Beyond MSAs: Determining How U.S. Pay Varies by Location
Using the Census Bureau's Metropolitan Statistical Areas (MSAs) can produce misleading results
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 CGPIscores 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. | |
Geographic Area [Pay Zone] | State: Geographic Locale |
Pay Zone 1. CGPI Range: 112.0%+ 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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