Labor contracts that include so-called COLA provisions
A)tend to link money wages to price increases
B)serve to preserve the purchasing power of workers
C)are a common form of wage indexation in many labor markets
D)often tie nominal wages to a specific price index
E)all of the above

Question

Quizplus · Accepted Answer

Labor contracts that include COLA (Cost Of Living Adjustment) provisions aim to protect workers' purchasing power by increasing wages in response to inflation. These provisions typically tie nominal wages to a specific price index, such as the Consumer Price Index (CPI). This wage indexation is a common practice in many labor markets and tends to link money wages to price increases, ensuring that workers' real wages remain constant despite the rise in the general price level. Therefore, all of the above statements are correct.

Labor Contracts That Include So-Called COLA Provisions