Notice2022-18938
Request for Comment on Inflation Measures for Adjusting Historical Income
Primary source
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Published
September 1, 2022
Issuing agencies
Commerce DepartmentCensus Bureau
Abstract
The Census Bureau is seeking comments on the use of alternative price indices to adjust dollar-denominated income values to reflect changes in the price level over time (inflation adjustment). Currently, historical estimates of income and earnings are inflation- adjusted using the Consumer Price Index for All Urban Consumers Research Series (R-CPI-U-RS) produced by the Bureau of Labor Statistics. The Census Bureau is considering adopting alternative chain-type price indices produced by the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA) for the inflation adjustment in the future. Based on comments received, the Census Bureau will weigh the advantages and disadvantages of these alternative price indices in choosing the optimal index for inflation adjustment.
Full Text
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<title>Federal Register, Volume 87 Issue 169 (Thursday, September 1, 2022)</title>
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[Federal Register Volume 87, Number 169 (Thursday, September 1, 2022)]
[Notices]
[Pages 53710-53712]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-18938]
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DEPARTMENT OF COMMERCE
Census Bureau
[Docket Number 220715-0157]
Request for Comment on Inflation Measures for Adjusting
Historical Income
AGENCY: Census Bureau, Commerce.
ACTION: Notice of solicitation of comments.
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SUMMARY: The Census Bureau is seeking comments on the use of
alternative price indices to adjust dollar-denominated income values to
reflect changes in the price level over time (inflation adjustment).
Currently, historical estimates of income and earnings are inflation-
adjusted using the Consumer Price Index for All Urban Consumers
Research Series (R-CPI-U-RS) produced by the Bureau of Labor
Statistics. The Census Bureau is considering adopting alternative
chain-type price indices produced by the Bureau of Labor Statistics
(BLS) and the Bureau of Economic Analysis (BEA) for the inflation
adjustment in the future. Based on comments received, the Census Bureau
will weigh the advantages and disadvantages of these alternative price
indices in choosing the optimal index for inflation adjustment.
DATES: Comments must be submitted in writing. To ensure consideration
of comments, they must be received by October 31, 2022. Because of
delays in the receipt of regular mail related to security screening,
respondents are encouraged to send comments electronically (see
ADDRESSES, below)
ADDRESSES: Comments may be addressed to: Matthew Unrath, Economist,
Income Statistics Branch, Social, Economic and Housing Statistics
Division, U.S. Census Bureau, 301-763-0863. Email comments may be sent
to <a href="/cdn-cgi/l/email-protection#f487919c8790da9d8796da9d9a929895809d9b9ada979b9999919a8087b497919a878187da939b82"><span class="__cf_email__" data-cfemail="4f3c2a273c2b61263c2d61262129232e3b262021612c2022222a213b3c0f2c2a213c3a3c61282039">[email protected]</span></a> with the subject ``Inflation
Index.'' You may also submit comments, identified by Docket Number
USBC-2022-0010, to the Federal e-Rulemaking Portal: <a href="http://www.regulations.gov">http://www.regulations.gov</a>. All comments received are part of the public
record. No comments will be posted to <a href="http://www.regulations.gov">http://www.regulations.gov</a> for
public viewing until after the comment period has closed. Comments will
generally be posted without change. All Personally Identifiable
Information (for example, name and address) voluntarily submitted by
the commenter may be publicly accessible. Do not submit Confidential
Business Information or otherwise sensitive or protected information.
You may submit attachments to electronic comments in Microsoft Word,
Excel, or Adobe PDF file formats.
Electronic Availability: This notice is available on the internet
at the Census Bureau's website at <a href="https://www.census.gov/topics/income-poverty/income/guidance/alternative-inflation.html">https://www.census.gov/topics/income-poverty/income/guidance/alternative-inflation.html</a>. Federal Register
notices are also available electronically at <a href="https://www.federalregister.gov/">https://www.federalregister.gov/</a>.
FOR FURTHER INFORMATION CONTACT: For further information about this
request for comments, contact Matthew Unrath, Economist, Income
Statistics Branch, Social, Economic and Housing Statistics Division,
U.S. Census Bureau, 301-763-0863, or email
<a href="/cdn-cgi/l/email-protection#a2d1c7cad1c68ccbd1c08ccbccc4cec3d6cbcdcc8cc1cdcfcfc7ccd6d1e2c1c7ccd1d7d18cc5cdd4"><span class="__cf_email__" data-cfemail="4c3f29243f2862253f2e6225222a202d38252322622f2321212922383f0c2f29223f393f622b233a">[email protected]</span></a> with the subject ``Inflation
Index''.
SUPPLEMENTARY INFORMATION: The Census Bureau is seeking public comments
on the strengths, weaknesses, and best practices for the application of
chain-type price indices used for the inflation adjustment of
historical income and earnings estimates. Currently, the Census Bureau
uses the CPI-U Research Series (R-CPI-U-RS) produced by BLS for the
inflation adjustment. The Census Bureau is considering the following
alternative chain-type price indices: the Chained Consumer Price Index
for All Urban Consumers (C-CPI-U) produced by BLS, and the Personal
Consumption Expenditures Price Index (PCEPI) produced by BEA. More
information about the potential change, the alternative chain-type
price indices, and Census Bureau's research on this topic can be found
at the Census Bureau's website: <a href="https://www.census.gov/topics/income-poverty/income/guidance/alternative-inflation.html">https://www.census.gov/topics/income-poverty/income/guidance/alternative-inflation.html</a>.
[[Page 53711]]
Background
The Census Bureau has considered using a chained-type price index
to inflation adjust its historical and earnings estimates for several
years. The Income and Poverty in the United States reports from 2019
and 2020 both contain appendices documenting how applying alternative
inflation indices would affect historical income and earnings
estimates. These reports can be found on the Census website: Appendix C
in the 2019 report (<a href="https://www.census.gov/library/publications/2020/demo/p60-270.html">https://www.census.gov/library/publications/2020/demo/p60-270.html</a>) and Appendix D in the 2020 report (<a href="https://www.census.gov/library/publications/2021/demo/p60-273.html">https://www.census.gov/library/publications/2021/demo/p60-273.html</a>). The Income
in the United States, 2021 report will also contain a similar appendix.
Furthermore, Census Bureau is especially motivated to seek public
comment on this change now due to a recent report issued by the
Interagency Technical Working Group on Consumer Inflation Measures
(ITWG). As discussed more below, the ITWG report included a set of
principles to help guide federal agencies in their selection of the
most appropriate inflation index for their specific purpose. Census
Bureau's use of the two chained-type price indices would be consistent
with the ITWG's guidance and framework.
Inflation Adjustment of Historical Income Statistics
Inflation is defined as a rise in the general level of prices (and
deflation as a decline in the general level of prices). Adjusting
income statistics for inflation better reflects changes in purchasing
power over time. In its annual report, Income in the United States, the
Census Bureau presents historical income and earnings statistics from
the Current Population Survey's Annual Social and Economic Supplement
(CPS ASEC) that are adjusted for inflation.
Current Method
The current method for the inflation adjustment that the Census
Bureau uses in its annual income report relies on the Consumer Price
Index Research Series (R-CPI-U-RS) produced by BLS. The R-CPI-U-RS
presents an estimate of the CPI for all Urban Consumers (CPI-U) from
1978 to the present that incorporates the numerous improvements made
over that time span into the entire series. For years 1967-1977, the
Census Bureau uses inflation estimates from the CPI-U-X1 series, an
experimental series that preceded the R-CPI-U-RS. For years before
1967, the Census Bureau uses a backwards projection, assuming the same
ratio between the R-CPI-U-RS and CPI-U as there was in 1967.
Chain-Type Price Indices
Despite the improvements made to the CPI-U and incorporated into
the R-CPI-U-RS, both of these measures have weights that are based on a
base period of consumer expenditures that are a few years old, and
therefore both measures risk overstating increases in the cost of
living. Inflation measures that use weights contemporaneous to the
months involved in the calculation better account for consumer
substitution and are known as ``chained'' measures. Examples include
the C-CPI-U produced by BLS and the PCEPI produced by BEA. Each are
explained below.
The Chained Consumer Price Index for All Urban Consumers (C-CPI-U)
Like the CPI-U, the C-CPI-U is designed to measure price changes
faced by urban consumers. BLS uses the same data on prices and spending
patterns, as well as the same sample of U.S. residents, to construct
the C-CPI-U and the CPI-U. The difference between the two indices is
that the C-CPI-U is designed to more rapidly account for how consumers
adjust spending when relative prices change. More information can be
found at the BLS website: <a href="http://www.bls.gov/cpi/additional-resources/chained-cpi-questions-and-answers.htm">www.bls.gov/cpi/additional-resources/chained-cpi-questions-and-answers.htm</a>. The C-CPI-U aggregates price changes
using a formula and weights based on consumers' current expenditures,
as opposed to the CPI-U which weights items based on expenditure shares
from a specified base period. By weighting price changes according to
consumers' current expenditures, the C-CPI-U better reflects changes in
consumers' actual cost of living. Since expenditure data for the
reference month are not immediately available from the Consumer
Expenditure Survey, BLS releases preliminary estimates of the C-CPI-U
which are revised later after the expenditure data are available. Final
estimates of the C-CPI-U are typically produced 10 to 12 months after
the initial publication of the preliminary estimates. The C-CPI-U was
first published in 2002 and is available for years 2000 and later.
The Personal Consumption Expenditures Price Index (PCEPI)
The PCEPI tracks changes in the prices of a wide array of goods and
services purchased by consumers and by nonprofit institutions that
serve households. More information about the PCEPI can be found at the
BEA website: <a href="http://www.bea.gov/data/personal-consumption-expenditures-price-index">www.bea.gov/data/personal-consumption-expenditures-price-index</a>. To create the PCEPI, BEA uses data collected by BLS to construct
the CPIs and Producer Price Indices (PPIs). The PCEPI differs from the
C-CPI-U in weighting, formula, and scope. A summary of these
differences can be found at the BEA website: <a href="https://www.bea.gov/help/faq/555">https://www.bea.gov/help/faq/555</a>. The PCEPI incorporates expenditure data from non-consumers and
tracks spending patterns using the PPI. Like the C-CPI-U, the PCEPI
accounts for substitution when relative prices change, although the
PCEPI uses a different formula for aggregating price change. The PCEPI
is available for years 1959 and later.
Alternative Price Index Series to the Census Bureau's Current Method
In 2019, the Office of Management and Budget convened the
Interagency Technical Working Group on Consumer Inflation Measures
(ITWG). In 2021, the ITWG issued a report to OMB, in which it outlined
a list of principles related to the proper application of alternative
price indices. The appendix to the report included an ``All purpose
index decision-making flowchart'' as a tool for applying these
principles. In the documentation accompanying that flowchart, the
example chosen to demonstrate how this flowchart can be used was the
Census Bureau decision about which index to use to adjust historical
median nominal household income for inflation. Per this example,
consistency with the ITWG principles would suggest the Census Bureau
select the C-CPI-U for the periods for which that is available (2000
and forward) and select the PCEPI for periods for which the C-CPI-U is
not available (prior to 2000). The ITWG published a Federal Register
Notice in May 2019 requesting comments on, among other things, ``the
strengths and weaknesses of the different indexes for making annual
adjustments to the historical income figures produced by the Census
Bureau.'' Only one comment, out of more than 57,000 comments received,
addressed this issue. The ITWG's final report can be found on the BLS
website: <a href="https://www.bls.gov/evaluation/technical-recommendations-for-the-consumer-inflation-measure-best-suited-for-conducting-annual-adjustments-to-the-official-poverty-measure.pdf">https://www.bls.gov/evaluation/technical-recommendations-for-the-consumer-inflation-measure-best-suited-for-conducting-annual-adjustments-to-the-official-poverty-measure.pdf</a>.
The Census Bureau is considering two price index series as
alternatives to the current method: (1) the C-CPI-U for years 2000 and
later combined with the current method for years prior to 2000; (2) the
C-CPI-U for years 2000 and later combined with the PCEPI for years
prior to 2000. By relying solely on chained
[[Page 53712]]
indices, the latter series may best align with the ITWG's principles.
The Census Bureau has provided a technical working paper that documents
the implications of using these two alternative series for CPS ASEC
historical estimates of median income and earnings. This technical
working paper can be found on the Census Bureau's website: <a href="https://www.census.gov/library/working-papers/2022/demo/SEHSD-wp2022-10.html">https://www.census.gov/library/working-papers/2022/demo/SEHSD-wp2022-10.html</a>.
Request for Public Comment
The Census Bureau is seeking comment from the public on (1) for the
period 2000 to the present, the strengths and weaknesses of using the
C-CPI-U for inflation adjusting historical income and earnings
estimates relative to the current method (2) in the event the C-CPI-U
is selected for the period 2000 to the present, the strengths and
weaknesses of using the PCEPI for periods prior to 2000 (for which the
C-CPI-U is not available) 3) the strengths and weaknesses of using the
current method for periods prior to 2000; (4) recommendations for the
use of the preliminary C-CPI-U for the production of official income
statistics, considering that it is subject to revision after initial
release.
Robert L. Santos, Director, Census Bureau, approved the publication
of this Notice in the Federal Register.
Dated: August 29, 2022.
Shannon Wink,
Program Analyst, Policy Coordination Office, U.S. Census Bureau.
[FR Doc. 2022-18938 Filed 8-31-22; 8:45 am]
BILLING CODE 3510-07-P
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