Mercer’s study compares local pay rates for more than 200 cities to national medians at different pay levels. According to the findings, geographic pay variations are less pronounced, but still evident, at higher pay levels. For a job with a median salary of $60,000 nationally, for example, pay varies from a low of $55,080 (–8.2%) in Baton Rouge, LA to a high of $72,000 (+20.0%) in San Jose, Calif.

Pay variations by geography are even noted at $90,000. Among the cities included in Mercer’s study, cities like Little Rock, Ark. and Omaha, Neb. represent the lower end of the pay range at $84,510 and $86,580, respectively. Meanwhile, cities like New York and San Jose hold the top spots at $102,060 and $104,040, respectively.

Mercer’s geographic analysis highlights the challenges faced by many large employers with employees in multiple locations throughout the US. Sensitive compensation issues can arise when an employee transfers from a relatively high-salary area to a relatively low-salary area, or vice versa. Good quality information on salary variances helps employers handle these situations in an equitable and consistent manner.

According to Howard Levine, a senior compensation consultant with Mercer, it is important to understand the difference between cost of living and cost of labor. Cost of living differentials reflect the difference between localities in terms of cost of goods, such as housing, groceries and transportation. Cost of labor takes into account the difference between localities in terms of cash compensation for the same work.

“Organizations must also be concerned about pay levels for employees in the same location. Individuals moving from one location to another should be paid a locally competitive salary and expenses such as higher rents and home prices should be offset in the relocation package,” Mr. Levine explains.

The 2006 Geographic Salary Differentials study can be purchased by contacting Mercer at imercer.com or 800 333 3070.

Mercer Human Resource Consulting is a global leader for HR and related financial advice and services, with more than 15,000 employees serving clients in more than 190 cities and 40 countries and territories worldwide. The company is 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.

Table 1: 2006 Geographic Salary Differentials for Select US Cities

(For a job with median national salary of $30,000)