Doc.A6465/14/12 Ag. 13.1 Joint Index Working Group on Article 64 and Article 65 of the Staff Regulations Meeting in Luxembourg 24th & 25th March 2014

Content of this presentation Test calculations of new Joint Index Influence of aggregation Influence of staff distribution

Staff Regulations – Annex XI Eurostat shall, in agreement with national statistical institutes […] calculate the economic parities which establish the equivalence of purchasing power […] The economic parities shall be calculated in such a way that each basic component can be updated twice per year […]. Eurostat shall update the economic parities using the change in the Harmonised Index of Consumer Prices of the Member States and the most appropriate indices as defined by the Working Group on Articles 64 and 65 of the Staff Regulations referred to in Article 13.

Staff Regulations – Annex XI Eurostat shall draw up an index to measure changes in the cost of living for officials of the Union in Belgium and Luxembourg. That index (hereinafter the ‘Joint Index’) shall be calculated by weighting national inflation (as measured by the Harmonised Indices of Consumer Prices (HICP) in the case of Belgium and the Consumer Prices Index (CPI) in the case of Luxembourg) between June of the previous year and June of the current year according to the distribution of the staff serving in those Member States.

Different approaches are possible… …so some test calculations here For information only: assess impact of choice of LU HICP versus LU CPI Decision 1: evaluate how to calculate the index movement weighted by staff numbers Decision 2: evaluate appropriate level of aggregation Apply consumption patterns from BH level Use overall index values

Influence of Staff numbers What-if calculation Necessary amount of changes in relative staff numbers BXL : LUX to have an influence on results Tests done using the overall numbers of BE HICP and LU CPI

Data for test calculations Tests done with index values of 2012 and 2013 2012m06 2013m06 change LU CPI 118.23 120.67 +2.064% BE HICP 118.06 119.86 +1.525% Joint 118.10 ??? Staff distribution in 2012: 21.7 : 78.3

Results if 2013 staff vary LU : BE staff in 2013 Joint 2013 % change 21.7 : 78.3 (ie. same as 2012) 120.04 1.6 (1.64) 10.0 : 90.0 119.94 1.6 (1.56) 8.3 : 91.7 119.93 1.5 24.1 : 75.9 120.06 1.7

Results (if weights applied to mvmt) LU : BE staff % change 21.7 : 78.3 1.6 (1.64) 10.0 : 90.0 1.6 (1.58) 4.6 : 95.4 1.5 (1.54) 23.2 : 76.8 1.7 (1.65)

Summary Realistic changes in staff numbers seem unlikely to influence results Proposal: Eurostat to calculate Joint Index variation t0 to t1 using BE HICP & LU CPI at t0 weighted by staff at t0 BE HICP & LU CPI at t1 weighted by staff at t1 variation = 100 x ( BELU t1 – BELU t0 ) / BELU t0

Overall calculation – HICP & CPI BE HICP and LU CPI with their respective all- items value and weighted by staff distribution → Index values: 2012: 118.097 2013: 120.036 → Change: 1.64%

Overall calculation – 2x HICP BE HICP and LU HICP with their respective all- items value and weighted by staff distribution → Index values: 2012: 118.592 2013: 120.526 → Change: 1.63%

Subindex aggregation – BE HICP & LUX CPI BE HICP and LU CPI, weighted with staff distribution and aggregated using expats' consumption patterns (SHE 2009) →Index values: 2012: 116.647 2013: 118.527 →Change: 1.61%

Subindex aggregation – 2x HICP BE HICP and LU HICP, weighted with staff distribution and aggregated using expats' consumption patterns (SHE 2009) →Index values: 2012: 116.628 2013: 118.504 →Change: 1.61%

Summary: 2012 – 2013 HICP & CPI HICP & HICP Aggregation 1.61% Overall 1.64% 1.63% Summary: yes, it makes a (small) difference!

For comparison: 2011 – 2012 HICP & CPI HICP & HICP Aggregation 2.15% Overall 2.11% 2.13%

Implications? Previously, there was consistency in calculating CC and monitoring BXL inflation for Ann.Adj. Reg.1023/2013 does not specify level of aggregation … can be read to imply overall calculation for Ann.Adj. … but aggregation is essential for CC → Proposal: Eurostat to use HICP & CPI with individual aggregation for both CC and REM purposes