We recently got a question about how to measure cost of living increases, and since that has come up before, a blog post seemed in order. Often folks want to know what cost increases they should use for budgeting purposes, and while we can’t tell you what will happen in the future, we can use the recent past as a guide.
Increases in the cost of living are commonly measured through changes in the Consumer Price Index, or CPI. The CPI is calculated by the U.S. Bureau of Labor Statistics (BLS). An increase in the CPI equals the amount of inflation in prices. In June, the most recent month when data is available, the BLS reports that the CPI had increased by 5% compared to a year ago.
Go to the Bureau of Labor Statistics for any inflation-related information.
- It has an inflation calculator that will do the adjustment for inflation for you – for example, it shows that $20 in 1980 has the same buying power as $53.11 in 2008.
- The most up-to-date information on changes in inflation are on the CPI Home Page.
- To do the calculations yourself the BLS provides a handy table.
Feel free to email Katherine on how to use the table (email@example.com) or with other questions about navigating the BLS site – it has a wealth of information that can be a little overwhelming.
The buying power of U.S. workers’ wages is certainly hurting right now. Inflation for 2008 is tracking above 4%, while weekly paychecks this past year have increased just 2.8%. This decline in earnings power means a person’s earnings doesn’t go as far as it used to. And that’s not good news for the economy.
-Nan Madden and Katherine Blauvelt