CPI-W and the COLA: How Your Benefits Are Determined
The CPI-W, or the Consumer Price Index for Urban Wage Earners and Clerical Workers, tracks the average change in prices paid by urban wage earners and clerical workers for a market basket of goods and services.
The Bureau of Labor Statistics (BLS) computes it, and it is released each month.
The weights used to construct the CPI-W are based on the spending habits of urban wage earners and clerical workers, and they represent the prices for a basket of products and services that are often purchased by these individuals.
The cost-of-living adjustment (COLA) for Social Security benefits and Supplemental Security Income (SSI) payments is computed using the CPI-W.
Each year, these benefits are adjusted using the COLA, which is the percentage rise in the CPI-W.
Although the COLA for 2024 has not yet been disclosed, the CPI-W rose 2.6% in the year that ended in July 2023.
If inflation keeps increasing at this rate, the COLA in 2024 would be roughly 2.6%.
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How is the Consumer Price Index Determined?
The BLS first chooses a sample of urban-area homes.
The BLS conducts surveys of these households to learn what products and services they consume and then gathers prices for those products and services.
The prices of the products and services are then weighted based on the spending habits of the households surveyed by the BLS to determine the CPI-W.
Does the CPI-W Work Well?
Although the CPI-W is a helpful indicator of inflation, it is crucial to be aware of its limitations.
For instance, the prices for every goods and services that urban wage earners and office workers buy are not included in the CPI-W.
Additionally, changes in the quality of products and services are not taken into account by the CPI-W.
Despite these drawbacks, the CPI-W is a popular inflation indicator and a crucial tool for businesses and governments.
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Source: Marca
