If we consider that inflation hovers around 2.6% on average, to cover the falling purchasing power of the dollar, one must get a raise of at least the rate of inflation to make, in adjusted dollars, exactly what they made the year before. So, for example, if inflation some year is 3.0%, and your employer offers you a 3.0% "raise", you really haven't earned a raise in terms of the buying power of your salary. You will be no richer or poorer than you were the year before. If inflation in a given year is 3.0%, and your employer gives you a raise of 2.5%, you actually come out 0.5% poorer the following year.

Most unions bargain for salary increases annually that act as a COLA - cost of living adjustment. These annual increases are to offset inflation and changes in cost of living, so that at the very least, employees don't get poorer the longer they work for a company. For comparison (and example), the 2006 Social Security COLA is set at 4.1% (http://www.ssa.gov/OACT/COLA/latestCOLA.html).

Raises in salary must take into consideration not only inflation, but they must also take into consideration fluctuations in cost of living. Changes in what consumers pay for certain goods are reflected in the CPI - consumer price index (http://www.bls.gov/cpi/home.htm). The CPI is then used to calculate a Cost of Living Adjustment (COLA). The distinction between a COLA and the CPI is stated on the Bureau of Labor Statistics website:

"The CPI frequently is called a cost-of-living index, but it differs in important ways from a complete cost-of-living measure. BLS has for some time used a cost-of-living framework in making practical decisions about questions that arise in constructing the CPI. A cost-of-living index is a conceptual measurement goal, however, not a straightforward alternative to the CPI. A cost-of-living index would measure changes over time in the amount that consumers need to spend to reach a certain utility level or standard of living. Both the CPI and a cost-of-living index would reflect changes in the prices of goods and services, such as food and clothing that are directly purchased in the marketplace; but a complete cost-of-living index would go beyond this to also take into account changes in other governmental or environmental factors that affect consumers' well- being. It is very difficult to determine the proper treatment of public goods, such as safety and education, and other broad concerns, such as health, water quality, and crime that would constitute a complete cost-of-living framework."

SO, if we want people who work for a company to maintain their standard of living, i.e. not get poorer every year they work for said company, they must demand COLAs at bare minimum (which one could quickly figure is at least the inflation rate). A raise below the set COLA is in actuality a pay-cut.

COLAs - good for people who work for a living.