The Cost of Living Allowance (COLA) under the urban postal operations collective agreement came into effect February 1, 2008. (See article 35.09). The COLA provides insurance against the possibility of a spike in inflation. If, during the three year period beginning February 1, 2008, the cost of living rises by less than 8%, the COLA will pay nothing. That’s because our wage increase of 8.2% will have been more than the rate of inflation. But, if inflation rises by more than 8% the COLA will be paid and the amount of COLA will basically make up the difference between our scheduled wage increases and the increase in the cost of living.

How the COLA works

Each month, Statistics Canada reports on the changes in the cost of living. The calculations are based on a broad “basket” of expenditures, such as housing, fuel and groceries, which constitute average spending patterns of individuals. Statistics Canada reports on the rate of inflation on a national, provincial and local basis. For our COLA, the collective agreement requires us to use the national figures and an index of 1992 = 100. In January 2008, the “all items” index (1992 = 100) was 133.0. If the Consumer Price Index (1992=100) rises to a level greater than 143.6 before February 2011, the COLA will start to pay out. The payment is made for all hours paid and begins on the first of the month that the Consumer Price Index surpasses the 8% “trigger”.

Example: Inflation goes up 9% between January 2008 and January 2011. The Consumer Price Index is 143.5 in December 2010 and increases to 145.0 in January 2011, the last month of our contract. Since the Consumer Price Index surpassed the 8% threshold in January 2011, the COLA will be paid only for that month. The difference between 145.0 and 143.6 is 1.4. The COLA is paid on the basis of 1 cent for each .06 points. Therefore the COLA would be $0.23 per hour. COLA payments end with the expiry of our collective agreement. If the COLA does pay out we will have to negotiate a provision to “roll-in” the COLA into our basic wage rate.

The COLA is Insurance

Remember the COLA is insurance against inflation. Like every type of insurance, we are better off if we never have to receive it because that would mean that our wage increases are greater than inflation.

Real Wages are Up

For many years, postal workers lost purchasing power because our wages did not keep pace with inflation. This was especially true in the years where we were legislated back to work and our wages were either imposed by an arbitrator or by parliament. In recent years, we have been able to reverse this trend. Last year, the national rate of inflation was 2.2% while the wages of letter carriers and postal clerks increased by 2.5 %. (MAM 11’s increased by 2.2%) During the past five years, letter carrier and postal clerk wages have increased by 14.8%, while the cost of living increased by 9.5%. Next year, letter carrier and postal clerk wages will increase 2.75% while the wages of MAM 11’s will increase 3.6%.