WASHINGTON, D.C. — Even before the inflationary trend that has grabbed headlines during 2022, the cost of just the basic necessities — the items that represent most, if not all, of the average family budget — increased by 5.8% from 2020 to 2021, a rate that is nearly 25% higher than the CPI increase over the same period, according to a new analysis by the Ludwig Institute for Shared Economic Prosperity (LISEP).
“The struggle to make ends meet in the face of rising prices is nothing new for low- and middle-income families — they have been fighting this battle for more than two decades,” said LISEP chair Gene Ludwig. “The CPI only tells part of the story and is just not an accurate reflection of the hardships facing America’s working families.”
LISEP today issued new data for its True Living Cost (TLC) Index, which made its debut earlier this year. The TLC is a measure of price changes of the minimum adequate needs required to maintain a basic standard of living, while the CPI is based on a diverse basket of more than 80,000 items. Many of these items — such as rental cars and hotel rooms — are of little or no relevance for low- and middle-income families. The TLC focuses on the basics: housing, food, healthcare, childcare, transportation, technology, and miscellaneous personal care and household items — the expenditures that consume nearly the entire budget of most American families.
Among the seven minimum adequate needs categories, between 2020 and 2021, average medical care costs increased 5.7% to $8,075, while the average cost of housing rose 4.7%, topping $13,980. The miscellaneous category (clothing, personal care, and household items) made the biggest jump from 2020 to 2021 at 23.4% at an average cost of $6,303, although that may be due, in part, from emergence from the pandemic and a resumption of previously deferred expenditures.
In its March analysis, LISEP concluded that while the CPI remains an excellent measure of overall inflation, it falls short when determining the impact of rising prices on low- and middle-income families. From 2001 to 2020, LISEP’s TLC rose faster than the CPI, 68.9% compared to the CPI’s 46.2%. The new data released today indicate that trend continued from 2020 to 2021, with the TLC showing the price of necessities has increased 5.8% versus the CPI’s 4.7%. And from 2001 to 2021 the TLC rose 50% faster than the CPI.
When looking at cost increases faced by different family types, prices increased rapidly across the board. But for a couple with one child, the news was much worse: LISEP found that their budget to cover basic necessities increased by 7.5%, from $63,285 to $68,022. Similarly, costs for a couple with at least three children jumped 6.7% from 2020 to 2021, from $76,419 to $81,564.
Meanwhile, real wages for middle- and lower-income households were taking a hit even before the 2022 inflationary trend. From 2020 to 2021, median wages for a full-time worker were down 4.1% after adjusting for the TLC, and out of the 747 occupations that were listed in both years, 75% saw their TLC-adjusted earnings decline.
“If there is a lesson to be learned from the midterm elections, it is that working families are hurting, and much more so than traditional headline economic statistics would lead us to believe,” Ludwig said. “I hope these LISEP numbers help policy makers recognize the disparity between headline numbers and reality — and take appropriate proactive measures to address this very real societal problem.”
The complete TLC report, including a breakdown by family type and household budget category, is available at https://www.lisep.org/costs.