Social Security 101, Part I.

Retirees' initial Social Security benefits are calculated according to wages earned over their lifetime. For purposes of the calculation, their earnings are adjusted for wage inflation. After the initial Social Security benefit is established, annual cost of living adjustments depend on price inflation.

For the last century, wages have risen about 1.1 percentage points a year faster than prices have. That has resulted in steady growth in the purchasing power of Social Security benefits.

(5-1-05, The Los Angeles Times.)