How will the freeze in 2026 locality pay affect take‑home pay across major metropolitan areas?
Executive summary
A 2026 package that gives a 1% across‑the‑board base pay raise while freezing locality pay percentages means most federal workers will see only about a 1% nominal increase in total pay despite living‑cost differences across metropolitan areas [1] [2]. In high‑cost metros—New York, Boston, Los Angeles, San Francisco, Washington, D.C., San Diego and similar areas—the frozen locality map amplifies a gap with private‑sector pay and inflation, producing a real take‑home pay loss relative to local costs even as gross pay ticks up slightly [3] [4] [2].
1. How the money is calculated and why the freeze matters
Federal pay is built from base GS pay plus a locality percentage designed to bring federal salaries closer to private‑sector pay in specific metropolitan statistical areas, and in 2026 the administration raised base pay by 1% but did not increase locality percentages from 2025 levels [5] [1]. Because locality is a percentage applied to base pay, the 1% base bump will increase the dollar value of locality pay slightly, but the locality percentages themselves remain unchanged, so the effective boost for someone in a high‑locality area is roughly the same as the headline 1% and notably smaller than recent years’ adjustments [3] [6].
2. What this means for take‑home pay in major metropolitan areas
Take‑home pay increases will be modest and uneven: employees in high‑locality metros still get larger gross checks than those in Rest‑of‑U.S., but the freeze removes an additional uplift that would have favored expensive cities, so real purchasing power in high‑cost metros will lag more than it did if locality had risen [7] [4]. Analysts and guides warn the freeze reduces effective raises compared with inflation and rising benefits costs (for example, projected health‑insurance premium increases), meaning the net effect for many federal families in places like New York or San Francisco is a squeeze despite a slightly larger dollar locality amount driven by the 1% base raise [2] [3].
3. Who wins, who loses, and the law‑enforcement exception
Most white‑collar GS employees receive the uniform 1% bump with frozen locality, which equates to a modest one‑percent total increase for many; however, certain federal law‑enforcement personnel receive a larger 3.8% adjustment under special authorities, creating a clear divergence in take‑home outcomes across job categories [5] [8]. Agencies and regions with acute private‑sector competition—technology hubs, major financial centers, and high‑cost government contracting markets—face higher retention risk because the frozen locality map allows pay disparities to widen relative to local employers [3] [9].
4. Longer‑term effects: pensions, high‑3, and career choices
Locality pay counts toward basic pay for pension calculations, so freezing locality percentages slows growth in the “high‑3” average used to compute annuities; that means retirement accruals will grow more slowly than if locality had increased, which may influence retirement timing for employees near separation [3] [6]. The modest base raise also has limited automatic impact on Thrift Savings Plan matching except via salary percentages and employee choices, so retirement‑savings outcomes are largely unchanged unless workers alter contribution behavior [6].
5. Policy context, alternatives, and what to watch
The freeze reflects budget priorities and executive decisions documented in OPM and Pay Agent materials; the Federal Salary Council and related documents show how base increases are tied to Employment Cost Index calculations but locality determinations are a separate process that was held flat for 2026 [9] [10]. Opponents argue the freeze lets federal pay fall further behind local markets and harms retention, while proponents point to fiscal discipline and targeted special rates for hard‑to‑fill occupations—watch for agency special‑rate tables and future Pay Agent actions if turnover spikes [8] [10].
6. Practical takeaways for employees in big metros
Expect a small nominal bump on paystubs in January 2026 (effective first pay period after Jan. 1), but plan for constrained purchasing power if local housing, health premiums, and inflation continue to rise faster than 1%—use online GS pay calculators and updated tables to model exact dollar changes by grade and locality [1] [7] [4]. Reporting and agency guides recommend running personalized estimates for retirement and relocation decisions because the frozen locality map affects both immediate take‑home pay and long‑term pension math in high‑cost metropolitan areas [6] [3].