Done By:

Mohana Priya,
Anusha,
Shri Rajeswari,
Jaya Pradha,
Ahaana,
Dheepa,
Vaanmathi

When prices rise over a period of time and

pay does not, real pay is actually lowered.
Cost of living is one of the external
factors influencing employee remuneration.
The Cost of Living Index figures out the
expense of a certain standard of living
maintained over time. Basically it measures the
changes of cost. If it rises over time, then it
means that there is an inflation. It reflects the
current price level of goods and services
related to some base year. Cost of living varies
from place to place, and from time to time.

The justification for cost of living as a criterion for

wage fixation is that the real wages of workers
should not be allowed to shortened by price
increases. This criterion matters during periods of
rising prices and is forgotten when prices are stable
or falling.
A rise in the cost of living is sought to be
compensated by payment of DA, basic to remain
undisturbed.
Many countries include an escalatory clause in
their wage agreement in terms which DA increases or
decreases depending upon movements of Consumer
Price Index (CPI).
Consumer Price Index (CPI) is a measure of the
average change over time in the prices paid by
consumers.

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To decide the class of people for whom it is

meant.
Five major items to be included-a) Food
b)Clothing 3) Fuel & Light d) Housing e) Misc.
To include mostly used goods in the groups.
To collect retail prices of the items at regular
intervals from important local markets.
To choose correct weights for the items/
groups because cost of living index is always
weighted index.