In a democracy there is scarcely any public question of greater importance than the standard of living of the common people. It is essential to know the actual level of this standard of living, and whether it is improving or deteriorating. There can be two types of standards of living. One is the standard of living of the society as a whole, and the other is the standard of a group within the society. It is perfectly possible for the standard of the society as a whole to be improving, while that of one or more groups within the society is declining. Moreover, if the distribution of economic power in the society is very unequal, it may happen that the group, the standard of which is declining may constitute a very large proportion, even a majority, of the total population. Our aim is to explore that standard of living of the average household (the wage earner), taking into account the following factors. First, indices of price levels are almost always based on the prices of articles most of which do not enter directly into the budget of the wage-earner’s family. The increase in prices in recent years has affected different classes of commodities very differently, and that the commodities, the prices of which have fallen rapidly are those which belong to the category of luxuries, while those articles, the prices of which have risen at a rate greater than the average, are the necessities of life, which constitute the major part of the workingman’s expenditure. Second, an index of wage levels is likely to be meaningless because of the extreme difficulty in arriving at anything like an average of wages.