Final answer:
The statement that it is common for labor agreements to include a cost-of-living adjustment (COLA) clause is true, especially as seen in the 1970s and 1980s when labor unions frequently negotiated such terms to protect wages against inflation.
Step-by-step explanation:
It is indeed common for labor agreements to contain a cost-of-living adjustment (COLA) clause during the term of the contract. This statement is true. Cost-of-living adjustments (COLAs) are typically designed to protect employees' wages from the erosive effects of inflation. During the 1970s and 1980s, it was standard practice for labor unions to negotiate wage contracts that included COLAs.
These adjustments ensured that an increase in inflation would lead to a corresponding wage increase, hence maintaining the purchasing power of the wages. For instance, a contract with COLA plus 3% would mean that if inflation were 5%, wages would increase by 8%. Similarly, if inflation climbed to 9%, wages under this formula would increase by 12%. This approach is known as indexing which ties wage increases to the inflation rate.