Should cost of living pay increases be based on the Consumer Price Index? Or what?

Question

I am trying to find out how to figure cost of living pay increases and what percentage to use to do the calculations.

Answer 1

In a word, yes.

CPI is a basket of goods and services. Naturally, everybody is different, so somepeople are going to get a nice bonus and somepeople are going to be hurt by inflation.  

You can use other inflation indices (eg, GDP price deflator, PPI), but CPI is usually the most common one.