Strategic Compensation: A Human Resource Management Approach, 9/e

Geographic Pay Differentials

1. 3 Summarize the reasons for the occurrence of geographic pay differentials.

Overall, there are relative pay differentials between geographic areas. Most typically, these are focused on comparisons between the nation and small geographic areas such as city or state. Based on the most recent comprehensive analysis published by the U.S. Bureau of Labor Statistics, all Los Angeles, California area employees were paid, on average, 20 percent more than the national average.¹³ In Lincoln, Nebraska, employees were paid 3 percent less than the national average. This is an example of relative pay differentials.

We can also consider pay rate differentials (expressed in dollars as hourly or annual pay) for occupations based ...