Geographic pay differentials are used to pay varying rates for jobs in different geographic locations eg San Francisco vs Modesto, California. Primarily the practice is justified based on such factors as cost of living and differences in pay for occupations between different states, cities, towns and other geographic areas.
Differences in Labor Market Rates across different geographic areas may not accurately reflect the differences in the cost of living in the same areas. This is because other factors come into play such as Labor shortages and over supply that vary across the array of occupation groups, job families and attendant jobs found in a specific location.
Proper compensation planning in the development of Geographic Salary Differentials takes into account actual labor market rates in each area an employer is located in along with salary survey analysis for each broad occupation group and down to the job family level.
The CompGeo Pro Forecast Library Geographic Salary Differentials Report Series provides both Mean and Median Geographic Differentials for Geographic Regions, States, Metro Areas and smaller Areas.