However, it could be argued that health insurance fringe benefits are more nearly private goods, influenced by private choices, than are the goods provided by local government. In choosing among jobs, workers have the possibility of accepting a job with higher money wages but without health benefits, while making their own arrangements for purchasing medical care or self-insuring; or they can choose something in between. But there are many fewer options in the basket of local public goods: one cannot typically buy a bridge single-handedly. Moreover, alternative baskets of compensation items among which workers have to choose will typically contain many fewer goods than the alternative baskets of local public services.11

From a practical standpoint, most of the analyses of changes over time in real income are derived by deflating survey data on nominal money incomes by the CPI. In turn, that nominal income data typically exclude the value of employer-financed fringe benefits. As a consequence, in Chapter 6, which deals with the pricing of medical care, the panel pragmatically recommends that the official “flagship” CPI continue to exclude coverage of employer-paid health benefits. On the other hand, while the appropriate conceptual treatment of employer-paid fringe benefits is not an open-and-shut issue, the panel does recommend in Chapter 6 that the BLS also publish a supplemental medical care price index that, among other features, includes health care expenditures financed by employers.


Drawing from the arguments presented in this chapter, the panel offers the following conclusion and recommendation:

Conclusion 3-1: Under either rubric, COGI or COLI, the domain of the “flagship” or official CPI and any subgroup indexes that are produced should be confined to the boundaries that the BLS has adopted—changes in the prices of private goods and services.

Recommendation 3-1: The BLS should not, on its own, conduct research aimed at producing a CPI with a substantially expanded domain. But we encourage BLS, jointly with other federal statistical agencies and particularly the Bureau of Economic Analysis (BEA), to undertake research aimed at producing on an experimental basis or in satellite accounts, more comprehensive measures of national output, income, and prices. These would take into account the effects of changes in outside conditions for which there may be at least some chance of reasonably measuring those effects—perhaps, for example, changes in the status of the natural environment.


Just as there are many aspect to a job in addition to the menu of compensation items, there are many aspects to the choice of residential location apart from the basket of local public services.

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