COLA Vs. Workers Pay Raise

Only a few months ago in January, federal employees saw a pay raise of 3.1%. At the same time, federal retirees only saw an increase of 1.6% to their pensions. The difference comes from how those increases come about. The increase the retirees see every year is called COLA, or Cost of Living Adjustment. The increase comes from a price index that is supposed to mirror inflation. Some would argue that it doesn’t do a great job (health insurance rates are rising at nearly 5.5% per year) but that is out of my scope. The increase that CSRS employees and Social Security recipients see every year is typically higher than what FERS retirees see especially in the years when inflation rates are higher. The pay raise the active employees see comes about in a completely different way. Every year the president and congress get together and decide on their budget. During this process, they decide on what type of raise if any they are going to give federal workers. The 3.1% raise that we just saw is much higher than we’ve seen in years. So far, federal pay (especially with all the other great benefits) seems to be still competitive enough to encourage people to seek out government jobs. We will have to wait and see what the government does next year and what the future holds for the millions of federal employees around the country.