Beyond Inflation: How Different CPI Measures Impact Government Employee Salaries
Inflation touches nearly every aspect of our lives. That carton of eggs that cost $2 last year might now be $6.23. The apartment you rented for $1,500 monthly might jump to $2,000. Even getting around town costs more when gas prices or bus fares increase. What's worse, bad policy can lead to a rise in inflation, such as irrational tariffs that lead to reactionary actions and a trade war.These changes aren't just numbers - they're real financial pressures that can slowly erode your purchasing power if your income doesn't keep up.
Cost of Living Adjustments, or COLAs, represent a commonly used solution. Local governments implement COLAs to ensure employees' wages maintain their purchasing power despite inflation. Good policy ties wages to inflation to prevent the erosion of employee living standards. If prices go up 3%, a corresponding 3% salary increase means employees can generally afford the same lifestyle as before. Most local governments adjust salaries once annually rather than monthly. This approach smooths out temporary market fluctuations and provides budget predictability for employees and government finance departments.
So, what specific economic measure do local governments use to determine these adjustments? Many rely on the Consumer Price Index for All Urban Consumers in the Midwest region, commonly known as the CPI-U Midwest.
The Bureau of Labor Statistics calculates the Consumer Price Index for All Urban Consumers (CPI-U). This metric tracks price changes for a representative basket of goods and services that typical households purchase including:
Food and beverages
Housing costs
Apparel
Transportation
Medical care
Recreation
Education
Communication
The CPI-U specifically measures price changes experienced by urban consumers, representing about 93% of the total U.S. population.
While a national CPI-U exists, many local governments specifically use a regional approach because:
Regional relevance: Cost increases in New York City or San Francisco don't necessarily reflect what's happening in Indiana.
Geographic accuracy: The Midwest experiences different economic pressures than coastal regions, with variations in housing markets, transportation costs, and food prices.
Local taxpayer alignment: Using a regional figure ensures that public employee compensation aligns with the economic reality that local taxpayers also experience.
Monroe County uses the December-to-December annual average change, which provides a yearly snapshot of inflation that seamlessly incorporates into employee expectations and budget planning cycles.
As Monroe County departments approach the 2026 Budget this background can be helpful. Understanding the key metrics gives fiscal policymakers a better idea about the ways to retain and support staff, even in this economy where Indiana's SB1 (2025), other state policies, and incompetent Federal leadership create headwinds.
