The Cost of 'Basic Necessities' Has Risen Slightly More Than Inflation Over the Last 30 Years
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[Excerpt] Contracts often use an all-items index to ensure that payments are adjusted to account for overall consumer inflation in the economy. The CPI is designed to track the average change over time in the prices paid by either urban consumers or urban wage earners for a constant-quality market basket of goods and services. Cost-of-living adjustments that use the CPI for All Items are based on changes in the average level of prices across the broadest range of goods and services available in the consumer marketplace. However, one might be interested in price change across a more limited range of items. For example, one might wish to know how the price of a set of items that constitute “basic necessities” for daily living changes. A general consensus on the set of goods and services necessary for daily living is perhaps elusive; however, this Beyond the Numbers article constructs three pairs of experimental indexes for three different sets of goods and services that might reasonably be considered necessary for daily living. Each pair consists of a U.S. city average for the CPI-U and for the CPI-W. Thus, six indexes are presented for comparison.
cost-of-living adjustment; COLA; Consumer Price Index; CPI; inflation; earnings