In 2025, the highest locality pay area for federal employees is San Francisco-San Jose-Oakland, California, with a raise of 2.35%. This is followed by Seattle-Tacoma, Washington, at 2.29% and New York-Newark, New York, New Jersey, Connecticut, Pennsylvania at 2.23%. Image: Alexander Lukatskiy/Shutterstock.com
Following is a section of a GAO report on options for changing how GS locality pay is calculated that have been raised in recent years, a report that meanwhile notes that most of those proposals arose from appointees to that council during the first Trump administration but that union representatives outvoted them.
The council identified four alternatives to the methodology for setting locality pay in its May 2019 memorandum to the Pay Agent. In that memorandum, the council stated that all members could not reach consensus on which alternative methodology, if any, should be recommended to the Pay Agent for consideration or even if these alternatives should be studied further. According to our analysis of council meeting minutes, these alternative methodologies were not further pursued by the council, following the publication of the 2019 memorandum.
Modify the existing salary survey methodology to reduce statistical modeling
Reduce the extent of statistical modeling by increasing the survey’s sample size of firms and targeting firms with nonfederal jobs similar to federal jobs.
2019: Three council members believed this would enhance market sensitivity by providing potentially more accurate overall nonfederal average pay in each locality pay area. This change also included selecting benchmark jobs for comparing nonfederal and federal pay by occupation and grade level. Four members objected to all proposed alternative methodologies and voiced support for the existing methodology, which they said was of high quality and economical.
2024: Five council members discussed various changes to the existing survey methodology, such as collecting data on salary ranges. Of these five members, none voiced support for the 2019 proposal to reduce the extent of statistical modeling.
Verify the results of the methodology
Use human capital data related to recruitment and retention to verify estimated pay gaps. For example, analyze attrition data to determine if a locality’s pay gap is significant enough to lead to employees leaving federal agencies.
2019: To the extent findings from analysis of other pay data or attrition data would be consistent with findings from the existing survey methodology, this option might help address concerns regarding the validity of the method’s statistical modeling, according to three council members. Four council members opposed all proposed alternatives.
2024: Three council members said that they did not believe that human capital data would be a valid way to assess pay estimates. Three other council members were supportive of using human capital data to inform locality pay discussions but said that its validity would depend on the human capital data used.
Assess the total compensation gap
Include nonsalary benefits such as employer payments for their employees’ health insurance, life insurance, and pensions when comparing federal and nonfederal pay.
2019: Three council members believed that this option would provide for a bicameral, bipartisan forum to review and make recommendations on changes to civil service pay and benefits. Four council members opposed all proposed alternatives.
2024: Four council members said that such a commission would be of little value and duplicate council responsibilities under the current law. Two council members said that they were open to a periodic review of federal compensation.
Establish a commission to periodically review federal civilian compensation
Conduct a comprehensive, periodic review of total compensation for federal civilians, patterned after other efforts to review federal compensation.
2019: Three council members believed that this option would provide for a bicameral, bipartisan forum to review and make recommendations on changes to civil service pay and benefits. Four council members opposed all proposed alternatives.
2024: Four council members said that such a commission would be of little value and duplicate council responsibilities under the current law. Two council members said that they were open to a periodic review of federal compensation.
Since 2019, three additional alternatives have been considered by the Pay Agent or council members.
Consideration of occupational estimates. Each annual report of the Pay Agent from 2019 to 2024 has noted that the underlying methodology for locality pay has “lacked credibility” since the beginning of locality pay in 1994. The Pay Agent attributes this to the use of a single locality rate per pay area, without regard for differing labor markets for occupational groups. In its 2019 through 2023 reports, the Pay Agent did not recommend specific changes to the method of calculating locality pay but did broadly call for legislative reform of the General Schedule (GS) federal pay system. In its November 2024 report, the Pay Agent did not call for legislative reform of the pay system but did reiterate the concerns in the 2019 through 2023 reports.
BLS officials said that it would be possible to calculate separate rates by major occupational group because it delivers separate estimates by major occupational groups to OPM for use in calculating the single locality rate. However, they cautioned that additional research would be needed to determine whether the separate rates would be reliable enough to meet the Pay Agent’s needs. This research would take at least 12 to 18 months, depending on how occupations are defined, and the cost is unknown, according to BLS officials.
Changes to the number of surveyed firms. In 2010, BLS announced a reduction in the number of firms surveyed for the National Compensation Survey (NCS) due to budget cuts. As we reported in 2012, BLS said that the results from combining the NCS at the reduced number of firms with Occupational Employment and Wage Statistics (OEWS) data could still be used to calculate pay gaps.22 Officials also stated in 2010 that only the number of firms surveyed for the NCS changed, not the substance of what is collected, and that the reduction should not affect the ability to compare nonfederal and federal pay.
One council member told us that increasing the number of surveyed firms for the NCS remained a valid alternative.23 The council wrote in its 2011 through 2014 memorandums to the Pay Agent that it had concerns about the reduction in the number of firms surveyed for the NCS and asked the Pay Agent to reinstate the full number. In its 2013 annual report, the Pay Agent said that restoring the number of surveyed firms for the NCS was not feasible given economic circumstances. Since 2014, the council has not raised the issue in its memorandums. When BLS reduced the NCS sample size in 2010, it estimated at that time that the change would save $9.8 million. BLS officials we spoke with said that this estimate is no longer accurate because of changes in survey procedures and the addition of 26 locality pay areas from 2010 to 2024. BLS does not have a current cost estimate for this alternative.
Salary range differences between federal and nonfederal jobs. According to the council Chair, the narrowness of the pay ranges for GS employees compared to broader nonfederal pay ranges may partially explain the size of the current pay gap. The Chair recommended, in the 2024 memorandum to the Pay Agent, and the council members unanimously agreed to ask BLS to collect data from a sample of survey respondents on nonfederal salary ranges (i.e., the minimum and maximum pay for a given position). The GS pay system has a pay range of 30 percent for most grades (i.e., the maximum salary is generally about 30 percent higher than the minimum salary within a grade). The Chair said that he requested that BLS produce a formal estimate of the cost to collect these data. BLS officials confirmed that the council requested these data and the cost estimate. In 2024, the President’s Pay Agent expressed support for the council’s interest in additional analysis into the impact of salary ranges on the pay gap.
BLS currently collects data on average nonfederal salaries and does not have the resources to undertake the proposed additional data collection, according to BLS officials. Further, they told us that they would require additional resources to evaluate the council Chair’s request to both collect the additional data and determine the cost for doing so. BLS officials said that they previously estimated in 2018 that a one-time survey to collect nonfederal pay range data from firms would cost between $400,000 and $600,000 annually. BLS said this estimate does not include survey development costs.
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