Who Determines the Cost of Living?
One method of determining the cost of living is to turn to the Bureau of Labor Statistics (BLS). The government collects data every year to determine the Consumer Price Index or CPI. The CPI reflects increases or decreases in cost of living based on items like food, housing, transportation, gas, and insurance costs to the average consumer.
One problem with the calculations researched by the BLS is that often, apples are not compared to apples. For example, an in-depth analysis of expenses from household to household is not considered. One family may be paying for two children in college where another family has two children relying on student loans to pay for college. Their analysis will only show a household with two children in college, regardless of the expense of tuition.
The size of a household is considered but cost of upkeep will vary from lifestyle to lifestyle. This is one reason it’s almost impossible for the BLS to come up with an accurate cost of living raise or adjustment each year.
The BLS carefully chooses approximately 14,000 households and analyzes income and expenses, or the cost to live. While you may not be on that list of households analyzed, the BLS argues that it is a good representation of both urban and rural households.
Of those 14,000 households, data experts determine annually how the cost of living should be adjusted. In 2013, the CPI was 1.2%. This included lower energy costs that offset rising costs in food and other commodities. Where you live in the United States is also a factor that is not necessarily determined by the BLS.