What is The Pay Scale Index?
The PayScale Index measures the change in pay of employed workers over time.
What specifically does The PayScale Index measure?
The PayScale Index specifically measures the quarterly change in the total cash compensation of full-time private industry employees in the United States, with additional detail on the 20 largest metropolitan statistical areas, 19 job categories, 15 industries, and three company sizes.
For a detailed description of the sample set, see The PayScale Index Methodology.
Are there specific business industries that The PayScale Index focuses on?
The PayScale Index focuses on all full-time private industry workers. Therefore, it excludes government workers (state, local, and federal), including those who are in the military or work in public education. In addition, those who are contract, temporary, piece-work and/or self-employed are excluded.
The PayScale Index also examines quarterly changes in the pay of employed workers across 15 private industry categories separately. These industries, which are defined by the North American Industry Classification System (NAICS), include: Arts, Entertainment & Recreation (NAICS Code 71); Business Operation Support Services (56); Construction (23); Finance & Insurance (52); Food Services & Accommodation (72); Healthcare & Social Assistance (62); Information, Media & Telecommunications (51); Manufacturing (31-33); Mining (21); Professional, Scientific & Tech Services (54); Real Estate (53); Retail (44-45); Transportation & Warehousing/Storage (48-49); Utilities (22); and Wholesale Trade 42).
Of the 20 highest level industry classifications in NAICS, five are not reported separately in The PayScale Index:Agriculture (11): few full-time employees – most are contract, temporary or self-employed
Which job categories does The PayScale Index cover?
The PayScale Index covers employees from most job categories, which are collections of jobs grouped together based upon duties performed, skills, education level, training and credentials.
The job families not included in The PayScale Index are typically in the public sector, such as military jobs, public safety jobs, education jobs, etc.
As of Q3 2011, The PayScale Index examines quarterly changes in the pay of employed workers in 19 job families. These job categories, which are defined by the Bureau of Labor Statistics through the Standard Occupational Classification (SOC) system and accessed on The Occupational Information Network (O*NET) include: Accounting & Finance (SOC Codes 11-3031.00 and 13-2000.00); Administrative & Clerical (11-3011.00 and 43-000.00); Architecture & Engineering (11-9041.00 and 17-0000.00); Art & Design (27-1000.00); Construction (11-9021.00 and 47-0000.00); Food Service & Restaurant (11-9051.00 and 35-0000.00); Healthcare Practitioners and Healthcare Technical (11-9110.00 and 29-0000.00); Human Resources (11-3121.00 and 13-1070.00); Information Technology (11-3021.00 and 15-1100.00); Installation, Maintenance & Repair (49-0000.00); Legal (23-0000.00); Manufacturing & Production (11-3051.00 and 51-0000.00); Marketing & Advertising (11-2011.00 and 11-2021.00); Media & Publishing (11-2031.00, 27-2000.00, 27-3000.00 and 27-4000.00); Retail (41-1011.00 and 41-2000.00); Sales (11-2022.00, 41-1012.00, 41-3000.00, 41-4000.00 and 41-9000.00); Science & Biotech (11-9121.00 and 19-0000.00); Social Service (11-9151.00 and 21-0000.00); and Transportation (11-3071.00 and 53-0000.00).
Of the 22 highest level job families defined by the SOC, eight are not reported separately in The PayScale Index:
What is the difference between an industry and a job category?
Industries group employers by their key product or business, while job categories group jobs by their key duties.
For example, while the healthcare industry contains jobs specific to healthcare (e.g. nurses, doctors, ultrasound technicians), it also will have jobs that are not specific to healthcare (e.g. janitor, accounts payable clerk, HR manager, etc.).
Some job categories can be industry specific. Nurses, for example, will primarily be found in the healthcare industry. Meanwhile, others job categories commonly span industries. For example, most companies, regardless of industry, employ HR or IT professionals.
How is The PayScale Index data collected?
PayScale hosts the largest ongoing compensation survey in the world. In exchange for a report detailing how their compensation compares to others in the market, individuals are asked to submit detailed, anonymous information about their jobs and workplaces. There are no offers, payments or other incentives made to individuals to encourage them to fill out a personal profile.
Once data is submitted to PayScale it is reviewed using advanced, patent-pending algorithms to determine if the information is accurate and eligible for analysis. PayScale currently has over 15,000 job titles.
How is The PayScale Index different from other indices?
There are three measures of typical wages* that are similar to the PayScale Index.
1. Employment Cost Index (ECI), derived by the Bureau of Labor Statistics (BLS) from the National Compensation Survey (NCS).
The main differences between the ECI and The PayScale Index are:
2. Usual Weekly Earnings of Wage and Salary Workers, derived by the BLS from the Current Population Survey (CPS).
The main difference between the Usual Weekly Earnings and The PayScale Index is that the UWE does not attempt to correct for changes in the mix of employed workers. For example, if unemployment rises more quickly for low-wage workers than high wage, the UWE will rise, even when the wages of workers who continue to be employed does not.
3. Average Merit Budget Increases, derived from employer submissions to World at Work and other compensation survey providers.
Merit Budget is the additional wages per employee available over the previous year's budget.
Since this is a "raise" budget, it combines both the average increase in market price for all jobs, and the average increase in competence of a company's workers.
The percentage of workers still growing in competency, and how quickly, versus the percentage of employees at their level of full competence is unknown in these surveys, and can vary widely based on company growth stage, industry, and location.
The PayScale Index is able to separate changes in marketable value of an employee (merit increases) from changes in market price at fixed competence over time and, is thus a better measure of changes in the price of labor.
*Wages are defined as all cash compensation earned in a year, including base salary, hourly wages, bonuses, overtime, commissions, profit sharing and tips. It does not include non-cash benefits, cash contributions to retirement plans, or equity (stock) compensation.
How often does The PayScale Index come out?
The PayScale Index is released quarterly.
What can employers and employees learn from The PayScale Index?
Employers can use The PayScale Index to understand how trends in average wages are changing nationally, by metropolitan area, by industry, and by company size. This information can be used to guide changes in mid-points of salary structures and grades, as well as give general guidance for pay adjustments for newly hired employees and raises for fully-qualified employees.
While The PayScale Index is useful for understanding broad market forces, for creating a market-based compensation structure for a specific workforce, we recommend companies use PayScale's Cloud Compensation Software.
Employees can use The PayScale Index to understand how the average market price (expected wages) for the services of broad categories of employees is changing. It provides an accurate measure of "typical" raises for fully qualified workers doing the same job in the same way for the same employer, as it is directly measuring the price of labor in the market.
Changes in individual responsibilities and competence over time often have a greater impact on pay than broad market changes. To get a more precise salary range for your exact position or job offer, complete the PayScale Survey and receive a free personalized salary report.
How current is the data in The PayScale Index?
Pay data is updated daily in the PayScale database. The PayScale Index measures quarterly pay trends and includes data through the end of the last month of the most recent quarter in the report.
How do we calculate The PayScale Index Forecast?
In order to forecast the next quarter of the U.S. national PayScale Index, we built an autoregressive (AR) model that takes in the following inputs:
The AR model predicts The PayScale Index for the next quarter based on the current quarter’s PayScale Index, CPI and the unemployment rate. This can be represented by the following model at time t:
PSIt+1 = α + β1PSIt + β2CPIt + β3URt + εt ,
where α is the intercept and ε is the residual.
We chose the CPI and unemployment rate as inputs into our forecast model due to their observed relationships with The PayScale Index. The CPI is strongly positively correlated with The PayScale Index, while the unemployment rate is negatively correlated with The PayScale Index. This means that increases in the CPI and The PayScale Index tend to occur together, while decreases in the unemployment rate coincide with increases in The PayScale Index. See the following chart for a visual representation of these relationships:
How is the PayScale Real Wage Index Calculated?
To adjust The PayScale Index for inflation, we incorporate the Consumer Price Index (CPI). The CPI measures the average change in the price of a fixed market basket of consumer goods and services. It tracks the buying power of urban consumer dollars. When the CPI is high, it takes more dollars to buy the same amount of goods and when it is low, it takes fewer dollars to buy the same amount of goods. Increases in CPI represent inflation. For more information, see the FAQ produced by the Bureau of Labor Statistics (BLS).
To calculate the PayScale Real Wage Index, we first divide each PayScale Index quarterly value by the CPI’s quarterly value (e.g., PSIt / CPIt). Once this is done for each quarter, we divide these ratios by the 2006 ratio, in order to baseline the PayScale Real Wage Index to 2006.
To then convert these index values to a percentage change since 2006, we take the percentage difference between each quarter of PayScale Real Wage Index and the 2006 value of the PayScale Real Wage Index. This produces the change in real wages since 2006.
What does the PayScale Real Wage Index Measure?
The PayScale Real Wage Index tracks the buying power of wages for full-time private industry workers in the U.S. When the PayScale Real Wage Index falls, then inflation is rising faster than incomes. In other words, a fall in the PayScale Real Wage Index implies your income can buy less stuff than previously. The price of goods is rising faster than the price of your labor (your wage).
Who is PayScale?
Creator of the largest database of individual compensation profiles in the world, PayScale, Inc. provides an immediate and precise snapshot of current market salaries to employees and employers through its online tools and software. PayScale's products are powered by innovative search and query algorithms that dynamically acquire, analyze and aggregate compensation information for millions of individuals in real time. Publisher of the quarterly PayScale Index™, PayScale's subscription software products for employers include PayScale MarketRate™ PayScale Insight™, and PayScale Insight Expert™. Among PayScale's 3,500 corporate customers are organizations small and large across industries including Mozilla, Tully's Coffee, Clemson University and the United States Postal Service.