Un-COLA: Why have cost-of-living clauses disappeared from union contracts and will they return?

For more than 20 years, unions have been trading cost-of-living adjustment clauses (COLAs) far other forms of compensation. Various explanations have been offered for the erosion of COLA coverage-including reduced inflationar y uncertainty, lower union power, and structural shifts in the economy-but the relative importance of these and competing hypotheses remains untested. We investigate the reasons for the decline in COLA coverage using a pooled cross-sectional, time-series model that accounts for industry fixed effect s and recognizes the multiyear nature of most union contracts. After assess ing the relative importance of alternative hypotheses, we conclude with a d iscussion of the potential for a rebound in COLA rates.