Transcript
Cost of Living & Inflation Measures
Robert ScardamaliaRLS Demographics, Inc.
with regards to Michael Lavin
Overview
• Inflation measures vs. Geographic Cost of Living Comparisons
• Their purpose• Who collects/produces them?• How are they produced?• How to obtain the data
Link from Wikipedia
www.missourieconomy.org/indicators/cost_of_living/index.stm
www.missourieconomy.org/indicators/cost_of_living/index.stm
Inflation Measures
Purpose
• To compare changes in prices over time • Need to distinguish between:– “price index” like the CPI versus – “cost of living”
Uses of Inflation Data• Fiscal and monetary policy• Cost of Living Adjustments (COLA)– Collective bargaining agreements– Government programs (SS, food stamps)– Contracts (leases, etc.)– Standardized tax deduction
• Poverty Threshold Adjustments• Website calculators
Consumer Price Index
• Produced by BLS• Measures prices for a specific market
basket of goods and services in a SPECIFIC GEOGRAPHIC AREA OVER TIME as an index relative to a base period
CPI Market Basket
• Based on purchases by average consumer– Urban Wage Earners & Clerical Workers (32% of
U.S. households)– All Urban Consumers (87%)
• Designed from Consumer Expenditure Survey
Consumer Expenditure Survey
• Conducted by Census Bureau for BLS• Diary Survey– Frequently purchased items– 2 consecutive 1-week periods
• Interview Survey– Large expenditures– Quarterly interview for 5 quarters
Data Collection
• Outlet selection– telephone survey of consumers on where they
buy goods within category
• Item selection– 305 entry level items (peanut butter)– Specific item • JIF, crunchy, 25 oz. glass jar• Price collected on specific item
Limitations
• Quality changes (e.g. generic drugs)• Replacement items (New chained index)• Population subgroups (elderly, poor)• Excludes taxes, • Excludes “free” public goods• Understates homeowner costs• Geographic areas covered
Indexes Available• Index series (who’s included)
– All Urban Consumers (CPI-U)– Urban Wage Earners and Clerical Workers (CPI-W) – Chained All Urban Consumers (C-CPI-U)• Starts in January 2000
– Same items included, but different weights• Base periods
– All indexes relative to this number– 1982-84 (average prices) = 100– 1967 = 100
Geographic Areas
• U.S. City Average• Census Regions• Metro Areas– 3 monthly metros– 11 bimonthly– 6 semi-annual
Other Inflation Measures
• Implicit Price Deflator of GDP– Combines consumer, gov’t., business– Weights based on proportion of GDP
• Employment Cost index
When You Need Location Comparisons• ACCRA (C2ER) Cost of Living Index– Average of all locations = 100
• Market Basket– “How do urban areas compare in the cost of
maintaining a standard of living appropriate for moderately affluent professional & managerial households”
– Very Specific Items (grocery, housing, utilities, health care, transportation, misc goods and services)• T-bone steak, eggs, potatoes, rent, tire balancing, dental visit
• Compiled and published quarterly– $75 per issue (PDF)– $150 per year (PDF - 4 quarters)
ACCRA Cost of Living Index – Cont’d• Data Collection– Chambers of Commerce and others– Establishments where mid-level managers, etc.
would shop• Geographic Coverage– About 340 Urban Areas– Exact coverage varies by quarter– Based on who collects data
• Data Reported– Index (by sector)– Average Prices
ACCRA New York Locations
Albany NY Brooklyn NYBinghamton NY Manhattan NYBuffalo NY Queens NYGlens Falls NY Plattsburgh NYIthaca NY Dutchess County NYNassau County NY Rochester NY
• ACCRA COLI Methodologywww.coli.org/method.asp
• COLI Manualwww.coli.org/surveyforms/colimanual.pdf
ERI Cost of Living Analysis
• Compiled by Economic Research Institute (subsidiary of Baker Thomsen Associates)
• Based on cities, not Metro Areas• Utilizes 4 different income levels• Annual compilation• Multiple data sources– Published data– Proprietary employer surveys– Surveys of national retail chains
ERI Cost of Living Analysis
HUD Fair Market Rents
• National coverage– Metropolitan Areas– Nonmetropolitan counties
• Represents lower income expenses• 3 methodologies used
– American Housing Survey– Decennial Census– Random Digit Dialing Telephone Surveys
• Updating older data with CPI• Will most likely switch to ACS data
Other Inter-City Comparisons
• Sperling’s Best Places• Free Web Resources– HomeFair (Nat. Assn. Realtors)– Salary.com
• Specialized SourcesBOMA, AAA, etc.
Which Source Is Best?
• ACCRA is best-known, most widely cited• Beware of sources where methodology is
undocumented
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