Learning about the 2009 Cost of Living Raise

Every year, the government provides a cost of living raise to help with the growing cost of inflation. The amount of increase is based on a series of factors. People can look at the Consumer Price Index to get an idea of what each year’s increase would be but over the years, the average has been 3.2% to 3.9%. While it would be nice to see more especially with the tough economic crisis, many people are grateful for anything. Interestingly, some governmental officials have opted out of a raise but people on Social Security and those working for the Federal Government have been provided with a decent 2009 cost of living raise.

The actual increase varies from one area to another. For instance, people living in major urban areas such as Los Angeles were provided with a 4.1% increase in 2005 but those in San Francisco only saw a 1.1% change. The Consumer Price Index or CPI covers changes such as housing, transportation to include gas and insurance, and even food. However, the government does not consider that each household has different expenses. For instance, one family may have horses or cattle or another family might have college tuition whereas another family does not.

Federal employees have inside information as to how the 2009 cost of living is determined. Even so, many federal employees feel the amount of increase they are provided does not even come close to actual expenses. Of course, each year a number of special events could happen that affect the government, which would have a direct impact on the raise.

The targeted raise in 2008 for federal employees ended up with a 2009 cost of living raise of 3.5% but with caveats. As an example, anyone leaving the government due to illness or a work-related injury would see an increase adjustment. Additionally, the calculation for determining the raise varies between retirement systems.

As an example, members of the House Armed Services Committee passed a bill whereby military pay starting in 2010 and ending in 2013 would benefit from a one-half percent increase over the ECI or Employment Cost Index relating to people working in the private sector. Also, federal retirees were in line for a larger 2009 cost of living raise over people actively working in the federal government.

For Social Security, people on VA disability were granted a 5.8% increase. Then, for people living on monthly Social Security and Supplement Security Income, they too were given a 5.8% 2009 cost of living raise. Today, more than 55 thousand people in the United States receive these benefits. To help, they were provided with a raise: the highest in the past 27 years. In addition to the pay increase, people receiving Social Security benefits can now earn more. However, this means that taxpayers will now start paying more for Social Security in 2009.

The bottom line is that the 2009 cost of living increase is designed to help people maintain a certain standard of living, not one of luxury but one of necessity. The determination as to what increase is given each year has a direct link to both deflation and inflation. The United States Bureau of Labor Statistics is the entity of the government that has the responsibility for monitoring and tracking changes, which are then compared to prices from a previous year. That information is one of the components for setting the increase or even decrease specific to the cost of living calculation.

What happens is that the Consumer Price Index completes an analysis of 14,000 households in the United States, looking at spending habits. These households are carefully chosen and deemed representatives of both metropolitan and urban living in the country. After the information has been gathered, highly trained data collectors pull it all together and then begin the process of compiling approximately 80,000 price quotes every month.

This process of gathering information for the Bureau of Labor Statistics first started in 1980 because of massive increases during the 1970s. At that time, the government realized that something had to be done to absorb excess cost of living. Since that time, increases have become an annual event. While the 2009 cost of living raise could have been more, considering the current economic situation, people are happy to have some kind of assistance.