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QUESTION:  Why do the differentials vary by salary level?

 

When the original research was done for the Geographic Assessor by ERI’s founder over 30 years ago, it was quickly determined that there was more than one labor market operating in geographic locations.  This occurs for several reasons, with a major reason being that supply and demand for labor can vary at different salary levels.  For example, we may observe a surplus in labor in lower-paid jobs, and that surplus cannot be used to directly fill demand in professional or management-level positions.

 

There could be a large difference in supply and demand in these various structures in a location due to driving economic factors.  Since labor is not interchangeable in these structures, it creates separate labor markets that can be subject to different levels of supply and demand, resulting in various pay differentials at distinct salary levels, even in the same geographic location.

 

The original analysis for the Geographic Assessor was run using nonexempt, exempt, and management-level salary structures separately, and the results were seamlessly connected.  Even within the structures, patterns were observed indicating that the pay differentials varied by salary level and not simply by overall salary structure.  The Geographic Assessor was built so that users could identify and use this additional information by inputting both locations and salary level(s) to obtain a relevant, precise salary differential.  Over time, this approach has been used to capture various specific situations, such as increasing local minimum wages that can affect one end of the salary range but have no impact on the other end.

 

As we collect and process additional new data, we have increased the underlying structures from three to eight by further segmenting each of the original structures.  However, these details work predominately behind the scenes; the Geographic Assessor still operates by inputting the locations and salary level(s) of interest to report the corresponding pay differentials by location.

 

For more information, see Salary Structure Variances.