The practice by governments and companies to provide cost-of-living increases with percentages instead of a dollar amount is a major contributor to the extreme gap between the rich and poor.10 comments on this story
For example: a person making $20,000 a year and one making $70,000 each get a 3 percent raise. The person earning $20,000 a year gets a $600 raise, while the person earning $70,000 would get a $2,100 raise. Multiply the difference over the last 20 years and it is easy to see the wide, wide gap in pay equity. Only when raises are given in dollar amounts rather than percentages will the disparity stop getting wider.
So if the cost of living increases by $1,200, the person earning $20,000 will only get half the increase, while the person earning $70,000 will get more than double the increase.