CRS – Federal Employees: Pay and Pension Increases Since 1969, Patrick Purcell, Specialist in Income Security, January 20, 2010
“Congress has linked increases in federal pay to the ECI so that wages for federal employees will remain competitive with wages paid by firms in the private sector. Congress has linked COLAs for Social Security and federal retirement benefits to the rate of increase in the prices of goods and services to protect retirement income from losing purchasing power through the effects of inflation. In general, wage increases reflect both improvements in the productivity of labor and increases in the general level of prices in the economy. Consequently, when measured over long periods of time, wages tend to rise faster than prices. 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 worseoff as prices rise over time. In 2010, there was no COLA for recipients of Social Security benefits or federal civil service pensions because the price level as measured by the CPI fell between 2008 and 2009.”
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