May 13, 2002
Many workers who have Cost of Living Adjustments, or COLA, in their union contracts were shocked to see that they suffered a wage cut recently. COLAs, as used in contracts and for certain pensions, depend on the government’s CPI (Consumer Price Index). And the CPI reports that prices went down by one% during the second half of 2001.
What nonsense! Every time we go to the grocery or pump gas for our cars, or pay a medical bill, we see that prices are going UP! So how can the CPI say DOWN?
Take one look at the way that government statistics deal with the price of cars. In 1969, the average price was almost $3,600. Since then, according to the CPI, the price of new cars has gone up a little more than 2 ½ times. That would bring it up to $9,500. But today, the average car sells for $20,000 – more than double what the government figures tell us it should be. The difference is supposedly made up by improvements in quality and gadgets.
Cars are one of the biggest things workers buy. The government uses the same method to grossly underestimate the rise in housing prices, which are the biggest expenditure workers make.
The CPI is just another way that government has of lying. And a COLA based on the CPI is only another way to cut our real wages and our standard of living.