A cost-of-living raise can help you afford an increase in expenses due to fluctuations to the economy, but not all employers offer these raises automatically.

As the cost of living continues to rise each year, many Americans struggle to pay their regular expenses. As much as people try to put money into savings, living paycheck to paycheck has become more common. But what if your salary could increase along with the cost of living?

Cost-of-living raises are pay increases that employers implement to keep up with rising living costs and inflation. Keep reading to learn more about these raises and how you might secure one. 

What is a cost-of-living raise?

Can You Get A Cost-Of-Living Raise?: Why & How You Should Ask Your Boss - What is a cost-of-living raise?

A cost-of-living raise, sometimes called a cost-of-living adjustment (COLA), is a pay raise that correlates to the rise in the cost of living from year to year. This pay increase can come from employers or companies as an addition to salaries, benefits, and wages. 

One of the most common forms of cost-of-living raises comes from the government. The federal government makes annual adjustments to Social Security benefits that correlate to the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers.

Some private organizations incorporate COLAs into their employees’ yearly raises or compensation plans. Other companies only offer COLAs based on merit for their best employees. 

Cost-of-living raises are not mandatory benefits of employment, which is why many employees decide to negotiate these pay increases into their contracts. 

How to calculate cost-of-living raises

Cost-of-living raises should reflect increases in living expenses due to inflation or other influences. Many factors contribute to a person’s cost of living, such as:

  • Housing.
  • Taxes.
  • Utilities.
  • Food.
  • Healthcare.
  • Transportation.
  • Childcare.

When these elements increase or decrease in price, the value of a person’s paycheck changes. As a result, with the rise in the cost of living each year, many people’s paychecks become insufficient to cover their living expenses

While no nationwide metric exists to calculate cost-of-living raises, many employers use the Consumer Price Index (CPI) as a reference. The Bureau of Labor Statistics lists the cost of living increases in the CPI each year, and employers may increase employees’ salaries by the same percentage.


Employers may also implement COLAs for employees who relocate to another city to perform the same job. Transferring from a small town in Ohio to New York City, for example, will often result in a pay raise, as the cost of living in New York City is much higher. 

If you are considering accepting a job in a new city, you should examine the cost of living in that city to determine how suitable the salary is. What seems like an increase in income may be a decrease after you factor in living expenses. 

Retirement income

Retirees living on a fixed income also benefit from cost-of-living raises. Inflation over time leads retirement savings and investments to decrease in value, and retirees who lived comfortably at the beginning of their retirement may struggle to make ends meet as the years go on. 

Some Social Security benefits and COLA-based pensions automatically factor the cost of living into retirement income. The IRS also regularly updates the maximum compensation that retirees can receive from pensions each year based on the cost of living. 

Why should you request a cost-of-living raise?

Can You Get A Cost-Of-Living Raise?: Why & How You Should Ask Your Boss - Why you should request a cost-of-living raise?

Cost-of-living raises contribute to employee satisfaction. If an employee does not receive this raise, their income decreases in value. In a sense, not adjusting salary based on inflation is the same as cutting employees’ wages each year. 

If your employer does not offer a COLA, you have a solid reason to switch to a company that offers higher wages. Employers often lose money when they have to spend time training a new employee, so it is more cost-effective for them to give you a COLA as an incentive to stay on with the company. 

Similarly, as the cost of living increases, many businesses become more profitable. Companies that make profits from goods and services that are necessities for everyday life may make more money as these elements rise in price. As a result, they may have additional funds with which to pay employees. 

Requesting a COLA can prevent you from tightening your budget as the cost of living rises, allowing you to save more money. Your job will feel more valuable to you when you know that it adequately provides for your living expenses and that it can sustain you long-term.  

All in all, a cost-of-living raise is a reasonable request for you to ask of your employer. 

How to request a cost-of-living raise

Employees have the right to ask for a pay raise, and employers have the right to accept or decline your request. Asking for a cost-of-living raise at the right time and in the right way is essential to receiving the increase in wages you have requested. 

Follow these steps to make the most convincing argument for your cost-of-living raise:

Establish yourself as a valuable employee

Many employers want proof that you deserve a pay increase before they offer one. Showing your company that you are a quality employee, that you contribute necessary work, and that you will stick around long-term will demonstrate what your employer has to gain by increasing your wages. 

Before you request a raise, you should work for a company for at least a year. This way, you will have a foundational salary upon which you can build as inflation increases costs of living. 

Come prepared

When you sit down with a supervisor to request a cost-of-living raise, you should come with sufficient evidence that justifies your need for this pay increase. Providing statistics about the rise in living costs from the CPI and the national average salaries will support your request.

Before your meeting, you should also decide on the amount you would like to request. Laying out the exact details of your request, including the salary you make now and the raise you would like to receive, can also help your case. 

Be confident

Any time you request something from your employer, you should ask with confidence. Doing so will allow your supervisor to see you eye-to-eye and understand your value as an employee. 

Come prepared to argue your case about your skills and expertise in your position and how valuable you are to the company. Showing confidence when you make your request can increase your employer’s confidence in giving you what you ask.  

Follow up on your request

After you meet with your supervisor, write a thank-you note or email that also lays out the details of your discussion. Presenting your request in writing will help your supervisor remember the exact numbers you discussed and serve as physical evidence of your conversation. 

How does COVID-19 affect cost-of-living raises?

Can You Get A Cost-Of-Living Raise?: Why & How You Should Ask Your Boss - How does COVID-19 affect cost-of-living raises?

COVID-19 has thrown a wrench in the American economy. Requesting a cost-of-living raise at a time in which your company is struggling financially, laying off employees, or even shutting down for several months may seem counterproductive. 

However, the cost of living has fluctuated for many individuals during the pandemic. For some, it has decreased; many of those transitioning from working in large cities to working remotely have relocated to more affordable living areas. Similarly, workers who no longer commute to work can save money by not having to pay for gas. 

At the same time, some living expenses have increased as a result of COVID-19. Some goods, like PPE and disinfectants, have increased in price as their demand has skyrocketed. The pandemic has also negatively affected sectors of the economy, such as housing

All this is to say that while now may not feel like the best time to ask for a cost-of-living raise, your cost of living may very well be increasing. Consider how well your employer would be able to grant your request during the pandemic and decide if you should wait until COVID-19 has settled down to ask for your raise. 

Other options for low earners

Perhaps you have asked for a cost-of-living raise in the past, and your employer has denied your request. Maybe you do not feel confident asking for a pay raise, or your employer has made it clear that you should not expect to receive one. 

If you cannot secure a cost-of-living raise, you can take other measures to save money and adequately afford increases in your cost of living. Taking out a personal loan or paycheck advancement and creating a budget can help you manage your expenses better. 

Personal loans

If you already have a secure grasp of your expenses, a personal loan will only cost you more money. However, if you struggle to make payments, have accrued debt, or cannot afford necessary goods and services, taking out a personal loan may give you the funds you need to get through a rough patch. 

Many people take out a low-interest personal loan to consolidate credit card debt. Paying off high-interest debt with a lower-interest loan reduces your total repayment amount. 

Individuals may also take out a personal loan to pay for a sizable one-time expense, such as a home renovation, medical bills, or a wedding. Instead of draining your savings to pay for such charges, you can spend the money gradually to reduce the hit to your bank account. 

You can request a personal loan through your bank, a credit union, or a private lender. Look for loans with low interest rates and reasonable repayment terms to make sure that you do not end up with more debt. Some services will even allow you to receive an advance on your paycheck for free.

Whether you decide to request a personal loan or receive funds from another lending source, loans can offer you the leeway you need to stop living paycheck to paycheck. 


Budgeting is an essential aspect of financial health, especially when your paycheck cannot sufficiently provide for your cost of living. 

Setting up a budget can reduce some of the anxiety that comes with checking your balance each week and paying your credit card bills. When you stick to an allowance that you know works for your income, you can feel more confident that you will be able to afford your expenses. 

These tips can help you set up a budget:

  • Determine your net income. Look at your recent pay stubs to determine how much income you bring in every pay period. If you work a job with irregular hours, your identified net income should be the minimum amount you could make. 
  • Track all of your spending. Every time you spend money, you should record the amount you spend and the category of the expense. This way, you can analyze where your money is going every month.
  • Set up a spending plan. After you have reviewed your typical spending in comparison to your net income, you can set limits on your spending. If you spend too much on food each month, for example, you can set a lower budget for this category and consider ways to reduce your spending. 

You can also reduce the extraneous fees you pay each month to save money. Better management of the money you do have can reduce some of the sting that comes with not being able to receive a cost-of-living adjustment. 


Cost-of-living raises help employees afford the increase in expenses that comes with regular inflation. 

Asking your employer to increase your wages in relation to the cost of living is a reasonable request, and if you provide ample evidence and support for your raise, you have a good chance of securing one. 

Ask yourself this question: how has my cost of living increased this year, and how does my salary reflect these changes?

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About the author

Chris Muller picture
Total Articles: 203
Chris has an MBA with a focus in advanced investments and has been writing about all things personal finance since 2015. He’s also built and run a digital marketing agency, focusing on content marketing, copywriting, and SEO, since 2016. You can connect with Chris on Twitter.