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Geographic Differentials
An important factor in market level pay is the law of supply and demand. Different locations may have widely different pay for positions, due to an oversupply or undersupply of candidates OR higher or lower living expenses (such as housing).
It is important to note the geographic difference of job structures and job families when determining salary and cost-of-living adjustments. This section will teach you how to use percentages to compute differentials between two or more areas.
Example of geographic differentials
| Nonexempt jobs | Positions that are subject to the minimum wage and overtime pay provisions of the Fair Labor Standards Act. |
The national average structure for nonexempt jobs is:
Salary = (1.0 x national average salary) + 0
If New York's salary structure for nonexempt jobs is:
Salary = (1.18 x national average salary) + $1,880
Estimate the salary in New York for a position that pays at a national average of $50,000.
New York's salary = (1.18 x national average salary) + $1,880
New York's salary = (1.18 x $50,000) + $1,880
New York's salary = $59,000 + $1,880
Now find out what percentage New York pays above the national level.
New York's salary = $60,880
New York's index = $60,880 / $50,000
New York's index = 1.22 or 122%
New York's index is 22% above the national average.
Note: To quickly make salary level comparisons between over 9,000 areas in the U.S., Canada, and cities around the world, see ERI's Geographic Assessor tool. (Use of this tool for setting branch office salary structures is discussed in DLC Course 83: Designing a Geographic Salary Structure.)
Memory Jogger
The national average salary for a paralegal is $74,000. New York's salary index is 22% above the national average. What salary could a paralegal in New York expect?