A Comparable Wage Approach to Geographic Cost Adjustment

"In this report, NCES extends the analysis of comparable wages to the labor market level using a Comparable Wage Index (CWI). The basic premise of a CWI is that all types of workers—including teachers—demand higher wages in areas with a higher cost of living (e.g., San Diego) or a lack of amenities (e.g., Detroit, which has a particularly high crime rate) (Federal Bureau of Investigation 2003). This report develops a CWI by combining baseline estimates from the 2000 U.S. census with annual data from the Bureau of Labor Statistics (BLS). Combining the Census with the OES makes it possible to have yearly CWI estimates for states and local labor markets for each year after 1997. OES data are available each May and permit the construction of an up-to-date, annual CWI. The CWI methodology offers many advantages over the previous NCES geographic cost adjustment methodologies, including relative simplicity, timeliness, and intrastate variations in labor costs that are undeniably outside of school district control. However, the CWI is not designed to detect cost variations within labor markets. Thus, all the school districts in the Washington, DC metro area would have the same CWI cost index. Furthermore, as with other geographic cost indices, the CWI methodology does not address possible differences in the level of wages between college graduates outside the education sector and education sector employees. Nor does the report explore the use of these geographic cost adjustments as inflation adjustments (deflators.) These could be areas for fruitful new research on cost adjustments by NCES." Source: National Center for Education Statistics

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