Business Payroll Analysis: Total Compensation by Industry and Location (2022)

What if you could see that California’s professional services industry pays $188.9 billion in total compensation while Wyoming pays just $904,000? This Business Payroll Analysis reveals exactly how total compensation varies by industry and location—and how you can position yourself in markets with the highest payroll values.

The data shows dramatic differences: professional, scientific, and technical services (NAICS 54) total payroll ranges from $188.9 billion in California to just $904,000 in Wyoming—a 209,000x difference. This isn’t just about geography—it’s about understanding market value, compensation levels, and location opportunities that directly impact your business strategy.

Analyze business payroll to see total compensation by industry and location. This analysis reveals wage patterns that

This analysis examines County Business Patterns (CBP) data from the U.S. Census Bureau to analyze business payroll—total annual compensation paid to all employees—by industry and location across all U.S. states. You’ll discover which markets have the highest total compensation, how payroll varies by industry and geography, and where opportunities exist in high-value markets.

What You’ll Discover:

• State rankings by total payroll by industry
• Industry-specific payroll patterns revealing market economic value
• Location-specific compensation levels impacting market opportunities
• Market value indicators by industry and location
• Economic activity indicators based on total compensation

Why This Matters: Understanding total payroll helps you identify markets with the highest economic value, assess compensation levels, and make strategic location decisions. Markets with high total payroll offer larger economic markets, higher compensation spending, and stronger economic activity.

Total Compensation Varies Dramatically by Location

The Numbers: Professional services total payroll ranges from $188.9 billion in California to $904,000 in Wyoming—a 209,000x difference. This means California’s professional services market has over 200,000x more economic value than Wyoming’s.

So What? Total payroll reveals market economic value. High payroll markets like California ($188.9B) and New York ($81.4B) offer massive economic opportunities and strong economic activity. However, high payroll may also correlate with higher costs and competition. Low payroll markets may offer less economic value but potentially lower costs.

How to Use This: If you’re in professional services, high payroll markets offer proven economic value and strong compensation spending. Low payroll markets may offer underserved opportunities but need careful market validation.

Payroll Reveals Market Economic Value

The Numbers: States like California ($188.9B), New York ($81.4B), and Texas ($85.7B) have the highest professional services payroll, indicating massive market economic value.

So What? High total payroll signals where markets have the highest economic value. Operating in high payroll markets provides access to larger economic opportunities and stronger economic activity.

How to Use This: Target markets with $50B+ total payroll for proven economic value and strong compensation spending. Consider markets with $10B-$50B payroll for balanced economic opportunity and manageable competition.

Location Strategy Must Account for Market Value

The Numbers: The difference between the highest payroll state (California, $188.9B) and lower payroll states (Wyoming, $904K) is 209,000x—meaning California has over 200,000x more professional services economic value.

So What? Market economic value directly impacts your business opportunities. High payroll markets offer larger economic opportunities but also potentially higher costs and competition. Your location choice should balance economic value with your competitive capacity.

How to Use This: For businesses requiring large economic markets, high payroll markets offer proven value. For businesses with general needs, moderate payroll markets ($10B-$50B) often offer the best balance of economic opportunity and manageable competition.

Red Flags

• Extremely High Payroll ($100B+): May indicate oversaturated markets with intense competition and high costs
• Rapid Payroll Growth: Markets with rapidly increasing payroll may be approaching saturation
• Payroll-Employment Mismatch: Markets where payroll is high but employment is declining may signal market contraction

Green Lights

• Moderate-to-High Payroll ($10B-$50B): Balanced markets with strong economic value and proven compensation spending
• Growing Payroll with Employment Growth: Markets where payroll is increasing alongside employment growth signal expanding opportunity
• Diverse Payroll Distribution: Markets with payroll across multiple industries offer stability and multiple opportunity sources

How to Use This Data

Follow this step-by-step process to analyze total payroll and make data-driven location decisions:

Step 1: Identify Total Payroll by Geography for Your Industry

Compare total payroll across your candidate locations:

• State-level: Get broad market economic value comparison
• Industry-specific: Use NAICS-filtered data for your specific industry
• Location-specific: Compare payroll across candidate markets

Action: Create a spreadsheet with your top 10 candidate locations. List total payroll for your industry in each. Rank by market economic value.

Step 2: Assess Market Economic Value

Match total payroll to economic value expectations:

• Very High Value ($50B+): Massive markets with extremely high economic value
• High Value ($10B-$50B): Large markets with strong economic value
• Moderate Value ($1B-$10B): Active markets with healthy economic value
• Lower Value (<$1B): Smaller markets with more limited economic value

Action: For each candidate location, assess whether the total payroll level matches your need for market economic value and economic opportunity.

Step 3: Compare Payroll to Employment

High payroll doesn’t always mean highest average wages. Consider both total payroll (market value) and employment (market size):

• High Payroll + High Employment: Maximum market value in large market
• High Payroll + Moderate Employment: Strong market value in moderate market
• Moderate Payroll + High Employment: Moderate market value in large market
• Moderate Payroll + Moderate Employment: Balanced market value

Action: Create a matrix scoring each location on total payroll (market value) and employment (market size). Rank by your strategic priorities.

Step 4: Make Your Location Decision

Combine payroll analysis with other factors (business climate, personal preferences) to choose your location.

Action: Create a decision matrix scoring each location on: total payroll (30%), employment (30%), business climate (20%), and personal fit (20%).

Common Use Cases

Scenario 1: Seeking Maximum Market Value → Focus on markets with very high total payroll ($50B+). These markets offer the highest economic value and compensation spending.

Scenario 2: Balanced Economic Strategy → Compare total payroll across candidate locations. Target markets with $10B-$50B payroll for balanced economic opportunity and competition.

Scenario 3: Cost-Optimized Market Entry → Consider markets with moderate payroll ($1B-$10B) that offer economic value with potentially lower costs.

Scenario 4: Underserved Market Opportunity → Consider markets with lower payroll (<$1B) that may offer underserved opportunities but require careful market validation.

Questions to Ask Yourself

• What matters more: market economic value (total payroll) or less competition?
• Can I compete effectively in a high payroll market, or do I need a smaller market?
• Does my business model benefit from large economic markets or smaller, focused markets?
• Am I entering an established high-value market or creating new economic value?

Action Items Checklist

• Identify total payroll for your industry in top 10 candidate states
• Assess market economic value levels (very high/high/moderate/lower) for each location
• Compare total payroll to employment for each candidate location
• Research business climate and economic policies in candidate markets
• Verify market size and customer base for each candidate location
• Assess cost levels in high payroll candidate markets
• Consult with Business Initiative for location and market value strategy guidance

Industry-Specific Recommendations

Professional Services (NAICS 54): Target markets with $10B-$50B total payroll. Professional services benefit from strong economic value while avoiding extreme oversaturation.

Technology Services (NAICS 51): Focus on markets with $5B-$30B total payroll in tech hubs. Technology businesses benefit from economic value and talent access.

Health Care (NAICS 62): Look for markets with $5B-$25B total payroll with aging population trends. Health care benefits from economic value and demographic demand.

Retail Trade (NAICS 44-45): Prioritize markets with $20B-$100B total payroll combined with high population density. Retail needs customer density and economic activity.

Accommodation and Food Services (NAICS 72): Target markets with $5B-$30B total payroll in areas with tourism or high employment. Restaurants benefit from economic activity and foot traffic.

Common Mistakes to Avoid

Mistake 1: Using Only Total Payroll Without Employment Context Total payroll doesn’t directly show average wages. Always compare payroll to employment to understand compensation levels.

Mistake 2: Ignoring Industry-Specific Patterns Overall payroll doesn’t reflect your industry’s economic value. Always use NAICS-filtered data for your specific industry.

Mistake 3: Not Considering Cost Implications High payroll markets offer economic value but may also have higher costs. Don’t choose high payroll markets solely for value without assessing costs.

Mistake 4: Overlooking Market Size Total payroll shows economic value but not necessarily market size. Consider both payroll (value) and employment (size) for complete picture.

Mistake 5: Ignoring Growth Trends Current payroll shows today’s economic value, but growth trends show tomorrow’s opportunity. Markets with increasing payroll signal expansion.

Optimization Strategies

For Maximum Market Economic Value: Target markets with very high total payroll ($50B+). These markets offer the highest economic value and compensation spending.

For Balanced Approach: Focus on markets with high total payroll ($10B-$50B). You get proven economic value with manageable competition and expansion opportunity.

For Cost-Optimized Strategy: Consider markets with moderate total payroll ($1B-$10B). These markets offer economic value with potentially lower costs.

For Economic Clustering: Prioritize markets where your industry represents a high percentage of total payroll. Industry economic clusters provide market value advantages.

Timing Considerations

Best Time to Enter High Payroll Markets: When you have competitive advantages and resources ready. High payroll markets reward quality and differentiation but require resources to compete effectively.

Best Time to Enter Growing Markets: Early in the economic growth cycle. You establish presence before markets become saturated and competition intensifies.

When to Reassess: Review total payroll annually when new CBP releases become available. Market positions change, and what was optimal 2-3 years ago may not be today.

Resource Recommendations

For Market Research:

• Census Bureau County Business Patterns (official CBP data source)
• NAICS code lookup tools (identify your industry classification)
• State economic development websites (local market insights)
• Industry association reports (industry-specific payroll data)

For Location Support:

• Business Initiative location strategy services
• Local chamber of commerce (county-level business information)
• State Secretary of State websites (business registration requirements)

For Market Value Analysis:

• Combine CBP payroll data with employment data for complete market picture
• Research local economic policies and business climate
• Consult with Business Initiative for personalized location and market value strategy guidance

FAQs - Frequently Asked Questions About Business Payroll Analysis: Total Compensation

In Summary

Our comprehensive exploration of business payroll by industry and location (2022) has revealed critical insights into total compensation, market economic value, and location opportunities that can inform strategic business decisions.

Key Findings:

• Total compensation varies dramatically by location—professional services payroll ranges from $188.9 billion in California to $904,000 in Wyoming (209,000x difference)
• Payroll reveals market economic value—high total payroll indicates large market value, strong economic activity, and significant compensation spending
• Location strategy must account for market value—high payroll markets offer larger economic opportunities but also potentially higher costs and competition
• Moderate-to-high payroll markets often offer best balance—markets with $10B-$50B total payroll provide proven economic value with manageable competition
• Payroll patterns reveal market structure—markets with high total payroll typically have larger employment bases and higher average wages

What This Means for Your Business: Understanding total payroll helps you identify markets with the highest economic value and assess compensation spending. High payroll markets offer larger economic opportunities and stronger economic activity but may also have higher costs and competition. The best approach balances market economic value (total payroll) with your competitive capacity and growth stage.

Practical Applications:

• Location Strategy: Use total payroll to identify markets with the highest economic value for your industry
• Market Analysis: Compare total payroll across locations to assess market economic value and compensation spending
• Competitive Analysis: Understand whether you’ll operate in high-value markets, moderate-value markets, or smaller markets
• Expansion Planning: Target markets with $10B-$50B total payroll for balanced economic opportunity and manageable competition

Next Steps:

1. Identify total payroll for your industry in top candidate locations
2. Assess market economic value levels (very high/high/moderate/lower) for each location
3. Compare total payroll to employment to understand compensation levels
4. Research business climate and economic policies in candidate markets
5. Consult with Business Initiative for personalized location and market value strategy guidance

Ready to take action based on this data?

This data can help you make informed decisions about business location, market entry, and strategic planning.

Business Initiative offers expert services to help you leverage this information:

• Explore Profit Margin
• Explore Break Even Analysis
• Explore Break Even

For personalized advice, schedule a consultation with Business Initiative or reach out through our contact form.

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