The 2025 federal employee cost of living adjustment (COLA) is expected to be the largest in decades. The increase is a result of the rising inflation rate, which has been driven by a number of factors, including supply chain disruptions, the war in Ukraine, and increased consumer demand. The COLA will help to ensure that federal employees can keep up with the rising cost of living and maintain their standard of living.
The COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W measures the changes in prices for a basket of goods and services purchased by urban wage earners and clerical workers. The COLA is equal to the percentage increase in the CPI-W from September of the previous year to September of the current year. The 2025 COLA will be based on the CPI-W data from September 2024 to September 2025.
The 2025 COLA is expected to be the largest in decades. The increase is a result of the rising inflation rate, which has been driven by a number of factors, including supply chain disruptions, the war in Ukraine, and increased consumer demand. The COLA will help to ensure that federal employees can keep up with the rising cost of living and maintain their standard of living.
Economic Factors Influencing the COLA Increase
Inflation and the Consumer Price Index
Inflation is a key factor in determining the COLA increase. The COLA is calculated based on the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures the average change in prices for goods and services purchased by urban wage earners and clerical workers.
Economic Growth
Economic growth can also influence the COLA increase. When the economy is growing, businesses typically have more money to invest in salaries and benefits, which can lead to higher wages for employees. However, economic growth can also lead to higher inflation, which can offset the benefits of higher wages.
Labor Market Conditions
The labor market conditions can also play a role in the COLA increase. When the unemployment rate is low, businesses may have to pay higher wages to attract and retain workers. This can lead to higher COLA increases for federal employees.
Other Economic Factors
Other economic factors that can influence the COLA increase include the federal deficit, the strength of the dollar, and the global economy. These factors can affect inflation, economic growth, and the labor market, all of which can impact the COLA increase.
Example Table on the Economic Impact
| Factor Influencing the COLA Increase | Example Impact |
|---|---|
| Increased inflation | Higher COLA increase |
| Strong economic growth | Higher COLA increase (due to increased wages) |
| Low unemployment rate | Higher COLA increase (due to increased competition for workers) |
Impact of the COLA on Federal Employee Salaries
The cost-of-living adjustment (COLA) is a yearly percentage increase to federal employee salaries that is designed to keep pace with inflation. The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures the average change in prices for goods and services purchased by urban wage earners and clerical workers. The COLA is applied to all federal employee salaries, including base pay, locality pay, and overtime pay.
The amount of the COLA is determined by the percentage change in the CPI-W from September of the previous year to September of the current year. If the CPI-W increases by 2.0% from September 2022 to September 2023, then the COLA for 2024 will be 2.0%. The COLA is capped at 5.0%, so if the CPI-W increases by more than 5.0%, the COLA will be 5.0%. The COLA is also subject to a minimum of 0.5%, so if the CPI-W increases by less than 0.5%, the COLA will be 0.5%.
How the COLA Affects Different Federal Employee Salaries
The COLA affects all federal employee salaries in the same way, regardless of the employee’s pay grade or job title. However, the COLA can have a different impact on different employees’ budgets, depending on their income and expenses. For example, a federal employee who lives in a high-cost area may find that the COLA does not fully offset the increase in their living expenses. On the other hand, a federal employee who lives in a low-cost area may find that the COLA provides them with a significant increase in their purchasing power.
The following table shows how the COLA would affect the salaries of different federal employees, assuming a COLA of 2.0%:
| Employee | Current Salary | COLA | New Salary |
|---|---|---|---|
| GS-1 | $25,000 | $500 | $25,500 |
| GS-5 | $40,000 | $800 | $40,800 |
| GS-9 | $60,000 | $1,200 | $61,200 |
| GS-13 | $80,000 | $1,600 | $81,600 |
| GS-15 | $100,000 | $2,000 | $102,000 |
Proposed COLA Legislative Changes
1. Elimination of the 0.5% Offset:
This proposal would eliminate the current 0.5% reduction in COLA that is applied to employees with less than three years of federal service.
2. COLA Calculations Based on Actual Inflation:
Instead of using the Employment Cost Index (ECI), this proposal would base COLA calculations on actual inflation as measured by the Consumer Price Index (CPI).
3. Eliminate the 1.3% Cap:
This proposal would remove the 1.3% maximum increase for COLA, allowing the increase to be based solely on inflation rates.
4. COLA Adjustments for Military Retirees:
This proposal would extend COLA adjustments to military retirees who retired prior to January 1, 2018.
5. COLA Adjustments for Social Security Recipients:
This proposal would increase the COLA adjustment for Social Security recipients to match the federal employee COLA.
6. Establish a Commission on COLA Reform:
This proposal would create a commission to study and recommend changes to the COLA system.
7. Allow for COLA Adjustments in Non-Budget Years:
This proposal would allow for COLA adjustments to be made in non-budget years if inflation exceeds a certain threshold.
8. COLA Adjustments for Federal Contractors:
This proposal would require federal contractors to provide COLA adjustments to their employees who are subject to the Service Contract Act or Davis-Bacon Act. The proposed COLA adjustment for federal contractors would be determined based on the following formula:
| Year | COLA Adjustment |
|---|---|
| 2023 | 0.5% |
| 2024 | 1.0% |
| 2025 and thereafter | 1.5% |
This formula would provide a modest but consistent COLA adjustment for federal contractors, ensuring that these workers are not left behind as inflation erodes their purchasing power.
Outlook for Future COLA Adjustments
The future of COLA adjustments is uncertain, as it depends on various economic factors and policy decisions. However, it is generally expected that COLA adjustments will continue to be made in the foreseeable future, at least in some form.
Factors Influencing Future COLA Adjustments
- Inflation rate
- Federal budget deficit
- Political priorities
- Economic growth
- Retirement security concerns
Possible Scenarios for Future COLA Adjustments
- COLA adjustments may continue to be made at the current rate of 1.5% per year.
- COLA adjustments may be increased to a higher rate, such as 2% or 2.5% per year.
- COLA adjustments may be reduced to a lower rate, such as 1% or 0.5% per year.
- COLA adjustments may be suspended or eliminated altogether.
Estimated COLA Adjustments for 2026-2030
| Year | Estimated COLA Adjustment |
|---|---|
| 2026 | 2.0% |
| 2027 | 2.2% |
| 2028 | 2.3% |
| 2029 | 2.4% |
| 2030 | 2.5% |
It is important to note that these are only estimates and actual COLA adjustments may vary depending on economic conditions and other factors.
2025 Federal Employee Cost of Living Increase
The 2025 Federal Employee Cost of Living Increase (COLA) is an important issue that affects millions of federal employees across the country. The COLA is designed to help ensure that federal employees are able to maintain their standard of living in the face of rising inflation.
The annual COLA adjustment is based on the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) over the 12 months ending in September of each year. The CPI-W measures the average price of goods and services purchased by urban wage earners and clerical workers. In 2022, the CPI-W increased by 8.7%, resulting in a 5.9% COLA for federal employees in 2023.
There is some uncertainty about the size of the 2025 COLA due to the recent volatility in the inflation rate. However, most experts expect that the COLA will be in the range of 3% to 5%. This would be a significant increase over the 2023 COLA, but still below the current inflation rate. This would provide federal employees with some relief from the rising cost of living but may not be enough to fully offset the impact of inflation.
People Also Ask
What is the average federal employee salary?
The average federal employee salary is $97,490. However, salaries vary widely depending on the employee’s job title, location, and years of service.
What is the General Schedule (GS) pay scale?
The General Schedule (GS) pay scale is a system of pay grades and steps that is used to determine the salaries of most federal employees. The GS pay scale consists of 15 grades, each of which is divided into 10 steps. Employees are placed in a grade and step based on their job title and years of service.
How often are federal employees paid?
Federal employees are paid biweekly, every other Friday.
