By Jim Cline and Kate Kremer
We often are asked, what the “Seattle” CPI is and whether it only covers the City of Seattle, or King County. In fact, the “Seattle” index covers the entire Seattle metropolitan area.
There is no requirement that you be in, or near “Seattle” to rely upon the Seattle index. In fact, you do not need to be in the Metropolitan area covered by the index, to justify its use. Even Eastern Washington jurisdictions likely have comparables that depend on the Seattle index for inflation adjustments, so tying those contracts into the Seattle index is the surest way to ensure that they keep pace with their Western Washington comparables.
There are two different Seattle indices, the “W” and the “U.” As the Bureau of Labor Statistics (BLS) explains:
The Consumer Price Index (CPI) is a measure of the average change in prices over time in a fixed market basket of goods and services. The Bureau of Labor Statistics publishes CPIs for two population groups: (1) a CPI for All Urban Consumers (CPI-U) which covers approximately 88 percent of the total population and (2) a CPI for Urban Wage Earners and Clerical Workers (CPI-W) which covers 29 percent of the total population. The CPI-U includes, in addition to wage earners and clerical workers, groups such as professional, managerial, and technical workers, the self-employed, short-term workers, the unemployed, and retirees and others not in the labor force.
We have indicated preference for the Seattle index over the national index based on past trends and future expectations. (Visit our Premium Website for our historic data on the All Cities and Seattle CPI.) Often employers will express the inverse desire to use the “All-Cities” (national) index. Employers, supported by the Municipal Research and Services Center of Washington will cite the BLS recommendation that only the national indices be used for labor contracts. The argument is that the regional indices have too small a “sample,” to produce a reliable number.
That logic has never made much sense to us. If the sample size was actually too small, why would BLS bother reporting the number at all? They have never claimed that their report was “statistically unreliable.” In reality, there are differences in inflation trends which occur among different regions of the country and only the regional indices pick these up. Arbitrators can and have disregarded the BLS view on this subject so there is no reason that parties to a collective bargaining contract should give this claim much weight. You inherently are always gambling whenever you adopted a particular index — or elect a fixed percentage in lieu of a CPI formula — but we continue to think that for the foreseeable future, the Seattle index is a better bet than the All-Cities index.
