Tres Pinos: Social Security CPI Reflective Of Actual Spending? View From A Private Duty Caregiver
Tres Pinos: Social Security CPI Reflective Of Actual Spending? View From A Private Duty Caregiver Serving, Carmel, Carmel-by-the-Sea, Marina, Monterey, Pacific Grove, Pebble Beach, Salinas, Seaside & Tres Pinos California
An article in the Monterey Herald May 28 noted that for every $10 the typical household earns before taxes, almost $1 goes towards gas, a 40% bigger than normal chunk. Wal-Mart recently blamed high gas prices for an eighth straight quarter of lower sales in the U.S., while Target said gas prices were hurting sales on clothing. The problem is, some governments use outdated baskets of goods and services while others include things like new electronic gadgets (cell phones, iPads, iPhones, etc.) which go down in price each year. This causes the overall index to sometimes show little to no inflation, despite the fact that most senior citizens aren't spending a big chunk of their disposable income on new consumer electronic devices. As one funny example of just how bizarre price indexes can be, the May 30 to June 5 edition of Bloomberg Businessweek had an article pointing out that in Brazil, the cost of a bikini wax is one component of the country's inflation index, and it has been going up. Price increases for services like the bikini wax, which make up 24.1% of Brazil's benchmark inflation rate, outpaced all other categories in the past two months, up 8.6% through April. So what's in the index used to calculate whether or not senior's will get a hike in their social security checks next year? According to the Bureau of Labor Statistics, the CPI market basket is developed from detailed expenditure information provided by 7,000 families and individuals about what they bought. Another 7,000 families were asked to collect information on frequently purchased items such as food and personal items. Over a two-year period, expenditure information came from about 28,000 weekly diaries and 60,000 quarterly interviews to determine the importance (or weight) which should be ascribed to the more than 200 item categories which are then put into eight major groups:
FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks) HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
Although items are included in the CPI that seniors frequently purchase like food and beverages, housing, transportation and medical care, the problem is that the index is not parsed into any type of demographic, such as by age group. Therefore, the weightings are unlikely to be the same for seniors as they are for the sample group. For instance, college tuition, computer software, sporting equipment, etc., are likely to be a much larger percentage of a younger person's income than an older person. Nevertheless, this is the system we are stuck with and as it has been widely reported, it is likely to result in a tiny increase in social security payments next year which will probably be offset by an increase in Medicare costs.
http://www.businessweek.com/magazine/content/11_23/b4231014777581.htm
http://www.bls.gov/cpi/cpifaq.htm#Question_2
[http://www.montereyherald.com/tourism/ci_18155644?nclick_check=1]
An article in the Monterey Herald May 28 noted that for every $10 the typical household earns before taxes, almost $1 goes towards gas, a 40% bigger than normal chunk. Wal-Mart recently blamed high gas prices for an eighth straight quarter of lower sales in the U.S., while Target said gas prices were hurting sales on clothing. The problem is, some governments use outdated baskets of goods and services while others include things like new electronic gadgets (cell phones, iPads, iPhones, etc.) which go down in price each year. This causes the overall index to sometimes show little to no inflation, despite the fact that most senior citizens aren't spending a big chunk of their disposable income on new consumer electronic devices. As one funny example of just how bizarre price indexes can be, the May 30 to June 5 edition of Bloomberg Businessweek had an article pointing out that in Brazil, the cost of a bikini wax is one component of the country's inflation index, and it has been going up. Price increases for services like the bikini wax, which make up 24.1% of Brazil's benchmark inflation rate, outpaced all other categories in the past two months, up 8.6% through April. So what's in the index used to calculate whether or not senior's will get a hike in their social security checks next year? According to the Bureau of Labor Statistics, the CPI market basket is developed from detailed expenditure information provided by 7,000 families and individuals about what they bought. Another 7,000 families were asked to collect information on frequently purchased items such as food and personal items. Over a two-year period, expenditure information came from about 28,000 weekly diaries and 60,000 quarterly interviews to determine the importance (or weight) which should be ascribed to the more than 200 item categories which are then put into eight major groups:
FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks) HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
Although items are included in the CPI that seniors frequently purchase like food and beverages, housing, transportation and medical care, the problem is that the index is not parsed into any type of demographic, such as by age group. Therefore, the weightings are unlikely to be the same for seniors as they are for the sample group. For instance, college tuition, computer software, sporting equipment, etc., are likely to be a much larger percentage of a younger person's income than an older person. Nevertheless, this is the system we are stuck with and as it has been widely reported, it is likely to result in a tiny increase in social security payments next year which will probably be offset by an increase in Medicare costs.
http://www.businessweek.com/magazine/content/11_23/b4231014777581.htm
http://www.bls.gov/cpi/cpifaq.htm#Question_2
[http://www.montereyherald.com/tourism/ci_18155644?nclick_check=1]
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