Linda Levine Specialist in Labor Economics The federal government, in an effort to
protect the purchasing power of Social Security beneficiaries, indexes
benefits to increases in the Consumer Price Index for Urban Wage Earners and
Clerical Workers (CPI-W). Concern has periodically been expressed that the
CPI-W may understate the impact of inflation on the elderly population and
that it therefore may not be the most appropriate measure of inflation’s
impact on the elderly.
At the behest of Congress, the U.S. Bureau of Labor Statistics (BLS) developed
an experimental price index to track changes in the cost of living for the
population aged 62 and older. In most years since 1982, the start of the
experimental consumer price index (CPI-E) for the elderly, the annual rate
of change in the CPI-E has exceeded that of the CPI-W and CPI-U. But, methodological
limitations in the experimental index may have contributed to this pattern.
Were BLS to construct an index that is more representative of the elderly
population than the CPI-E, there is no guarantee that the relationship
between the new index and the CPI-W would be the same.
Interest in the CPI-E most recently emerged in response to deficit-reduction
plans issued in 2010 and 2011 that recommend inflation-indexed provisions
in federal law be based on the Chained Consumer Price Index for All Urban
Consumers (C-CPI-U). Because the C-CPI-U has typically risen more slowly
than the CPI-W, this proposal raised concern at the time among those Social Security
recipients who already believe they have not been fully compensated for
increases in their cost of living. Bills were then introduced to switch
for purposes of Social Security indexation from the CPI-W to a CPI for
those aged 62 and older (H.R. 456, H.R. 539, H.R. 776, H.R. 798, and S.
1876). As suggested by an amendment in the nature of a substitute to the FY2013
budget resolution in the House, interest has lingered into 2012 among some
Members to switch to the C-CPI-U as a means of curbing the rate of growth
in the budget deficit.
Date of Report: March 30 , 2012 Order Number: RS20060
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