Stronger dollar may affect U.S. COLA rate
Stars and Stripes March 16, 2008
The stronger dollar means servicemembers buying won will be paying less for off-post goods and services, but it was unclear Friday whether a cost-of-living allowance adjustment would mitigate the advantage.
The Pentagon’s Per Diem, Travel and Transportation Allowance Committee usually evaluates COLA on the 1st and 16th of each month.
It hasn’t changed COLA for South Korean-based servicemembers since Jan. 16, U.S. Forces Korea officials said Friday.
COLA is based on surveys that determine servicemembers’ shopping patterns and retail prices off post.
When overseas prices are higher using dollars than they would be in the United States, servicemembers see more COLA money in their paychecks.
Because of the won’s recent dive, it now takes fewer dollars to buy goods and services off post. Should the trend continue, servicemembers at some point would be likely to receive less COLA.
However, if the cost of living in the United States were to drop at the same time the stronger dollar makes living in South Korea cheaper, then the COLA might not change, according to information provided by USFK from the Per Diem, Travel and Transportation Allowance Committee.
COLA is based only on spendable income. Housing costs, taxes and a few other items aren’t part of COLA calculations.
Overseas Housing Allowance is a separate calculation from COLA but is also subject to changes in the currency exchange rate.
The same Pentagon committee must evaluate OHA once every six months, but it can decide to make changes as often as every payday.