Locality Pay is Not Based on Cost of Living

In the notice, OPM noted that some who commented on the draft rules suggested that separate locality pay areas be established in additional locations due to high living costs. Such comments reflect a common perception in the federal workforce that locality pay is linked to cost of living–when in fact it is determined according to job demand in local labor markets. Said OPM, “Living costs are not directly considered in setting locality pay or defining locality pay areas. Locality pay is set by comparing GS and non-federal pay for the same levels of work to allow the government to recruit and retain an adequate workforce. Locality pay is not designed to equalize living standards for GS employees across the country. Since living costs are just one of many factors that affect the supply and demand for labor, they are not considered separately.”