Consumer Price Index (CPI-U and CPI-W)
This page provides an overview of the Consumer Price Index (CPI) for local governments in Washington State, including how to use the CPI and where to find CPI-U and CPI-W data.
What is the Consumer Price Index?
The Consumer Price Index (CPI) measures how prices for certain consumer goods and services have changed over time within the United States. It is one of the most widely used inflation indexes and is calculated by the U.S. Bureau of Labor Statistics (BLS).
The CPI is divided into two broad categories:
- All Urban Consumers (CPI-U)
- Urban Wage Earners and Clerical Workers (CPI-W)
BLS calculates the CPI-U and CPI-W for many different geographic regions.
How is the CPI Used?
Local governments use the CPI for various purposes, such as:
- Cost-of-living adjustments (COLA) for employees who are part of collective bargaining agreements;
- Pension adjustments; and
- Automatic increases for certain fees or revenues, such as impact fees or multi-year levy lid lifts.
The State of Washington also uses the CPI to calculate the statewide minimum wage and overtime and comp time thresholds (which are based on the minimum wage rate).
Which CPI Index Should We Use?
The question of which CPI index to use—CPI-U or CPI-W, as well as which geographic region—is a matter of local policy. The answer may depend on the agency's geographic location, size, context, and needs.
CPI-U vs. CPI-W
BLS divides the CPI into two different population groups:
- The Consumer Price Index for All Urban Consumers (CPI-U) measures the price changes faced by urban consumers and covers approximately 93% of the nation's population.
- The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is a subset of the CPI-U and reflects the price changes faced by urban households that derive more than half their income from clerical and hourly wage jobs. It covers approximately 29% of the nation's population and is sometimes referred to as the "blue-collar measure."
Geographic Regions
BLS calculates CPI-U and CPI-W data for many different geographic regions. The regions of most interest to local governments in Washington State are:
| CPI Region | Area Covered | Data Released |
|---|---|---|
| U.S. City Average | All urban areas nationwide | Monthly |
| West Census Region | Washington, Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, and Guam Subdivided into Class A (population over 2.5 million) and Class B/C (population under 2.5 million) |
Monthly |
| Pacific Census Division | Washington, Alaska, California, Hawaii, and Oregon | Monthly |
| Seattle-Tacoma-Bellevue Metropolitan Area (formerly Seattle-Tacoma-Bremerton) |
King, Snohomish, and Pierce counties; this is the only metropolitan index in the Pacific Northwest | Every two months |
BLS recommends using one of the U.S. City Average indexes for contract adjustments. See their webpage How to Use the Consumer Price Index for Escalation. The regional and metropolitan indexes are based on smaller samples and potentially more volatile due to measurement error, and the Seattle-Tacoma-Bellevue index is also published less frequently.
However, some local governments use one of other indexes, such as Seattle-Tacoma-Bellevue or the West region.
None of the CPI indexes measure price changes in rural areas. For rural governments, we recommend using one of the U.S. City Average indexes.
Practice Tip: Make sure your documents clearly state:
- Whether you are using the CPI-U or CPI-W.
- Which geographic region you are using—U.S. City Average, West Region, Seattle-Tacoma-Bellevue, etc.
- When and how your agency will calculate the adjustments.
- Whether there are any caps or floors—for example, will adjustments be capped at a certain amount even if the CPI exceeds that amount? What happens if the CPI is negative?
- When the changes will take effect.
Where Can I Find Current CPI Data?
For current and historical CPI data of interest in Washington State, see the BLS Consumer Price Index Tables: Pacific Cities and U.S. City Average.
The BLS release schedule shows upcoming CPI release dates and includes an online calendar you can subscribe to.
Practice Tip: Never use estimates for contract adjustments. Always write your contracts so you will adjust based on actual CPI figures.
Recommended Resources
Below are some useful resources from the U.S. Bureau of Labor Statistics:
- How to Use the Consumer Price Index for Escalation – General guidelines to consider when developing an escalation agreement using the CPI.
- Consumer Price Index FAQs
- Addressing Misconceptions About the Consumer Price Index (2008)
