Currently COLAs are determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).  The CPI-W surveys the change in costs of younger urban workers rather than surveying the goods and services upon which seniors spend most of their money.  Because younger workers are more likely to have employer-provided insurance, and use less health care services and prescription drugs, the CPI-W tends to grow more slowly than the CPI-E which gives greater emphasis to the health care costs seniors use.

According to an ongoing study by Mary Johnson, editor of The Social Security & Medicare Advisor, a person who retired with an average benefit of $460.60 in 1984 would have received $6,321 more in benefits using the CPI-E rather than the CPI-W. In 2002 their monthly benefit would be about $56 higher, $852 versus $796.

The study further illustrates the plight of older seniors for whom Social Security is their only source of income. An individual who retired with an average benefit of $460.60 in 1984 receives just $9,557 in 2001 only $725 above the federal poverty level in the 48 states and Washington DC. That same income is below the federal poverty level in Alaska and Hawaii. 

Sources: CPI-E data, Bureau of Labor Statistics, October 25, 2001. Average benefit data, Social Security Administration, October 31, 2000. 2001 HHS Poverty Guidelines.

For a related story click here to read "Higher COLAs Possible" http://www.tscl.org/newcontent/101162.asp.

To see a copy of the chart illustrating the difference between the CPI-W and the CPI-E click here:  http://www.tscl.org/newcontent/101271.asp

If you would like to sign our online "Fair COLA" Petition, click here: http://action.tscl.org/FairAnnualSSCola.asp

January 2002