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Cost of Living in 1984 for Low-Income Families in Washington State

Executive Summary
 

Washington State law requires that DSHS set need standards for public assistance recipients. Standards must include reasonable allowances for shelter, fuel, food, transportation, clothing, household maintenance and necessary incidentals. The Office of Research, Department of Social and Health Services, conducted a comprehensive study of the cost of these items for low-income households in 1980 and developed methods for updating public assistance need standards annually.l/ The study constructed market baskets of goods and services necessary fora minimum but adequate standard of living and priced these items. This report presents the findings of the first major repricing of Washington's cost of living market baskets since the earlier study.

Objectives
The primary objective of this study was to develop new cost of living estimates for Washington State based on 1984 prices. Additional objectives were:

1. To evaluate use of the revised U.S. Department of Agriculture Thrifty Food Plan as a basis for food consumption market baskets.
2. To evaluate the methods used to price rental costs in 1980.
3. To evaluate the methods used to price the utility components of the 1980 market baskets and develop a separate utility cost estimate.
4. To evaluate the adequacy of methods used to prepare annual updates of need standards.

Methods
This study prices market baskets of goods and services developed in the 1980 Cost of Living study. These market baskets include the components required by state law and a combined utility cost figure.2/ Goods and services in the market baskets were priced in April 1984 in retail outlets, from published price lists, from rental cost figures prepared by the U.S. Department of Housing and Urban Development, and from surveys of service providers. As in the 1980 study, separate market baskets were priced for two model families: a family of four and a household made up of a single elderly individual. Equivalence scales were used to estimate costs for families of different sizes.

The contents of the market baskets are based on judgments about what low-income people ought to be able to consume, regardless of the actual consumption choices they might make. This normative approach reflects
1/ Russell M. Lidman, Thomas M. Sykes, et. al., Cost of Living in 1980 For Low-Income Families in Washington State, Office of Research, DSHS, January 1981.

Detailed lists of items included in the market baskets are included in the 1980 Cost of Living study.

conventional market basket methods. Market basket contents, however, were based on research findings and the advice of consultants. Judgments of individual project staff were minimized.

The market baskets do not include items such as restaurant meals; home ownership; home repairs or decoration; purchase or repair offurniture, appliances, television or other home entertainment equipment; vacation
or local recreational travel; admission to movies, plays, school, or sporting events; medical services magazine subscriptions; charitable or religious contributions; purchase of toys, games, and 'gifts; alcohol or tobacco; and basic school fees and supplies.

This study divided Washington State into seven pricing areas and collected price data for each area. Statewide cost figures were then prepared using a weighting formula that gives costs in populous regions more weight than those in less populous ones.

FINDINGS
Evaluation of the methods used to measure food costs, rental costs and energy costs in the 1980 Cost of Living study showed them to be sound.
The present study used 1980 procedures for measuring food and rental costs. While methods used to measure energy costs were substantially revised, they yielded results that are similar to 1980 cost figures updated for inflation.

In April 1984, the basic requirements for a family of four priced in this study cost $862.46 per month, up 21.9 percent from October 1980. The market baskets of goods and services for an elderly individual cost $464.00. Equivalence scales were used to calculate the costs faced by families of other sizes.

If the model family of four were on public assistance on July 1, 1984, and had no other income, it would receive $736.38 per month in AFDC, Food Stamp and Low-Income Home Energy Assistance benefits. A single elderly individual receiving Supplemental Security Income (SSI), Food Stamps and Low-Income Home Energy Assistance would receive $430.69 per month. Medical benefits have not been calculated because medical costs were not examined in this study: All medical needs were assumed to have been met through medical assistance and private sources.

When utility costs were isolated from the various market baskets in which they were included, the family of four needed $88.33 per month to purchase heat, other essential energy, telephone service, water, sewer and garbage. The equivalent costs for an elderly individual were $45.75 per month.

Four methods of preparing annual updates of cost of living results were analyzed. These included use of the Implicit Price Deflator (IPD), national data from the U.S. City Consumer Price Index (CPI), Seattle-Everett CPI data, and the combination of national and local CPI data recommended by the authors of the 1980 study. When applied to 1980 study findings, the recommended 1980 update methodology proved to be the best predictor of 1984 cost of living results. Unfortunately, the Seattle-Everett CPI data used in that method will not be available on a monthly basis after January 1987. U.S. City data provides an acceptable substitute for the local data, however. U.S. City CPI data should be used to produce annual updates after that date.
 

Modified: Friday May 19 2006

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