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Basic Needs Budgets Revisited: Does the U.S. Consumer Price Index Overestimate the Changes in the Cost of Living for Low-Income Families?

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  • Trudi Renwick

Abstract

The consumer price index (CPI) is used in the United States to measure changes in the cost of living. Since the CPI is used to index the official U.S. poverty guidelines and to establish eligibility criteria for various public assistance programs, a change in the methodology used to calculate the CPI would impact the accuracy of poverty statistics and, more importantly, poor families' access to public assistance. Since the majority of these poor families are headed by women, the CPI becomes a critical issue for feminist economics. In December 1996 the United States Senate Finance Committee's Advisory Commission to Study the Consumer Price Index issued its final report which concluded that use of the consumer price index results in widespread substantial overindexing. This paper uses the basic needs budgets (BNB) to evaluate changes in the cost of living for low-income families. The author compares the cost of the BNBs for single-parent families in 1983 and 1996 and finds that the cost of the bundle of goods and services included in the BNBs has increased faster than the CPI. The author finds similar results for two-parent families.

Suggested Citation

  • Trudi Renwick, 1998. "Basic Needs Budgets Revisited: Does the U.S. Consumer Price Index Overestimate the Changes in the Cost of Living for Low-Income Families?," Feminist Economics, Taylor & Francis Journals, vol. 4(3), pages 129-142.
    • Handle: RePEc:taf:femeco:v:4:y:1998:i:3:p:129-142
    DOI: 10.1080/135457098338338
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    References listed on IDEAS

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    1. Julie A. Nelson, 1995. "Feminism and Economics," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 131-148, Spring.
    2. Trudi J. Renwick & Barbara R. Bergmann, 1993. "A Budget-Based Definition of Poverty: With an Application to Single-Parent Families," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 1-24.
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    1. Thesia I. Garner & Katherine S. Short, 2008. "Creating a Consistent Poverty Measure Over Time Using NAS Procedures: 1996-2005," Working Papers 417, U.S. Bureau of Labor Statistics.
    2. Latimaha, Rusli & Bahari, Zakaria & Ismail, Nor Asmat, 2018. "Factors Influencing the Basic Needs Budget Among the Middle Income Earners in Selected Major Cities in Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(3), pages 29-39.
    3. Latimaha, Rusli & Bahari, Zakaria & Ismail, Nor Asmat, 2019. "Middle Income Household Spending Patterns on Housing in Malaysian State Capital Cities: Where Does All the Money Go?," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(2), pages 55-65.
    4. Thesia I. Garner & Kathleen Short, 2005. "Economic Well-Being Based on Income, Consumer Expenditures and Personal Assessments of Minimal Needs," Working Papers 381, U.S. Bureau of Labor Statistics.
    5. Latimaha, Rusli & Ismail, Nor Asmat & Bahari, Zakaria, 2020. "Cost of Living and Standard of Living Nexus: The Determinants of Cost of Living," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 54(3), pages 1-14.
    6. Latimaha, Rusli & Ismail, Nor Asmat, 2019. "Examining the Linkages between Street Crime and Selected State Economic Variables in Malaysia: A Panel Data Analysis," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(1), pages 59-72.

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