Each year, Mercer´s study compares local pay rates for more than 175 cities to national medians at different pay levels. The 2004 findings suggest that geographic pay variations are less pronounced, but still evident, at higher pay levels. For a job with a median salary of $60,000 nationally, pay varies from a low of $54,480 (-9.2%) in Little Rock, Ark., to a high of $71,040 (+18.4%) in San Francisco, for a variation of nearly 28 percentage points.
Even at $90,000, there are still pay variations by geography. Cities like Buffalo, N.Y., Albuquerque, N.M., and Omaha, Neb., represent the lower end of the pay range at $84,690, $85,320, and $85,410, respectively. Meanwhile, cities like San Francisco, San Jose, and New York hold the top spots at $103,410, $103,230, and $103,050, respectively. Among the cities in Mercer´s study, the pay variance at this salary level is about 21 percentage points.
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. Good information on salary variances helps employers handle these situations in a fair and consistent manner.
According to Darrell Cira, a senior compensation consultant in Mercer´s Philadelphia office, a review of Mercer´s survey data over the past four years clearly indicates that salaries are growing at different rates around the country.
While salaries in some locations, such as Denver, Colo., have remained consistent over the past four years (approximately 4.5% above the national median), salaries in other locations have moved either closer to or farther from the national median, says Mr. Cira. For example, salaries in Washington, D.C., and Seattle, Wash., have increased several percentage points faster than the national median, while salaries in Buffalo, N.Y. and Portland, Ore. have grown several percentage points slower.
"We´re seeing a differential shift in pay relative to the national market that is undoubtedly a result of supply and demand factors in the geography," explains Mr. Cira. "Although our study does not identify these local factors, it supports what many hiring managers in these geographies have been saying over the past few years and reinforces the importance of vigilance and year-over-year monitoring of pay levels. Organizations that have not looked at their local pay scales in the past four or five years should review them to make sure salaries and salary scales are still competitive."
The 2004 Geographic Salary Differentials study can be purchased by contacting Mercer at imercer.com or 800 333 3070.