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True Living Cost

LISEP’s cost-of-living metric

True
Living Cost
6.3
%
Minimum Adequate Needs
Increase 2021–2022
Headline
Inflation Metric
8.0
%
Consumer Price Index
Increase 2021–2022
To determine the TLC, LISEP tracks changes in prices for the essential items and services that individuals and families need to maintain a basic standard of living.
These are the key differences in the methods used to calculate the Consumer Price Index (CPI) and TLC:
Medical Care
The portion of CPI for medical care largely ignores healthcare premiums — which make up the majority of a medical budget in most households. For the bottom 60% of American Households, health insurance premiums account for more than 70% of all medical costs. The CPI instead focuses on the prices paid by the insurance companies, which is irrelevant for Americans’ budgets and spending.
Housing
CPI’s housing portion allocates less than 25% of the cost to rent, thus assuming a majority of Americans own their home. But for the bottom 60% of the U.S. population by income, only about half were homeowners in 2020. Making the issue even worse, the housing CPI relies mostly on surveys of homeowners’ estimates of the value of their own home. Alternatively, the TLC uses actual rental prices.
Technology
CPI for technology does not account for the fact that technology has gone from being a luxury to a necessity. The CPI attempts to price, for example, the cost of checking email. But it doesn’t consider that Americans are now expected to be able to do this instantaneously, whereas this was not the case 20 years ago. This paradox is reflected in the fact that from 2007 to 2018, the newest iPhone release price went up 100% while the CPI for telephone hardware went down by more than 50%. The TLC index instead considers the minimal amount of technology that families need to function in society in any given year, and then prices this bundle throughout time.
Transportation
CPI for transportation accounts for all transportation-related goods, including boats, new cars, and airline fees, which are largely irrelevant to middle- and low-income families. The TLC Index takes into account the price of only the necessities, including gas, used car prices, and regular car maintenance.
Why does it matter? Using the TLC in place of CPI to assess the changes in cost of living for LMI households would significantly alleviate their financial burden by better adjusting pay, pensions, and government transfers.
True
Living Cost
The True Living Cost (TLC) is a cost-of-living metric that provides a more accurate picture of the economic reality for median- and lower-income (LMI) families.
Median Earnings for a Full-Time Worker, Adjusted by TLC
Median Earnings for a Full-Time
Worker, Adjusted by TLC
In 2022 Dollars
Select any point on the chart to see the data for that year.
When considering the most critical items the median earner needs to buy, buying power has decreased since 2001 by 3.3% (Median Earnings adjusted by TLC). The CPI, however, shows an increase in buying power for the median earner of 9.4%. Policymakers looking at CPI might believe that Americans are earning more and thus are able to purchase more necessities. But LISEP’s TLC Index shows the opposite is true: Americans are struggling more than ever as rising living costs have eaten away at earnings.
Median Annual Income by Occupation, Adjusted by TLC
Median Annual Income by
Occupation, Adjusted by TLC
In 2022 Dollars
Select any point on the chart to see the TLC-adjusted median annual income for that occupation.
Occupations are defined by the 2010 Census occupational classification system and are calculated using the Outgoing Rotational Group supplement of the Current Population Survey. The NAICS occupation data is not used because the Bureau of Labor Statistics stresses that the data is not comparable over time.
TLC vs. Consumer Price Index
Increase Since 2001
Select any point on the chart to see the data for that year.
CPI drastically understates changes in living costs for low- and moderate-income families — TLC has risen 1.3 times faster than CPI since 2001.
Income Left After Meeting Minimal Adequate Needs
Income Left After Meeting
Minimal Adequate Needs
Annual, 2001–2022. LISEP assumes each adult is a median earner, and couples comprise a dual-earning, median-income household.
Select a family size to see the data for that demographic.
For each household type, LISEP shows the amount of income remaining after meeting minimal adequate needs from 2001-2022. This is before any savings or spending on recreation. In certain scenarios, borrowing is necessary just to meet the household’s minimal adequate needs.
TLC by Expense Category
Increase Since 2001
Select a family size to see the data for that demographic.
LISEP shows the percentage change in price over time for each category of minimal adequate needs faced by a median-income family of various household sizes. For instance, housing costs for a couple with three children have increased 97% between 2001 and 2022.