How To Ask for a Cost of Living Raise

It seems like everything around you is getting more expensive, and that’s because it is. This means that it might be time to ask for a cost of living raise (COLA).

After spending more than two decades below 3%, the consumer price index (which is a key measure of U.S. inflation) nearly tripled from 2020 to 2021, rising from 1.4% to 7.0%. This has led the country to see the largest price increases since the 1970’s and early 1980’s.

If you’re struggling with rising costs, you’re not alone. A 2019 Pew survey found that 35% of middle-income families frequently worry about paying their bills; similarly, 37% worry about the cost of health care for themselves and their families. If you need further validation that living is more expensive than ever, the White House estimates that between 1990 and 2019, the overall cost of living rose by 74% based on the Personal Consumption Expenditures Price Index and by 90% based on the Consumer Price Index retroactive series.

Okay, so prices are rising, but your income is staying the same. Sound familiar?

If this is the case, you may want to inquire about a cost of living raise.

What is a Cost-of-Living Raise?

A cost of living raise, otherwise called a cost-of-living adjustment (COLA), is an increase in pay or benefits designed to keep up with the rising costs of goods and services due to inflation. COLAs help keep people’s earnings and living costs in proportion. Inflation is one factor that makes goods and services cost more.

With that said, asking for a cost of living raise can be daunting.

Cost-of-Living Adjustment (COLA) Information You Need to Know

Some employers integrate COLAs into their annual compensation plans, while other companies only offer these raises as incentives. This means that they offer COLAs based on merit. Alternatively, some employers may be open to the idea of a COLA, however they leave it up to the employee to bring it up for discussion.

When considering asking for a COLA, keep in mind that the average increase is typically 2% with a maximum COLA of 3%. The Social Security Administration’s Cost of Living Adjustment has jumped from 1.3% in 2020 to 5.9% in 2021 with the pandemic. It jumped again in 2022 to 8.7%. While these numbers are staggering, an 8% COLA isn’t very likely. With this said, some employers say they’re boosting that to 4%, given the current economic climate.

Regardless of skyrocketing inflation rates, cost of living raises are not mandatory for companies to offer. This leads many employees to seek employment elsewhere in order to negotiate a higher salary upon receiving an offer.

How to Calculate Your Cost of Living

To calculate your cost of living, you’ll need to have a breakdown of your expenses. This encompasses food, rent/mortgage, transportation, healthcare, childcare, and any other expenses you incur to sustain your current lifestyle.

To calculate your personal cost of living, add up all of your monthly expenses:

• Fixed expenses (i.e. rent or a mortgage payment, car payments, insurance payments, etc.)
• Variable expenses (utilities, groceries, gas costs, etc.)
• Occasional but expected purchases (i.e. car maintenance, home maintenance, or doctor visits)

The resulting amount, assuming you aren’t going to debt every month, is your cost of living.

To calculate the general cost of living, economists evaluate prices for goods and services. This is referred to as the Consumer Price Index (CPI), which is used to measure changes in the cost of living over time.

The CPI is calculated by taking the average prices of a fixed basket of goods and services and comparing it to the prices of the same basket in a different period.

To determine the cost of living based on different areas, you can use online calculators that evaluate average expenses based on regional prices. These calculators utilize data conducted by researchers who evaluate prices in each city at a specified time in compliance with specific standards. This helps provide the most accurate estimate possible.

Reasons You Might be Eligible for a Cost-of-Living Raise

Relocation

Whether you’re relocating for a job or relocating for a spouse, partner, or family member, this may make you eligible for a COLA. Some companies offer salary adjustments based on where employees live.

Different regions are in different tiers based on the local cost of living. For example, an employee living in the San Francisco Bay Area may get paid more than an employee in Oregon, simply because cost of living is higher in different pockets of the country. In this case, The Bay Area is more expensive than living in Oregon.

Increased Healthcare Costs at Work

Benefit prices fluctuate just like other goods and services. If your employer has raised your healthcare rates, or a benefit payment that you regularly make, you may be able to use this as leverage for a cost of living raise. 

If this is the case, be sure to come prepared with hard facts, numbers, and comparisons.

Updated Employment Requirements

Many people who got hired during the pandemic were afforded the opportunity to work remotely. As pandemic requirements have lifted, many companies are asking employees to come back to the office, or at the very least, to work a hybrid schedule. If this is the case, this official measure may give you leverage when asking for a COLA. 

Consider bringing up points including increased transportation expenses, potential relocation, or increased childcare costs associated with working onsite versus remotely.

Cost of Living Has Increased

Cost of living has increased everywhere because inflation is currently high. This is a reason to ask for a cost of living raise.

However this raise must be in line with the average increase in your area. The COLA increase is not meant to supplement a lavish lifestyle, but to help individuals and families keep up with the average price of goods and services.

How to Request a Cost-of-Living Raise

While the cost of living may be expensive, it should not be the #1 reason you “deserve” a raise. Instead, consider it to be part of the discussion. 

Come Prepared

When asking for a COLA, come in prepared. Evaluate your work, note the achievements you’ve made, and consider the impact your achievements have had on your team, department, or organization. Use this information to highlight why you deserve a raise.

In addition, research if COLAs are common at your company. As another leverage factor, you can look up the Bureau of Labor Statistics to review salary data based on your job title and location to assess if you’re being compensated fairly. This might help provide you insight on how well (or how poorly) you’re being compensated.

Calculate Your Total Compensation

Many people forget all that is included in “total compensation” and merely focus on their salary. Instead, identify all of the compensation or benefits you’re getting in your job. 

Some benefits that would be factored into total compensation include:

• Wellness incentives or healthcare benefits (think: parental leave, fertility support, etc.)
• Stocks (options or RSUs)
• 401K matching, HSAs, or pensions offered by your employer
• PTO
• Longevity pay

While these are not reflected in your salary, the monetary benefits that each of these perks adds into your total compensation.

Consider the Company’s Standing

While you may be eligible for a cost of living raise, be mindful of the timing in order to determine when to ask for it. If the company just landed additional funding or secured a new partnership, it may be a great time to inquire about this raise.

On the flip side, if the company is going through layoffs or had a poor quarter in regards to meeting goals, it’s probably not the best time to make the ask.

Even during tough times, you should ask for a raise when:

• You’ve taken on extra responsibilities. 
• You’ve upskilled to a level that warrants extra compensation.
• You’ve hit (and exceeded) the goals you set. 
• You’ve been working steeply below market value for a long time. 
• You were promised a raise or promotion if [x] happened—and it has. 
• Your organization is doing well, partly due to your specific efforts.

You (Maybe) Shouldn’t Ask for a Raise When:

• You’re only asking because you’ve been at the company for a certain amount of time. This alone will not be a compelling case for management.
• You can’t find evidence that you’re a good employee, much less an irreplaceable employee.
• You know your company is in the red due to the current climate.
• You can’t gather meaningful data about the impact you’ve made.
• You’ve recently received a poor performance review or a corrective action. 
• Your manager has explicitly communicated that raises are not on the horizon. However, do have a conversation about when you can revisit the subject matter.

When Asking for a Raise, Think Beyond Money

Yes, money makes the world go ‘round, but asking for other benefits that may not increases your salary, but reduce your cost of living can make a big impact on your bank account. 

When asking for a raise, specifically when the company cannot accommodate an increase in salary, consider what perks will benefit your life and reduce your expenses.

This might come in the form of a flexible schedule. Remote work might help cut down on your childcare costs, and we all know how expensive little ones will be! Working remotely might also help ease the burden of taking care of a loved one who is ill.

Alternatively, you may ask for additional PTO. While it doesn’t give you a percentage increase in your salary, it allows you more (paid) time to do as you please. Whether it’s traveling, having a staycation, or just taking a mental health day when you need it, having the extra PTO is a huge plus!

How to Ask for a Raise [The Template]

The easiest way to effectively ask for a raise is to cover the Who, What, Where, Why, When, and How. Here’s the formula. We’re calling it “The GIMME”:

• G: Give Background Info
• I: Introduce Why You’re Awesome
• M: Make Your Case Research-based (This is where all that research comes in!)   
• M: Make the Ask
• E: End With a Bang

Use this template to guide you, and fill in the details as necessary. Once you have the info, practice! 

You’ll want to set up a time to speak with your boss, so get something on the calendar. You can set up a meeting prior to getting this information together, but depending on how fast your boss usually responds to meeting requests, it’s probably better to work on this before inquiring about a meeting. Consider reaching out and saying something along the lines of:

What it Comes Down To

Your company is not required to offer you an annual increase in pay. If you need the extra support, it might be worth considering making moves in your career and putting your feelers out there for other opportunities.

While it’s not required for companies to offer COLAs, you do deserve to be fairly compensated. If your research shows that you’re not being properly compensated for your work, focus on finding a role where you will meet the compensation level you deserve.

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This article was written by The Salary Project writer, Michele Lando.