Budget Index

Budget Index


an indicator used in studying the dynamics of the material level of living, sometimes called the index of the “cost of living.” It differs from the index of prices in that it is weighted in terms of the base period rather than the current period. It is computed on the basis of the

and current periods and q0 is the quantity of various goods of the base period. The budget index (first introduced in Great Britain in 1918 and in the USA in 1919) defines a family’s expenditures on the purchase of a budgetary group during the current period in comparison with expenditures on the same group during a previous (base) period: in this manner the amount of money required to maintain the same standard of living (understood as the volume of consumption) is calculated. The number of goods included in the group is comparatively small, as opposed to the price index, which has a numerically large, varying group of goods. The budget index must be drawn up as a group index, with the subsequent influence of a total (general) index.

In the USSR, the calculation of the budget index was begun in 1922. The establishment of budget indexes for various economic groups of the population (since they have differing purchasing power) and for various commodity groups and noncommodity state services (benefits from public funds, grants of living quarters, and rent subsidies by the state) provides the most reliable picture of consumption levels. As a rule, benefits from public funds (subsidies for children’s institutions, recreation, medical treatment, and so on) go primarily to low-income families, which diminishes to some extent the difference between the standards of living of the highand low-paid. At the same time, when the state assumes a portion of family expenditures (for example, when a child studies at boarding school), the purchasing power of a family is increased. The prices that are included in the budget group are obtained from budget records (consumer budgets) of the sums actually paid for goods; the average sale prices are computed on this basis. These prices differ from price lists, since the same goods are purchased at different places (state trade, cooperatives, kolkhoz markets). It is possible to establish various combinations of summary indexes, including the index of business conditions, on the basis of group indexes. To calculate the real wages of the toiling masses, Soviet statistics uses the income index of the population, which evaluates in comparable prices the cash and kind incomes and the privileges granted by the government.

In capitalist countries, the officially calculated budget index and the budget index obtained by workers’ organizations differ sharply. The budget index obtained by official statistics does not provide a true picture; budget surveys frequently exclude low-income families, whose consumption is more heavily weighted toward mass-consumption goods (which have the most sizable price increases), and do not adhere to representative sampling of budget groups, registering the groups only in the large cities.


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