Adjusting Social Security Benefits for Changes in the Cost of Living

Brief

Adjusting Social Security Benefits for Changes in the Cost of Living

July 26, 2010

This brief examines different price indices that might be used to adjust Social Security benefits for changes in the cost of living. The currently used consumer price index for wage and clerical workers (CPI-W) is probably biased upward. A new experimental "chain" index removes some of the upward bias and therefore rises more slowly. Using it would help solve some of Social Security's long-run financial problems. Another candidate is an experimental index designed to reflect the purchases of the elderly. Largely because it heavily weights health costs, it is likely to rise faster than the CPI-W.

Research Area: 

Cross-Center Initiative

Cross-Center Initiative: 
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