**To measure changes in prices, the Bureau of Labor Statistics considers a basket of 80,000 goods, assigning each one a certain percentage. The composition of the basket remains essentially the same over time and includes luxury goods like expensive watches and second homes.**
**To assess true living costs for middle- and lower-income America, the Ludwig Institute for Shared Economic Prosperity created our own cost-of-living index that contains only the most necessary elements a family needs to live — housing, food, fuel and healthcare — and leaves aside Rolexes and pieds-à-terre. Our index, which we call the “true living cost,” also swaps out items you might have needed in 2008, like a landline phone, for items you need today, like a smartphone....**
**<snip: this analysis rebalances the items for the actual proportions of income spent on housing, utilities, car, food, clothing, health insurance and taxes by real families in the median income bracket>**
**Our index shows rising costs of living have outpaced wage growth since at least 2001. In fact, we found the true-living-cost index rose 40% faster than the CPI over the last 20 years....** [end quote]
The analysis presented in the article included a family with a child but it didn’t include child care. It assumed a employer-provided healthcare plan. The median-income ($49,000 in Minnesota) family has 13% of its annual income — $6,541 — left over for retirement savings, college funds, emergency expenses and other discretionary spending. If they needed child care or medical expenses it could easily chew up that excess.
Many families have more children, don’t have company health insurance and have health-related or other expenses. Health and higher-education costs have been rising faster than inflation for many years.
This analysis shows that middle and lower income families are stressed more by inflation than the CPI accounts for.