Catherwood LibraryILR School

In what is likely to be one of the most overlooked developments of the year but also one of the most significant---not only for the field of work and employment issues but also for the economy and the population at large, the Bureau of Labor Statistics (BLS) is adopting a new Consumer Price Index that for the first time will take into account substitution of goods across categories. The CPI is a calculation of the average amount of money spent by the average family on a range of over 200 common products and services, which serves as the main indicator of inflation and the basis for determining interest rates, tax brackets, Social Security, veterans' and most other Federal benefits. In the past the BLS has ignored the tendency of individuals and families to substitute cheaper categories of products for products whose prices rise (for example: eating more vegetables and less steak when beef prices go up). It was not until 1999 that the Bureau began to take into account substitution within categories (for example: buying generic brand batteries when prices of the name brands go up). The Bureau's decision has met with mixed opinions, ranging from concern that it will cause large decreases in benefits and pensions, to approval that it will correct flaws and reduce over-estimation, to assertions that the entire system is faulty and that there is no objective criteria by which to determine whether the new system will be any "better" than the old one. Whether the change is for better or worse, it will have a far-reaching relevance---as a change of even a few percentage points in the CPI can reverberate in gains or losses of ten of thousands of dollars for working people and retirees.