Cost-of-Living Adjustment. An annual adjustment in wages to offset a change (usually a loss) in purchasing power, as measured by the Consumer Price Index. The Consumer Price Index is used rather than the Producer Price Index because the purpose is to offset inflation as experienced by the consumer, not the producer. For 2016, there is no COLA so the maxiumum taxable amount subject to the Social Security tax remains $118,500. 

Use COLA in a sentence

The COLA was of significant concern to the people who were living in the high inflation environment who wanted to retire soon.

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The factory workers were disgruntled when they were denied the generous annual raise they were accustom to, only receiving enough of an increase to cover COLA.

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To counteract the effect of inflation, COLA is made to Social Security and supplemental wages to offset the change.

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