What factors does the federal government's cost of living index reflect?


Quick Answer

There is no cost of living index created by the federal government. Rather, the Bureau of Labor Statistics creates a Consumer Price Index, which measures the difference in the cost of goods over time. The National Center for Policy Analysis creates the ACCRA Cost of Living Index, which measures the prices of goods in various urban and suburban areas across the country. The Council for Community and Economic Research produces a cost of living index based on this data.

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Full Answer

The Consumer Price Index, or CPI, is a measure of inflation by the Bureau of Labor Statistics. It measures the changes in the cost of all consumer products over time with a focus on month to month changes. The data is categorized into food, energy and all other items with subgroups such as apparel, shelter and medical care. CPI data is what the government uses as a cost of living measure for such purposes as Social Security payments, retirement and pension system payouts and tax bracket adjustments.

The ACCRA Cost of Living Index collects data pertaining to how much a good or service costs in different parts of the country, both urban and suburban. Several companies use this information to provide consumers with an estimate of how far their salary would stretch in one area of the United States versus another.

For example, CNN Money provides a calculator that allows users to enter their salary and residence then creates an analysis of comparable salary and cost of goods in a different part of the United States. The tool provides the percentage that groceries, housing and utilities, transportation and health care will rise or fall in the newly selected area.

The Council for Community and Economic Research charges a fee to view its index, which is referenced by the US Census Bureau.

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