During this year’s contract negotiations, CPI language was added to the contract on how we will calculate our COLAs in the future. The numbers that we will use to determine our CPI will come from the Bureau of Labor Statistics (BLS) West Region Class B/C-sized cities (a city with a population of fewer than 2.5 million people). Once our population exceeds 2.5 million, we will use data from Class A-sized cities to determine the COLA.
We will use the prior years’ numbers to calculate our COLA with a floor of 2% and a ceiling of 3%. As an example, if CPI were at 1.7% the prior year, then we would get a 2% COLA, or if it were at 3.9%, then we would get a 3% COLA. The BLS publishes a monthly report on its website documenting the prior month’s CPI numbers. Since these reports are monthly, we will be able to determine by the end of January what COLA we will be receiving in July.
I have been asked what, exactly, CPI is. Well, CPI is short for the Consumer Price Index, which is a measure that examines the weighted average of prices of a basket of consumer goods and services. It is calculated by taking the price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living. In short, it’s a measurement for inflation.
There are eight major groups that are used and weighted to determine CPI. These groups are housing, apparel, transportation, education and communication, food and beverages, medical care, recreation, and other goods and services. The BLS uses these groups and data from about 80,000 other items to determine the CPI.
Before we considered adopting this language into our contract, we compared the past CPI numbers using this exact model with the same 2% floor and 3% ceiling, and we calculated what we would have received with this model and compared it to what we received in COLA increases. If you calculate just the last 10 years before this contract, you will find that we received 16.75%. If we had used the CPI model, we would have received 22.70%.
The CPI numbers for the first half of this year are available, and it is at 3.6% in our region with a month-over-month upward trajectory. If this trend continues, or as long as the second half of this year stays slightly higher than 2.4%, then we can expect to see another 3% COLA in July 2022.
If you have any questions about CPI or the contract, please feel free to contact me.