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Beyond MSAs: Determining How U.S. Pay Varies by Location
Using the Census Bureau's Metropolitan Statistical Areas (MSAs) can produce misleading results

By Culpepper and Associates  3/1/2010
 

 

Location is the dominant factor influencing market pay rates for most nonexecutive jobs. Culpepper and Associates’ annual analysis of technology and life science industry wages in the U.S. demonstrates the importance of considering the impact of geography on compensation.

For 2010, the geographic pay analysis of participating companies in Culpepper Compensation Surveys confirms that Silicon Valley and San Francisco in the California Bay Area continue to have the highest market wage levels in the United States. Pay rates in these technology-driven markets average 126.6 percent of the U.S. national average (see Table 1).

Other high-paying locations include Boston, Denver/Boulder, New York City, Seattle and Washington, D.C. Pay levels in these markets run about 108 percent of the national average.

Pay Rates Can Vary Among Locales in Large Metro Areas

One common method of analyzing pay by geography is using Metropolitan Statistical Areas (MSAs) defined by the U.S. Census Bureau. While MSAs might be popular for determining geographic pay differentials, MSAs were not designed for pay analysis and do not always provide precise geographic breakouts.

Culpepper's analysis of individual cities and large metropolitan areas across the U.S. reveals significant pay differences among locales within a number of large metro areas. Examples of some large metro areas where MSAs are inappropriate to use for geographical pay analysis include:

  • California Bay Area. In the California Bay Area, pay rates for East and North Bay average 109.7 percent of the national average, considerably lower than Silicon Valley and San Francisco.
  • New York. The MSA for the New York metro area includes several locales across the tri-state area of New York, New Jersey and Connecticut. Pay rates for New York City and Newark, N.J., typically run higher than other locales within commuting distance of New York City, such as Westchester County, Long Island, and Stamford/Greenwich/Norwalk.
  • Seattle. In Washington state, the MSA for the Seattle metropolitan area includes Seattle, Tacoma and Bellevue. But pay levels in Tacoma are significantly less than in Seattle and Bellevue. Combining data from Tacoma with data from Seattle and Bellevue (as the MSA does) will inflate market data erroneously for Tacoma and decrease market data for Seattle and Bellevue. Because pay rates in Tacoma are similar to those in Olympia, a better approach is to combine them to create a Tacoma/Olympia geographic locale. The Seattle locale would best include the city of Seattle along with Bellevue and other communities east of Seattle within commuting distance that have similar pay rates.

Examples of large metro areas where MSAs are appropriate to use for geographical pay analysis include Atlanta, Boston, Dallas/Fort Worth, Denver/Boulder and Minneapolis/St. Paul. Because the pay levels are similar for the core city and combined adjacent cities and counties, the MSA for each of these markets is suitable to use for geographic data cuts.

Pay Rates Can Vary Within Regions

One of the most common mistakes in pricing jobs by geography is using data cuts for states or broad geographic regions. The problem with using broad regions is that they fail to capture differences among local markets within a state or region.

For example, using a broad geographic data cut for the Midwest region will decrease wage data artificially for the highest-paying locales in the region (Chicago, Minneapolis/St. Paul) and inflate wage data for lower-paying locales (Cincinnati, Cleveland/Akron, Detroit/Ann Arbor) and rural areas in the region.

Geographic Data Cuts

There are three types of U.S. geographic data cuts that Culpepper has found to be effective. Each step up, from geographic locale to geographic area to pay zone, provides a larger grouping of geographic data with similar pay rates.

  • Geographic localesare designated for an individual city (Austin), broad metropolitan area (Los Angeles) or multiple cities that are close in geographic proximity (Dallas/Fort Worth) with similar pay rates. Geographic locales for the U.S. are based on the work location of individual employees by ZIP Code from participating companies. Example: Research Triangle locale is in the Southeast geographic area and Pay Zone 3.
  • Geographic areasamalgamate data from geographic locales in a geographic region with similar pay rates. The number in brackets appended to each geographic area represents the corresponding pay zone. Example: Southeast includes Atlanta and Research Triangle.
  • Geographic pay zonesrepresent the highest paying regions (Pay Zone 1) through the lowest pay regions (Pay Zone 6). Similar to geographic areas, pay zones amalgamate data from multiple geographic locations and areas with similar pay rates. Geographic locales and areas assigned to a pay zone might or might not be contiguous. Pay zones provide large geographic data cuts and are useful for organizations that want to create geographic pay differentials accurately and intelligently. Example: Pay Zone 3 includes Atlanta, the Research Triangle and other similar paying geographic locales outside of the Southeast, such as Los Angeles, Chicago, Philadelphia and Austin. See Table 1 for a complete list of locales in each pay zone.

The Culpepper Geographic Pay Index (CGPI) is an index that measures relative pay rates of different geographic locations. CGPI scores are based on the work location and cash compensation of individual employees collected from participating companies in Culpepper Compensation Surveys. Scores are used to allocate locales with similar pay rates to larger geographic areas and pay zones.

CGPI =

Average Pay Rate of Work Location

x

100

U.S. National Average Pay Rate

U.S. Market Wage Levels by Geographic Pay Zone

Table 1 provides average CGPI scores for six pay zones in the United States. Each pay zone includes groupings of locales and areas with similar pay rates. The data source is the Culpepper Compensation Operations, Technology, and Life Science U.S. Surveys as of January 2010.

Table 1.
U.S. Market Wage Levels by Geographic Pay Zone

Geographic Area [Pay Zone]

State: Geographic Locale

Pay Zone 1. CGPI Range: 112.0%+ of National Average.
Average CGPI = 126.6% of National Average.

California Bay Area [1]

CA: Bay Area: San Francisco

California Bay Area [1]

CA: Bay Area: Silicon Valley

Pay Zone 2.  CGPI Range: 106.0 to 111.9%. Average CGPI = 107.8%.

California Bay Area [2]

CA: Bay Area: East

California Bay Area [2]

CA: Bay Area: North

Northeast/Mid-Atlantic [2]

DC: Washington, D.C. Metro (DC-MD-VA)

Northeast/Mid-Atlantic [2]

MA: Boston

Northeast/Mid-Atlantic [2]

NJ: Newark

Northeast/Mid-Atlantic [2]

NY: New York City

Northwest [2]

WA: Seattle

Southwest [2]

CA: Santa Barbara/San Luis Obispo

Southwest [2]

CO: Denver/Boulder

Non-Contiguous U.S. [2]

AK: Anchorage

Non-Contiguous U.S. [2]

AK: Fairbanks

Pay Zone 3. CGPI Range: 100.0 to 105.9%. Average CGPI = 102.2%.

Midwest [3]

IL: Chicago

Midwest [3]

MN: Minneapolis/St. Paul

Midwest [3]

WI: Milwaukee

Northeast/Mid-Atlantic [3]

CT: Stamford/Greenwich/Norwalk

Northeast/Mid-Atlantic [3]

DE: Wilmington

Northeast/Mid-Atlantic [3]

MA: Springfield

Northeast/Mid-Atlantic [3]

MA: Worcester

Northeast/Mid-Atlantic [3]

MD: Baltimore

Northeast/Mid-Atlantic [3]

NJ: Atlantic City

Northeast/Mid-Atlantic [3]

NJ: Trenton

Northeast/Mid-Atlantic [3]

NY: Albany

Northeast/Mid-Atlantic [3]

NY: Long Island

Northeast/Mid-Atlantic [3]

NY: Westchester

Northeast/Mid-Atlantic [3]

PA: Philadelphia

Northeast/Mid-Atlantic [3]

PA: State College

Northeast/Mid-Atlantic [3]

RI: Newport

Northeast/Mid-Atlantic [3]

VT: Burlington

Northwest [3]

OR: Portland

Southeast [3]

GA: Atlanta

Southeast [3]

NC: Research Triangle

Southwest [3]

CA: Los Angeles Metro

Southwest [3]

CA: San Diego

Southwest [3]

TX: Austin

Southwest [3]

TX: Dallas/Fort Worth

Pay Zone 4. CGPI Range: 95.0 to 99.9%. Average CGPI = 97.6%.

Midwest [4]

IN: Indianapolis

Midwest [4]

MI: Detroit/Ann Arbor

Midwest [4]

MI: Lansing

Midwest [4]

MO: Kansas City (KS & MO)

Midwest [4]

OH: Cleveland/Akron

Midwest [4]

WI: Madison

Northeast/Mid-Atlantic [4]

CT: Bridgeport/New Haven

Northeast/Mid-Atlantic [4]

CT: Hartford

Northeast/Mid-Atlantic [4]

MA: New Bedford/Fall River

Northeast/Mid-Atlantic [4]

MD: Frederick

Northeast/Mid-Atlantic [4]

NH: Manchester/Concord

Northeast/Mid-Atlantic [4]

PA: Harrisburg/Lebanon

Northeast/Mid-Atlantic [4]

PA: Pittsburgh

Northeast/Mid-Atlantic [4]

RI: Providence

Northeast/Mid-Atlantic [4]

VA: Charlottesville

Northeast/Mid-Atlantic [4]

VA: Richmond

Plains [4]

MT: Metro Areas

Plains [4]

NE: Omaha/Lincoln

Southeast [4]

AL: Huntsville

Southeast [4]

FL: Boca Raton/Palm Beach

Southeast [4]

FL: Lakeland-Winter Haven

Southeast [4]

FL: Melbourne/Titusville

Southeast [4]

FL: Miami-Dade

Southeast [4]

FL: Orlando

Southeast [4]

FL: Port St. Lucie/Sebastian

Southeast [4]

GA: Athens

Southeast [4]

GA: Columbus

Southeast [4]

NC: Wilmington

Southeast [4]

SC: Charleston

Southwest [4]

AZ: Flagstaff/Prescott

Southwest [4]

CA: Oxnard/Ventura

Southwest [4]

CA: Sacramento

Southwest [4]

CA: Stockton/Modesto

Southwest [4]

CO: Fort Collins

Southwest [4]

UT: Salt Lake City

Non-Contiguous U.S. [4]

HI: Hawaii & U.S. Pacific Islands

Pay Zone 5. CGPI Range: 90.0 to 94.9%. Average CGPI = 92.2%.

Midwest [5]

IA: Cedar Rapids

Midwest [5]

IA: Des Moines

Midwest [5]

IA: Quad Cities (IA & IL)

Midwest [5]

IL: Champaign/Urbana

Midwest [5]

IL: Peoria/Bloomington

Midwest [5]

IL: Rockford

Midwest [5]

IN: Anderson/Muncie

Midwest [5]

IN: Evansville

Midwest [5]

IN: South Bend

Midwest [5]

MI: Grand Rapids

Midwest [5]

MN: Rochester

Midwest [5]

MN: St. Cloud

Midwest [5]

MO: St. Louis

Midwest [5]

OH: Canton

Midwest [5]

OH: Cincinnati

Midwest [5]

OH: Columbus

Midwest [5]

OH: Dayton

Midwest [5]

OH: Youngstown

Northeast/Mid-Atlantic [5]

NY: Buffalo

Northeast/Mid-Atlantic [5]

NY: Syracuse

Northeast/Mid-Atlantic [5]

VA: Norfolk/Virginia Beach

Northeast/Mid-Atlantic [5]

WV: Morgantown/Clarksburg

Northwest [5]

WA: Bellingham/Mount Vernon

Northwest [5]

WA: Spokane

Northwest [5]

WA: Tacoma/Olympia

Northwest [5]

WA: Yakima/Kennewick

Southeast [5]

FL: Daytona Beach/Palm Coast

Southeast [5]

FL: Fort Myers/Naples

Southeast [5]

FL: Sarasota/Bradenton

Southeast [5]

FL: Tampa/St. Petersburg

Southeast [5]

GA: Macon

Southeast [5]

GA: Savannah

Southeast [5]

KY: Lexington

Southeast [5]

KY: Louisville

Southeast [5]

LA: New Orleans

Southeast [5]

MS: Gulfport/Biloxi

Southeast [5]

MS: Jackson

Southeast [5]

NC: Asheville/Brevard

Southeast [5]

NC: Charlotte

Southeast [5]

SC: Columbia

Southeast [5]

SC: Greenville/Spartanburg

Southeast [5]

TN: Johnson City/Kingsport/Bristol

Southeast [5]

TN: Knoxville

Southeast [5]

TN: Memphis

Southeast [5]

TN: Nashville

Southwest [5]

AZ: Phoenix

Southwest [5]

AZ: Tucson

Southwest [5]

CA: Bakersfield

Southwest [5]

CA: Fresno

Southwest [5]

CO: Colorado Springs

Southwest [5]

NM: Las Cruces/White Sands

Southwest [5]

TX: Houston

Southwest [5]

TX: San Antonio

Southwest [5]

TX: Waco/Killeen

Pay Zone 6. CGPI Range: < 90.0%. Average CGPI = 88.3%.

Midwest [6]

IL: Springfield

Midwest [6]

IN: Fort Wayne

Midwest [6]

MI: Kalamazoo/Battle Creek

Midwest [6]

MI: Saginaw/Midland

Midwest [6]

MO: Columbia/Jefferson City

Midwest [6]

MO: Springfield

Midwest [6]

OH: Toledo

Midwest [6]

WI: Eau Claire

Midwest [6]

WI: Green Bay/Appleton

Northeast/Mid-Atlantic [6]

MD: Hagerstown/Martinsburg

Northeast/Mid-Atlantic [6]

ME: Portland

Northeast/Mid-Atlantic [6]

NY: Newburgh/Kingston

Northeast/Mid-Atlantic [6]

NY: Rochester

Northeast/Mid-Atlantic [6]

PA: Allentown/Bethlehem

Northeast/Mid-Atlantic [6]

PA: Lancaster

Northeast/Mid-Atlantic [6]

PA: Reading

Northeast/Mid-Atlantic [6]

PA: Scranton/Wilkes-Barre

Northeast/Mid-Atlantic [6]

PA: York/Hanover/Gettysburg

Northeast/Mid-Atlantic [6]

VA: Roanoke

Northeast/Mid-Atlantic [6]

WV: Charleston

Northeast/Mid-Atlantic [6]

WV: Huntington/Ashland

Northwest [6]

ID: Boise

Northwest [6]

ID: Idaho Falls/Pocatello

Northwest [6]

OR: Eugene

Northwest [6]

OR: Salem

Plains [6]

KS: Topeka

Plains [6]

KS: Wichita

Plains [6]

ND: Fargo

Plains [6]

OK: Oklahoma City

Plains [6]

OK: Tulsa

Plains [6]

SD: Sioux Falls

Plains [6]

WY: Cheyenne

Southeast [6]

AL: Birmingham

Southeast [6]

AL: Mobile

Southeast [6]

AL: Montgomery

Southeast [6]

AR: Fayetteville/Bentonville

Southeast [6]

AR: Little Rock

Southeast [6]

FL: Fort Lauderdale/Broward

Southeast [6]

FL: Gainesville/Ocala

Southeast [6]

FL: Jacksonville

Southeast [6]

FL: Pensacola

Southeast [6]

FL: Tallahassee

Southeast [6]

GA: Augusta

Southeast [6]

GA: Gainesville

Southeast [6]

LA: Baton Rouge

Southeast [6]

LA: Lafayette

Southeast [6]

LA: Shreveport

Southeast [6]

NC: Fayetteville

Southeast [6]

NC: Greensboro/Winston-Salem

Southeast [6]

NC: Hickory/Morgantown

Southeast [6]

NC: Rocky Mount/Greenville

Southeast [6]

TN: Chattanooga

Southwest [6]

CO: Pueblo

Southwest [6]

NM: Albuquerque

Southwest [6]

NV: Las Vegas

Southwest [6]

NV: Reno

Southwest [6]

TX: Beaumont

Southwest [6]

TX: Corpus Christi

Southwest [6]

TX: El Paso

Southwest [6]

TX: Longview/Tyler

Southwest [6]

TX: Lubbock

Southwest [6]

TX: McAllen/Brownsville

Southwest [6]

UT: Ogden

Southwest [6]

UT: Provo

Non-Contiguous U.S. [6]

PR: Puerto Rico & U.S. Virgin Islands

Conclusion

Geographic location is the prevalent factor influencing market pay rates for most nonexecutive jobs. Compensation for specific jobs in local markets can vary and can be impacted by a variety of other factors, including job level, company size, industry sector, talent availability, cost of living and health of local economies. 

Culpepper and Associates conducts worldwide salary surveys and provides benchmark data for compensation and employee benefit programs.

Reposted with permission

Source: Culpepper Compensation Survey, January 2010, www.culpepper.com 

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