COSTS OVER TIME: THE ALICE ESSENTIALS INDEX
Inflation is a key indicator of the health of the economy. When prices increase faster than wages and other sources of income, purchasing power decreases and households struggle to make ends meet.
The ALICE Essentials Index measures change over time in the cost of the household essentials that matter most to ALICE and poverty-level households: housing, child care, food, transportation, health care, and basic technology. The standard measure of inflation in the U.S., the Bureau of Labor Statistics' Consumer Price Index (CPI), tracks a much larger basket of over 200 categories of goods and services — including items that financially insecure households can't afford on a regular basis, like full-service meals at restaurants, wine, major appliances, travel, and jewelry. Tracking costs over time using the CPI alone can conceal important changes in the costs of household essentials.
Nationally, the ALICE Essentials Index has outpaced the broader CPI since 2007. Costs for both measures increased at a faster pace following the pandemic. Between 2021 and 2024, the ALICE Essentials Index increased at an annual rate of 5.6% compared to 5.0% for CPI — both much faster than the annual rates from 2007 to 2019 (2.7% annual increase for the ALICE Essentials Index and 1.8% for CPI).
In Alabama, the ALICE Essentials Index also increased faster than the national CPI, as shown in Figure 4. And like the national trend, essential costs in Alabama increased at a faster rate following the pandemic (4.9% annual increase in the ALICE Essentials Index from 2021 to 2024, compared to 2.8% between 2007 and 2019).
The Cost of Basics is Increasing Faster Than Overall Inflation
Inflation Indices, Alabama and U.S., 2007–2026
Note: Inflation index scores provide a way to?summarize complex data and track changes in costs over time using a numeric scale. The baseline for CPI was set at 100 in 1982. Compared to that baseline, CPI reached 207 in 2007, meaning that prices were 107% higher than in 1982. To compare the ALICE Essentials Index to CPI, the ALICE Essentials Index is set to the 2007 CPI value of 207. With this standardization, Figure 4 shows how the change in these two?measures compares over time. In the text, keeping with convention, we report the percent change in each index from one year to another. Year-to-year changes should be interpreted with caution; multi-year trends are more reliable. The ALICE Essentials Index rates for 2025 and 2026 are projections. CPI 2026 is preliminary (based on data through February 2026).
Sources: ALICE Essentials Index, 2007–2026; Bureau of Labor Statistics, 2007–2026—CPI
Learn More: Inflation Policy Implications
CPI is integrated into government policy, yet it does not provide policymakers with a full picture of who is bearing the brunt of inflation, or how the effectiveness of social insurance programs is diminished as benefits continue to fall further behind the cost of basics. As a result, many government policies fall short in their efforts to support workers and reduce hardship. This is especially true for the programs most relevant to ALICE households, including inflation stabilization strategy; tax brackets and credits; annual cost of living increases for a range of programs from Social Security to pensions for veterans and civil servants; and the annual increase of the FPL (as well as programs with eligibility based on multiples of the FPL, like SNAP and Medicaid).