How are annual General Schedule raises determined?
The annual pay adjustment for most General Schedule employees consists of two parts: a national, across-the-board increase, and a locality-based pay adjustment. The amount of the across-the-board increase is supposed to be based on a change in the Employment Cost Index, less 0.5 percent.

The locality pay determination procedure starts with pay comparison studies by the Bureau of Labor Statistics. Findings are presented each autumn to the Federal Salary Council, a group made up of agency and labor union representatives and compensation experts. The council submits recommendations based on that data to a group called the President’s Pay Agent, which in turn decides the pay areas and makes recommendations to the President.

In practice, the annual federal raise has been negotiated between Congress and the White House, typically using the pertinent ECI figure as a starting point and with most of the total raise being designated as across-the-board pay while the remainder is apportioned among localities according to the pay gap data. That has resulted in substantial pay variation building up over the years between the highest-paid locality areas and the lowest-paid catchall “rest of the U.S.” for areas outside the designated metropolitan zones (note: Alaska and Hawaii are separate zones in their entirety).