The TLC takes into account household size (the eight household sizes range from one to two adults and zero to three children) and census region (Northeast, Midwest, South, and West). The TLC tracks change in price for this minimal bundle over time.
As a comparison to the TLC, the CPI measures rising prices. The CPI better serves as an inflation metric rather than a cost-of-living metric due to the inclusion of luxury items and because it only includes the urban population, among other issues.
Thus, the CPI distorts the reality of changing costs faced by most consumers. LISEP found that the CPI drastically understates changes in living costs for LMI families — the TLC rose nearly 1.5 times faster than the CPI since 2001: 78.8% compared to the CPI’s 54.4%.
Using the CPI as a cost-of-living metric has material implications for the well-being of American households.
Increases in pay, retirement, and Social Security are tied to the CPI. More than 15 federal assistance programs, such as the Child Tax Credit (CTC) and veterans’ pensions, are indexed to some iteration of the CPI in part or in full. This means that American households receive benefits that are not commensurate with the cost of living they face, and thus are worse off over time. This mismeasurement of the rising cost of basic needs poses a financial crisis for many families, making the American Dream further out of reach. Indexing government benefits and pay increases to the TLC would substantially correct for this mismeasurement and alleviate the financial burden of LMI families.