salaries for civilian federal employees have increased by 418 percent” while those of members of Congress were up by 309 percent. To see the CRS report, click here.

Be that as it may, the average federal worker makes a lot more than the average federal retiree who makes a lot more than the average person getting Social Security benefits. And members of Congress, even with their scant 309 percent pay gains, make more than all of you.

Go figure.

Nearly Useless Factoid

One of President Grover Cleveland’s favorite fishing spots was the C&O canal.

To reach me: mcausey@federalnewsradio.com

Copyright © 2024 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.