Will 2018 COLA Exceed Federal Employee Raise?

Current federal employees are likely to receive a smaller pay increase in 2018 than federal retirees.

How big will the COLA be for retired federal employees and Social Security recipients in 2018? Will current federal employees receive more or less than the 2018 COLA?

Prognostication for 2018 COLA

As of July, the relevant figure for the 2018 COLA increase is 1.6%. That is not the final amount that will be applicable in January 2018.

The cost of living adjustment (COLA) for Social Security recipients and federal retirees has averaged about 1% since 2012. This includes Social Security and federal retirees not receiving any increase in 2016.

One estimate for the final 2018 COLA amount is 2.1%. While the actual increase is not effective until January 2018, the amount of the 2018 increase will be announced in mid-October.

2018 Federal Employee Pay Raise

Based on past experience, the final amount of any pay raise for federal employees may not be known until late in 2017. That is because, unlike the annual COLA amount, the federal pay raise process is more complex and unpredictable. A number of factors can determine the final amount.

We do know that the current best estimate for the 2018 pay raise for current federal employees is 1.9%.

As of now, we assume that the 1.9% pay raise is likely to be an average with a higher amount in some locality pay areas and less in others. The base pay rate increase for 2018 will be less than the overall average.

The average 2018 federal employee pay raise figure is likely to be reached by taking into account locality pay rates.

If Estimates Are Correct…

If the current estimates are correct, this means that retired federal employees and Social Security recipients will have a greater increase in their income in January 2018.

2017 COLA Increase

The 2017 COLA increase was 0.3%. This was the smallest increase on record with the exception of the several years without any COLA increase.  The COLA increase was 1.7% in 2015, 1.5% in 2014 and 1.7% in 2013. There were no COLA increases in 2016, 2011 or 2010.

2017 Pay Raise

In 2017, there was an average pay raise of 2.1%.  There was an across the board 1% pay raise. An additional amount was added for locality pay rates. Locality pay increases are applicable to most federal employees. The actual amount of the 2017 pay raise therefore varied according to the geographic location of an employee.

It is likely there will be a similar situation in 2018 with some federal employees receiving a higher raise and others receiving a lower raise depending on the applicable locality pay rate.

A number of factors could alter the estimate of an average raise of 1.9% for current federal employees. Legislation could be passed in Congress to grant a higher or lower amount. Legislation could also be passed to implement a form of higher raises for the highest performing employees.

The 2018 pay raise is likely to be in a state of flux until November of December. Based on current estimates, it appears federal retirees may come out slightly ahead of current federal employees. There could also be a change in locality pay prior to 2018 that would impact some readers.

No doubt, several events will occur that will create excitement or consternation for the 2018 pay raise. We will keep readers advised as new events occur.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47