To adjust for geographic difference in the cost-of-labor between the Pierce County and peer employer locations, Segal uses the cost-of-labor differentials report by the Economic Research Institute (ERI) for each peer location.
It is important to note that the cost-of-labor differentials do not necessarily reflect cost-of-living differences. Cost-of-living differences (which reflect the supply and demand for goods and services) are not necessarily a good predictor of salary levels. In other words, while the cost of housing (or other goods and services) in Tacoma, WA may differ from the cost of housing in another peer employer’s location by a certain percentage, the prevailing salaries may not differ by the same percentage. For adjusting salaries in a market study such as this one, the cost-of-labor differentials provide a more accurate method of determining whether employers are paying a competitive wage appropriate to a given geographic area.