Health & Fitness
Is Your Pay Keeping Pace With Cost of Living?
Compare the rates of increase of various food items and other expenses to the rate of increase of your pay.
The Consumer Price Index (CPI) does not include the cost of food or fuel, so don’t be surprised if your family expenses rise faster than the CPI.
The Bureau of Labor Statistics includes food and fuel in its urban households report (CPI-U) and its report for lower-income urban and blue-collar workers (CPI-W). Sometime around 1999, the method of computing all CPI’s was changed to incorporate the concept of substitution. Before 1999, the food index, for example, was computed on the basis that a family would buy the same proportions of beef, fish and fowl.
After 1999, the index was computed on the basis that a family would substitute a lower-cost item for a higher-cost item. For example, if the price of beef rose relative to the price of fowl, a family would buy more fowl and less beef. Substitution makes the CPI rise less than would be computed by the pre-1999 method because food and energy prices have risen faster than the CPI’s (Exhibit 1). Substitution is not as effective for the low-income worker (CPI-W) as for the average urban worker (CPI‑U) because, if we continue our example, the low-income worker was not buying much beef previously.
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Description
Increase
Find out what's happening in Restonwith free, real-time updates from Patch.
rice
-3.90%
CPI-U
2.90%
rent
3.00%
CPI-W
3.10%
all food
3.80%
milk
4.90%
eggs
5.30%
chicken
7.10%
sugar
8.20%
ground beef
10.80%
gasoline
12.80%
white bread
17.50%
Exhibit 1: U.S. City Average Price Increase from Feb 2011 to Feb 2012
In computing the CPI’s, the Bureau of Labor Statistics uses a typical family budget for various items, with food being only 15.26% of the total costs (Exhibit 2).
Category
Percent
Housing
41.02%
Transportation
16.88%
Food and beverages
15.26%
Medical care
7.06%
Education and communication
6.80%
Recreation
6.04%
Apparel
3.56%
Other goods and services
3.39%
Exhibit 2: Summary of Categories and Their Weighting Factors
You can compare the rates of increase in costs to the rate of increase in your income to determine if you are more (or less) wealthy than in the past (Exhibit 3). On average, professionals have kept ahead of the CPI. Fairfax County employees have kept well ahead. The median-income worker has not. (In Exhibit 3, the CPI’s listed under 2011-2013 are only for 2011-2012. The others are the two-year-average increases from the actual values in 2011 to the advertised budget values in 2013. The school budget has not been reconciled with the County budget. The County data has been taken from the County budget documents; the other data, from the Bureau of Labor Statistics at the website: http://data.bls.gov/pdq/querytool.jsp?survey=cu. The salaries of County employees were between 4% and 11% lower than private-sector employees, depending on who is reporting the difference and what year is used. The benefits of County employees are greater than those of private-sector employees, far more than offsetting the salary differences. See http://www.fcta.org/data/fx-public-schools/are-salaries-of-fairfax-county-teachers-too-high-too-low-or-just-right.) Notice that, for example, the 8.52% average annual increase in fringe benefits for County employees resulted in benefits in 2011 that were 2.46 times those in 2000.
Description
Average
annual
increase
(2000-2011)
Proposed
average
annual
increase
(2011-2013)
Ratio,
2011
to
2000
Fringe benefits for County employees other than school employees
8.52%
9.93%
2.46
Fringe benefits for County school employees, including teachers
6.79%
16.36%
2.06
County school budget
4.77%
7.39%
1.67
County budget
4.75%
2.78%
1.67
A typical teacher's salary
4.32%
1.59
Salaries for County employees other than school employees
4.25%
3.07%
1.58
A typical professional in private sector
3.23%
1.42
CPI-U in MD-WV-DC-VA area
2.90%
2.66%
1.37
CPI-W
2.48%
3.15%
1.31
CPI-U
2.45%
2.87%
1.31
County-wide median household income
2.21%
1.27
CPI
1.99%
2.17%
1.24
Number of school-system employees
1.40%
2.86%
1.16
Number of teachers
1.35%
1.16
County population
1.03%
0.41%
1.12
Public-school enrollment
0.89%
1.89%
1.10
Number of County employees other than school employees
0.41%
2.78%
1.05
Exhibit 3: Average Annual Rates of Increase of Wages, CPI’s, etc.