ESCALATOR CLAUSE

A provision in a contract that stipulates that wages or prices are to be automatically increased or decreased at specific times according to a schedule that is usually related to changes in the cost of living (cost of living allowance, or COLA) as measured by a designated index or other standard (e.g. the consumer price index). The provision may also apply to any ties between employee benefits and the cost of living, as in a pension plan. (TRB)