Cost of living scardamalia sdc

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Cost of living scardamalia sdc

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

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