By Jim Cline and Kate Kremer
In our last blog we reported that the Seattle CPI-W index had dipped slightly to fall closer in line with the national (All-Cities) index. The June Seattle Index was reported at 2.2 while the All-Cities index was 2.0%.
From month to month and year to year these relative numbers fluctuate. Still, it has been a recurring statement on our part that the Seattle index has a bit of a long-term upside “advantage” that should make it the “preferred” choices to use to negotiate your contract. As we said in September 2012:
As our long term readers are aware, we have recommended adopting the Seattle index over the National index. While there is an ebb and flow in the dueling sets of numbers, the Seattle index has historically outperformed the All-Cities index and we anticipate that trend will resume with a number of reports and indicators revealing that the Seattle economy will outgrow the national economy in the near term.
Since 2012, the Seattle economy has proven more robust than the national economy and that has been a factor in edging the Seattle CPI rate upward at a higher rate. Because we continue to anticipate that the Seattle economy will likely continue to outperform the national economy over the near term, it would stand to reason that the Seattle inflation rate will likely outrun the national rate during that time period.
Of the past 10 years, for example, in most (but certainly not all) reporting periods, the Seattle number has edged out the All-Cities number:
Over the cumulative course of the past 10 years, the Seattle CPI has edged out the All-Cities CPI by 2.8%. While that is not an overwhelming difference, it is, on average, about a .3% difference per year. A .3% difference is not insignificant, in our view, to the extent that number might directly impact your ultimate wage settlement.
In your contract negotiations, you probably should anticipate selecting one index to rely upon and then be prepared to “live with that” for future contracts. Predicting the year to year variation as to which index is higher is extremely difficult. Nor would you be persuasive in your negotiations if you simply varied back and forth between inflation index proposals each year, selecting whichever number happened to be higher at any given time, no matter how inviting that approach might seem at the time.
Contrary to some misunderstanding, the “Seattle” index is number narrowly not focused only on the immediate Seattle area, but measures inflation for the broader Metropolitan region, as we explained in another 2012 blog. As we said then:
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.
While you need not specify any particular inflation formula in your contract, at least for the near foreseeable future, we continue to think that the Seattle index has an edge. To the extent the Seattle rate begins to edge upwards, we also anticipate the regional wage settlement trend line will follow.
We have posted the most recent CPI data but also historic and other comparison CPI data on our Premium Website: http://clinelawfirm.com/premiumcontent/ For more information on the Premium Website, visit http://clinelawfirm.com/services/premium-information-services.shtml.