Will Next COLA Match 7.4% of 1982? CPI-W Index Up 8.6% in 12 Months

The 2022 COLA was 5.9%—the largest in 40 years. The CPI-W for February is up 8.5% in 12 months. Will the 2023 COLA go even higher?

Last year, the 5.9% cost-of-living adjustment (COLA) that was applicable in January based on the CPI-W index was the highest COLA in 40 years. But, hang on to your hats, the 2023 COLA may go even higher based on the latest estimates and CPI figures.

While current predictions are pointing to a higher COLA next year, if the initial reaction of a reader is excitement over getting a bigger COLA adjustment in January 2023, your enthusiasm should be restrained. If the annual COLA is higher than 5.9% in 2023, it means your purchasing power is continuing to decline more than your income is going up.

The CPI-W and Why It is Important for COLA Predictions

Here is why the CPI-W is important.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is the index used to determine the amount of the COLA for the next year. Through February of 2022, the CPI-W index increased 8.6% over the last 12 months. Just in February, this inflation index rose 1%.

The annual COLA is determined by comparing the change in the CPI-W from year to year, based on the average of the third-quarter months of July, August , and September. Last month, the CPI-W was 2.93% higher than the average CPI-W for the third quarter of 2021.

CPI-W Now 3.92% Higher Than 3rd Quarter of 2021

In February, the CPI-W average was 3.92% higher than the third quarter of 2021.

As announced in October 2021, federal retirees received a 5.9% increase for Civil Service Retirement System (CSRS) annuities and Social Security benefits. There was a 4.9% increase for Federal Employees Retirement System (FERS) annuities beginning in January 2022. 

For comparison, in March 2021, people were just starting to notice inflation. In that month, a FedSmith article noted the projected COLA cited for 2022 was 3%. At that time, the inflation index was up 2.2% over the third quarter average for the previous year. But, as we now know, the actual COLA percentage was 5.9%.

CPI-W IncreaseFinal COLA
March 20212.2%5.9%
March 20223.92%?

Inflation Up 7.9% On An Annual Basis

The latest consumer price index climbed 7.9% on an annual basis, according to data released on Thursday by the Bureau of Labor Statistics. Month-over-month, inflation rose 0.8%.

The new monthly figures compare to an annual 7.5% jump in January. The February rate is the fastest increase in inflation since February 1982, when inflation hit 7.6%.  

The largest increase was in gas prices which jumped 6.6% and accounted for almost one-third of price hikes. The cost of food went up 1%. According to the American Automobile Association, the average gas pump price is now almost $4.32 per gallon. In California, the average price today is listed as $5.69 and reportedly now above $7.00 at some filling stations.

A Look Back at Previous COLA records

For a bit of history, in 1982, the COLA was 7.4%. President Carter left office in 1981. The largest COLA was in 1980 when he was still in office. In that year, the COLA hit 14.3%.

Prior to 2022, the highest COLA in recent years was in 2009 when the COLA was 5.8%. The second-highest reading was 4.1% in 2005. The 2022 COLA is now the number one position for the highest COLA in recent memory. It is too early to project what the COLA will be in 2023. The 7.4% reached in 1974 is not out of the question for 2023.

Inflation was obviously running very high before the Russian invasion of Ukraine—most likely as a result of the large amount of money being fed into the economy by the federal government and the large consumer demand for goods and services with the receding of the COVID pandemic, but other events have made the inflation scenario more dramatic.

With the banning of Russian oil sales, the impact the war will start to have on food prices, and the insecurity and political turmoil likely to result from the havoc and destruction of this war, betting on a higher inflation rate for much of this year would not be unreasonable.


No one can predict with assurance what will happen with inflation and the war in the Ukraine with any certainty. Inflation was already going up significantly before the Russian invasion of Ukraine. It is now going up faster.

Will inflation and the 2023 COLA break a 40-year old record? Will the remaining months of 2022 bring back memories of the misery gas lines of the 1970’s and bring back proposals to ration gas and impose price controls?

No one knows, of course. The Federal Reserve will be raising interest rates to tamp down inflation but there are events now unfolding that could rapidly escalate leading to inflation levels not seen in 40 years or more.

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