Low gas prices have been a boon for many Americans, but they haven’t meant good news for everyone. The latest example: The millions of Social Security recipients aren’t going to see an increase in their benefits next year due in large part to the cheap prices at the pump.
Social Security payouts are adjusted each year to keep pace with inflation. That annual cost-of-living-adjustment (COLA) is calculated by comparing consumer prices in July, August and September with prices in the same three months from the previous year.
According to the Bureau of Labor Statistics, the consumer price index fell 0.1 percent in August, chiefly because of the declining price of gas, which has fallen 23 percent over the past year. Even though the index rose by 0.1 percent in July, the September inflation data that will be released on Thursday likely will mean no Social Security benefit increase for next year, as gas prices plunged 13 percent between August and September.
“It’s a very high probability that it will be zero,” Polina Vlasenko, a research fellow at the American Institute for Economic research, told the Associated Press.
Benefits were also held flat in 2010 and 2011.
Economists and policymakers have at times debated just how best to determine the annual Social Security benefit changes, with some arguing the system should use an inflation index the better reflects costs borne by seniors. The elderly may not benefit as much from low gas prices, for example, because they’re not driving to and from work.
Henry Aaron, a senior fellow at the Brookings Institution, finds that the current index works, especially over time. “Next year you could very easily have the reverse situation where gas prices rebound, causing the overall price index to rise more than other prices are rising and very few people will protest that,” Aaron says.