Boskin Commission Inflation Essay Questions

The Senate Finance Committee created the Boskin Commission in 1996, which consisted of five prominent economists, to report on any biases in the Consumer Price Index (CPI). The Boskin Commission concluded that the CPI overstated inflation by 1.1 percentage points, meaning that if the official CPI stated inflation rate was 3.0%, then the true rate of inflation was 1.9% (3.0%-1.1%) in the eyes of the Boskin Commission.

The following tables detail the average nominal yearly wages of workers with only a high school degree and the average real wages (2016 dollars) for the years 1980-2016. The first table's CPI is based on the Bureau of Labor Statistic's CPI data and the second table is based on the Boskin Commission's CPI.

Instructions:

Use the information in the preface to answer the following questions in an essay format:

1) How would the 1.1 percentage point reduction in the CPI inflation rate revise or change the level of wages in the United States? Were individual's incomes higher or lower than what economists previously had thought under the Bureau of Labor Statistics' (BLS) prior formulation of the CPI?

2) How would the 1.1 percentage point reduction in the CPI inflation rate revise or change the rate of real wage growth in the United States over the previous decades? Why would it revise or change the rate of real wage growth?

Your essay needs to be a minimum of three paragraphs with size 12 font. You can include equations in your response if it aids your explanations. Please type or copy and paste your essay into the textbox below. MLA format is not required

Year Nominal Wage BLS CPI Real Wage (2016 Dollars) 1980 13,832 86.4 38,873.84 1986 17,888 110.8 39,202.00 1992 20,956 142.3 35,759.36 1998 24,908 164.4 36,789.45 2004 29,848 191.7 37,807.62 2010 32,552 220.472 35,851.76 2016 35,984 242.821 35,984.00 Year Nominal Wage Boskin CPI Real Wage (2016 Dollars) 1980 13,832 60.825 26,400.98 1986 17,888 73.191 28,374.05 1992 20,956 88.202 27,583.36 1998 24,908 94.463 30,612.19 2004 29,848 104.393 33,194.12 2010 32,552 112.524 33,585.34 2016 35,984 116.096 35,984.00