Definition

Noun: 1. A system of economic adjustment: The automatic linking of wages, pensions, taxes, or other financial values to a recognized index, most commonly a cost-of-living index, to preserve their real value against inflation. 2. The process of creating an index: The act or method of compiling data into a systematic list or indicator for reference.

Usage

• Primary Usage (Economic): Used to describe a policy or contractual mechanism where payments are adjusted periodically based on changes in a specified index.
  • The government introduced indexation to protect pensioners from losing purchasing power.
  • The contract includes an indexation clause tied to the Consumer Price Index.
• Secondary Usage (General): Used in contexts involving the organization of information.
  • The indexation of the library's archives took several months to complete.

Advanced Usage

• "Wage indexation": A specific system where salaries are automatically adjusted for inflation.
  • Strong wage indexation can sometimes contribute to an inflationary spiral.
• "Tax bracket indexation": The adjustment of tax brackets to prevent "bracket creep," where inflation pushes taxpayers into higher tax brackets without an increase in real income.
  • Many countries use tax bracket indexation to ensure fairness.

Variants and Related Words

• Index (noun/verb): The list or figure (e.g., CPI) used as a reference point; the act of creating such a list.
• Index-linked (adjective): Describing a financial product whose value changes with an index.
  • He bought index-linked bonds.

Synonyms

• Escalation (in a contractual context)
• Adjustment
• Linking

Antonyms

• Fixed rate
• Static valuation

Related Phrases

• "Tied to the cost-of-living index": A phrase describing the core mechanism of indexation.
  • Their salaries are tied to the cost-of-living index.
• "Inflation protection": A common goal of indexation policies.
  • Indexation provides a form of inflation protection.

Noun

1. a system of economic regulation: wages and interest are tied to the cost-of-living index in order to reduce the effects of inflation