The purpose of a cost of living adjustment (COLA) is:
A) to give employees a 3% pay adjustment each year to adjust for increasing housing costs.
B) to provide money employees can set aside for their retirement funds.
C) to offset the increases in the price of goods and services employees purchase to prevent wages from lagging in the market.
D) to offset stock market declines so employees have money to withdraw when they incur large losses.
E) to provide a performance reward to those employees that exceed productivity expectations.

Question

Quizplus · Accepted Answer

The purpose of a cost of living adjustment (COLA) is to offset the increases in the price of goods and services employees purchase to prevent wages from lagging in the market. It is designed to ensure that employees maintain the same purchasing power over time despite inflation. Therefore, option C is the correct answer.

The Purpose of a Cost of Living Adjustment (COLA) Is