Pay raises vs. COLAs: Are the numbers cooked?

Thursday - 8/28/2014, 2:00am EDT

Do you trust the way the government measures the cost of living? Do you believe the inflation-tracking system is accurate? Or is Uncle Sam living in an insulated, inside-the-Beltway ivory tower when it comes to prices at the pump or grocery store? Do the people who measure inflation actually go out and buy new school shoes for their kids?

When it comes to monitoring the cost of living, there are as many ways to do it as there are people.

Example: George Clooney and I are alike in so many ways. Yet, we might differ as to what's cheap, what's a bargain, what's an outrage. But as alike as some people are, or think they are, everybody's cost of living index is slightly different. Sometimes a lot different.

For Americans, the best-known (also official) inflation barometer is the Consumer Price Index. It's operated by the Labor Department's Bureau of Labor Statistics, which has a variety of CPIs. One of them, the CPI-W, monitors on a monthly basis price changes for a market basket of goods. It's OK, but it does have critics many of whom say it low-balls inflation.

The unofficial but more realistic inflation tracker, at least for you, is you. You may, intentionally or unconsciously, compare costs every time you pump gas, shop for hamburger, thump a watermelon or squeeze an avocado to see if it is a good buy. As in, can you afford it?

People have an endless variety of ways to determine what they can afford and how to avoid high prices. Some drive to a different state to avoid local sales taxes. Or make long treks to fill up their tank. Or shop on certain days of the week when prices are slightly lower.

Two months ago according to the CPI, millions of retirees — federal, military and Social Security — seemed likely to get a 1.9 percent cost of living adjustment in January. Not much, but something. Then the data for July came out, and the pending COLA has slipped to 1.8 percent. So what happened?

According to the government, prices declined slightly over the time period measured. That caused a lot of people, who depend on the January COLAs, to flip out. How can anybody who shops and pays bills say things are getting better? Even a little better?

Some people have similar problems with monthly government reports on employment vs. unemployment. They either question the methods used or the motives behind, when government data, just before an election, shows that a long-sagging job market is suddenly improving. If it is a number coming out of Washington, many people are automatically suspect.

Last week's column, July Living Costs, January COLA Drop , was not well received by a lot of retirees. Or for that matter, by many people who are still working. Check out the "comments" section for that day.

Many retirees wanted to know how anybody who can push a shopping cart can dare say living costs are going down.

Lots of workers question why the retirees are going to (apparently) get a raise of around 1.8 percent, when white collar federal workers will be lucky to get a 1 percent pay raise. Short answer: It's the law. Retirees get COLAs based on living costs as measured by the government. They are automatic. Federal workers get pay raises that are based on fiscal and political considerations. That's why they went three years without a pay raise even as retirees were getting small COLAs.

Got a thought or comment? Fire away.


NEARLY USELESS FACTOID:

By Michael O'Connell

Actor George Clooney owned a pig named "Max" for 18 years. Max, which was a gift from actress Kelly Preston, died on Dec. 1, 2006.

Source: IMDB.


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