Calculating the Cost of Living: The Bureau of Labor Statistics

Occasionally there is a need to compare prior income or costs of living with more recent ones. So how exactly do you account for changes in the cost of living ? The easy answer is you turn to the Bureau of Labor Statistics (BLS). The BLS is a government office that, among other things, is responsible for the CPI - or the Consumer Price Index. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Quite literally it represents an actual shopping list of goods and services and checks them, on a monthly basis, for changes in pricing.

So what goods and services are we talking about ? The major groups and examples of categories in each are as follows:

• FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
• HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
• APPAREL (men's shirts and sweaters, women's dresses, jewelry)
• TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
• MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
• RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
• EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
• OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

Also included within these major groups are various government-charged user fees, such as water and sewerage charges, auto registration fees, and vehicle tolls. In addition, the CPI includes taxes (such as sales and excise taxes) that are directly associated with the prices of specific goods and services. However, the CPI excludes taxes (such as income and Social Security taxes) not directly associated with the purchase of consumer goods and services. The CPI does not include investment items, such as stocks, bonds, real estate, and life insurance. (These items relate to savings and not to day-to-day consumption expenses.)

For each of the more than 200 item categories, using scientific statistical procedures, the Bureau has chosen samples of several hundred specific items within selected business establishments frequented by consumers to represent the thousands of varieties available in the marketplace. For example, in a given supermarket, the Bureau may choose a plastic bag of golden delicious apples, U.S. extra fancy grade, weighing 4.4 pounds to represent the Apples category. For more information about the CPI and how it is used visit the BLS CPI web page.

The BLS also has an Inflation Calculator which allows you to put in a dollar amount, attached to a specific year all the way back to 1913, and then ask what that amount would be in some other year based on the impact of inflation. So for example, my father had an annual salary of roughly $9,000 in 1962. According to the BLS Inflation Calculator that would be the equivalent of an annual salary of $69,297 today.

To see inflation adjusted income measures for Herkimer and Oneida Counties from 1970 to the most recently available data, click on the table below.

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