A management challenge for employers
New York –
Where you live continues to be a key determinant of how much you are paid, a new study shows.
A job that demands an average salary of $30,000 nationally can pay as little as $26,820 in Little Rock, Ark., or as much as $36,870 in San Francisco, according to the 2003 Geographic Salary Differentials Survey from Mercer Human Resource Consulting. This represents a pay variation of more than 33 percentage points — from 10.6% below the national average to 22.9% above.
Each year, Mercer’s survey compares local pay rates for more than 175 cities to national medians at different pay levels. The 2003 findings suggest that geographic pay variations are less pronounced, but still evident, at higher pay levels. For a job with an average salary of $60,000 nationally, pay varies from a low of $54,780 (–8.7%) in Asheville, N.C., to a high of $70,980 (+18.3%) in San Francisco, for a variation of 27 percentage points.
Even at $90,000, there are still pay variations by geography. Cities like Omaha, Neb., Knoxville, Tenn., and Buffalo, N.Y., represent the lower end of the pay range at $85,500, $85,590, and $85,680, respectively. Meanwhile, cities like San Francisco, San Jose, and New York hold the top spots at $104,400, $103,590, and $103,410, respectively. Among the cities in Mercer’s survey, the pay variance at this salary level is about 21 percentage points.
“What’s noteworthy is that pay variations exist at the higher salary levels and to this extent,” says Darrell Cira, a senior compensation consultant in Mercer’s Philadelphia office. “It was once believed that geographic pay differences disappeared at salary levels of $80,000 to $90,000, where the market for talent tends to be national rather than regional or local. Clearly, that’s not the case any more.”
“Today, you need to take geographic location into account even for salaries of $100,000 and higher, especially in cities like New York and San Francisco,” he notes.
Mercer’s geographic analysis highlights the challenges faced by large employers with employees in multiple locations throughout the US. Sensitive compensation issues can arise when an employee moves from a relatively high-salary area to a relatively low-salary area, or vice versa, Mr. Cira says. Having good information on salary variances helps employers handle these situations in a fair and consistent manner.
However, he notes, it is important to apply geographic salary differentials correctly.
“Differentials are helpful for adjusting pay structures and for broadly understanding differences in pay to help formulate pay policy,” Mr. Cira explains. “However, employers also need to be aware of the micro-markets within their geographies. While salaries for all jobs may average 5% more than the national average in a given location, individual jobs may be at the national average or 10% above the national average. These micro-markets are often the source of employee complaints that they are not paid competitively.”
The 2003 Geographic Salary Differentials Survey can be purchased by contacting Mercer at imercer.com or 800 333 3070. The cost is $495 for a web-based version of the survey.
Mercer Human Resource Consulting, one of the world’s leading consulting organizations, helps organizations create measurable business results through their people. With more than 13,000 employees serving clients from 142 cities in 40 countries worldwide, the company is part of Mercer Inc., a wholly owned subsidiary of Marsh & McLennan Companies, Inc., which lists its stock (ticker symbol: MMC) on the New York, Chicago, Pacific, and London stock exchanges.