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GAO: BLS Should Consider Improvements Concerning the CPI

Government Affairs
The Department of Labor’s Bureau of Labor Statistics (BLS) should make improvements concerning the consumer price index (CPI), says the Government Accountability Office (GAO).

In “RETIREMENT SECURITY: BLS Should Explore Ways to Improve the Accuracy, Timeliness, and Relevance of Its Cost-of-Living Measurements” the GAO recommends that the BLS explore different ways to evaluate the data currently used to produce certain indexes, as well as produce more accurate, timely and relevant CPIs.
 
Why this Matters
 
The BLS produces these indexes that are the basis of cost-of-living adjustments (COLAs) used to make sure that benefits in federal retirement programs, such as Social Security, keep pace with inflation. And accuracy in these calculations, says the GAO, is “critical” since “as the life expectancy of Americans continues to increase, more Americans will be subject to these adjustments.”
 
The GAO notes that it was asked to review efforts to measure the cost of living for older populations. Its report examines:
 
  • key issues that the BLS faces in measuring that cost of living; and
  • other countries’ experiences in developing alternate methods of adjusting retirement benefits.
Findings
 
The BLS faces challenges regarding accuracy, timeliness and relevancy in developing CPIs for groups of blue-collar workers and older Americans, the GAO found. For example, the CPI for these workers is used to adjust federal retirement benefits for inflation, including Social Security.
 
The GAO says that the BLS has not evaluated whether its data accurately reflect what the groups affected pay, where they shop, and what they purchase. It reports that BLS officials cite budgetary reasons for not having done so, and that this means that federal retirement benefits could be based on inaccurate information and require adjustment.
 
In addition, the GAO says that the BLS has made limited use of data the federal government already collected—such as National Accounts data on U.S. production and consumption—that could make CPI data more accurate.
 
The GAO notes that most countries belonging to the Organisation for Economic Co-operation and Development use their primary measures of inflation to adjust government retirement benefits. Further, in Australia, New Zealand and the United Kingdom—which the GAO treated as test cases—a variety of CPIs are used.
 
Recommendations
 
The GAO recommends that the BLS explore:
 
  • cost-efficient ways to evaluate the data currently used to produce indexes for relevant groups; and
  • the use of National Accounts data to produce more accurate, timely and relevant CPIs.
The GAO reports that the BLS agreed with the first recommendation but disagreed with the second.