Ludwig Institute Refines True Living Cost Index to Better Reflect LMI Challenges

LISEP updates methodology and corrects data to increase TLC accuracy

June 25, 2024

For Immediate Release

WASHINGTON, D.C. — The Ludwig Institute for Shared Economic Prosperity (LISEP) today announced refinements to the methodology of its True Living Cost Index (TLC), a metric designed to better assess the impact of inflation on low- and middle-income (LMI) families, and a correction to the 2022 data.

The TLC tracks price changes for essential goods and services LMI families need to maintain a basic standard of living. Unlike the Consumer Price Index (CPI), which tracks price changes on a diverse basket of more than 80,000 items, the TLC focuses on eight core categories that make up a majority of most LMI household budgets: housing, food, healthcare, childcare, transportation, basic technology, and miscellaneous personal care and household items.

From 2001 to 2022, LISEP found that the cost of these essentials rose nearly 1.3 times faster than the CPI — 83.8%, compared to the CPI’s 65.3%. This update to the TLC methodology ensures it continues to accurately reflect the changing financial realities faced by LMI families.

Through collaboration with experts in the field, LISEP refined the TLC methodology in several key areas:

More Precise Rent Data: The TLC now incorporates the effective date window (applicable starting in October of the previous year) for Fair Market Rents (FMRs), providing a more precise picture of LMI rental costs.
Improved Housing Cost Representation: The process for aggregating housing costs has been improved to better represent the housing needs of LMI households.
Consistent Aggregation: The aggregation of cost-of-living changes from local to national levels is now more consistent across different geographic areas and household types.

In addition, LISEP addressed a technical error in the 2022 TLC calculation. Originally reported as a 7.8% year-over-year increase, the revised change in the TLC from 2021 to 2022 is 6.3%. This was a one-year anomaly that had no impact on data reported for previous years.

“LISEP is committed to providing the most accurate and reliable data possible,” said LISEP
Chairman Gene Ludwig. “We view this update as an ongoing process of improvement and are confident that the refined methodology strengthens the TLC as a valuable tool for understanding the economic realities of LMI families.”

The updated TLC white paper, reflecting the revised methodology and corrected data, and full TLC report are available on the LISEP website at www.lisep.org/tlc.

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Through collaboration with experts in the field, LISEP refined the TLC methodology in several key areas:

The updated TLC white paper, reflecting the revised methodology and corrected data, and full TLC report are available on the LISEP website at www.lisep.org/tlc.

Press Contact:

‍Jim Gardner

press@lisep.org

(573) 680-1822

Additional Resources:

About TLC

In announcing the debut of the True Living Cost (TLC) metric, LISEP issued the white paper Determining More Accurate Living Cost for Median- and Lower-Income American Families (abridged version here). TLC assesses a set of minimal adequate needs that a household requires to function: housing, medical care, transportation, food, childcare, technology, and miscellaneous (e.g., clothing, personal care, and household items) that takes into account household size (the eight household sizes range from one to two adults and zero to three children) and the relevant census region (Northeast, Midwest, South, and West). The TLC tracks change in price for minimal adequate needs over time.

As a comparison to the TLC, the Consumer Price Index (CPI) measures rising prices of a whole host of goods and services, many of which are not relevant for middle- and low-income Americans. The CPI remains a useful inflation metric rather than a cost-of-living metric due to the inclusion of items not relevant to one group or the other and by only including the urban population, among other issues.

About LISEP

The Ludwig Institute for Shared Economic Prosperity (LISEP) was created in 2019 by Gene Ludwig and his wife, Dr. Carol Ludwig. The mission of LISEP is to improve the economic well-being of middle- and lower-income Americans through research and education. LISEP’s original economic research includes new indicators for unemployment, earnings, and cost of living. These metrics aim to provide policymakers and the public with a more transparent view of the economic situation of all Americans, particularly low- and middle-income households, compared with misleading headline statistics.

About Gene Ludwig

In addition to his role as LISEP chair, Gene Ludwig is founder of the Promontory family of companies and Canapi LLC, a financial technology venture fund. He is the founder and CEO of Ludwig Advisors, which counsels financial firms on critical matters. Ludwig is the former vice chairman and senior control officer of Bankers Trust New York Corp. and served as the U.S. Comptroller of the Currency from 1993 to 1998. He is also author of the book The Vanishing American Dream, which investigates the economic challenges facing low- and middle-income Americans. On Twitter: @geneludwig.