Locality adjustments are based on local labor market data, not cost of living measurements. Image: Foxys Graphic/Shutterstock.com
By: FEDweek StaffWith specific locality pay rates for 2024 likely to be announced in late December, OPM has issued a reminder that those rates are based on comparisons of federal vs. non-federal salaries locally, not on comparisons of local costs of living.
That is an issue that commonly arises under the locality pay system, which starting in 2024 will have a total of 58 separate pay rates—including four new city areas, Alaska and Hawaii which are localities in their entirety, and the “rest of the U.S.” locality for other areas.
For 2024, federal employees are in line for an average 5.2 percent raise, split as 4.7 percent across the board and funds for the other 0.5 percentage points divided up by locality. The precise figures likely won’t be released until a late-December executive order finalizing the raises, which would vary from several tenths of a percentage point above 5.2 to several tenths below.
Those figures will be based on local labor market data that the Bureau of Labor Statistics recently reported to the Federal Salary Council. The numbers indicated that the largest raises will be paid to employees in the San Francisco, New York, Seattle, Washington, D.C. and Los Angeles areas, while the smallest will be paid in the RUS locality, with the Davenport, Albuquerque, Omaha and Cleveland areas just above.
Employees living in areas with smaller raises commonly cite issues such as high housing or transportation costs as meriting larger raises regardless of what salary comparisons may show.
In issuing final rules creating the new localities (in the Fresno, Calif.; Reno, Nev.; Rochester, N.Y.; and Spokane, Wash., areas) and expanding the boundaries of most others effective in January, OPM said that many of those who commented on the initial rules proposal “expressed the belief that various indicators of living costs are or should be considered in defining locality pay areas or in setting locality pay rates.”
OPM however said that under the law, “locality pay rates are based on comparisons of GS pay and non-federal pay at the same work levels in a locality pay area rather than on any consideration of local living costs.”
“Relative living costs may indirectly affect non-Federal pay levels, but living costs are just one of many factors that affect the supply of and demand for labor, and therefore labor costs, in a locality pay area. A comparison of living costs between geographic areas is not permitted under the locality pay law, but even if it were, it would not be a reliable indicator of local labor costs,” it said.
It added: “One commenter suggested that all GS employees should receive the same locality pay rates regardless of location after adjusting all GS pay rates nationwide so that they equal the GS pay rates now applicable in the San Jose-San Francisco-Oakland, CA, locality pay area, which currently has the highest locality pay percentage. Such an approach would not be permissible under current law.”
OPM issued the rules on behalf of the President’s Pay Agent, to which the salary council reports and which in turn makes recommendations to the White House on locality pay boundaries and comparative rates.
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