Average Compensation Across Santa Clara County: A $100K Gap Hiding in Plain Sight

In 2024 the gap between the highest- and lowest-compensated municipal workforces in Santa Clara County spans nearly $100,000 per employee — from Santa Clara City at $172.1K average to Morgan Hill at $73.7K. That gap is not random. It reflects which services each city provides in-house, how aggressively labor contracts were renegotiated after COVID, and — in a few outlier cases — the small-sample distortions that come with a workforce of 15 or 76 people.

Santa Clara City: the outlier at the top

Santa Clara City's average compensation of $172.1K in 2024 stands alone in the county. In 2015 it was at $92.3K — solidly mid-pack among full-service cities. Over nine years it grew 86%, adding nearly $80K per employee in average cost. Unlike Palo Alto or Mountain View, Santa Clara operates Silicon Valley Power, a municipally owned electric utility with its own workforce and separate compensation schedules. Utility workers — engineers, linemen, power schedulers — skew the average substantially above what a general-purpose municipal workforce would show. The headcount barely changed (1,760 → 1,764), which means every dollar of that growth is compensation, not expansion.

The contract-city floor

At the other end sit cities that have outsourced the most expensive services. Morgan Hill ($73.7K), Los Altos Hills ($79.5K), Cupertino ($81.7K), and Campbell ($86.7K) contract out police (to the county sheriff or neighboring departments), fire (to the county fire district or a neighboring city), and often public works. Removing sworn police and fire from the payroll — the two highest-compensated job classes in local government — pulls the average down mechanically. It doesn't mean these cities pay their remaining employees less; it means the employees they retain are almost entirely administrative and managerial, a narrower and sometimes lower-volume workforce. Cupertino's 409 employees and Campbell's 401 employees are both doing the work of a much larger headcount through contracted services billed outside the payroll ledger.

San Jose's unusual arc

San Jose had the highest average compensation in the county in 2015, at $113.9K. By 2019 that had declined to $101.1K — an 11.2% drop while most other cities were rising. This is a known effect of the 2012 San Jose pension reform (Measure B), which created a lower-cost pension tier for new hires. As the city brought on large numbers of new employees under the reduced-benefit structure, the average total compensation per employee fell for several years. After Measure B was partially invalidated by the courts and a new labor agreement was reached, compensation began rising again — reaching $133.8K by 2024, a 32.3% post-2019 rebound.

The post-COVID wage shock

Every city in the county saw compensation accelerate after 2019. But the acceleration was not evenly distributed. Campbell (+46.9%), Cupertino (+44.6%), and Santa Clara (+43.4%) saw the sharpest post-2019 jumps. Sunnyvale (+11.7%) was the notable exception — its pre-COVID trajectory was stronger than most (+13.8% from 2015–2019), and it appears to have entered the COVID period with less room to compress. The post-COVID surge reflects a mix of factors: multi-year union contracts negotiated during the 2021–2022 inflation spike, step-increase schedules that continued regardless of fiscal conditions, and CalPERS contribution rate increases that inflate total compensation figures even when base wages hold flat.

What these numbers don't capture

Average total compensation as reported by the CA State Controller includes wages, overtime, benefits (health, dental, vision), and employer pension contributions. It does not include unfunded pension liability — the gap between what cities have promised retirees and what their pension funds are actually projected to pay. That gap is substantial across Santa Clara County and represents a long-term fiscal obligation that doesn't show up in any single year's payroll figure. The compensation numbers here are also averages across all employees, including part-time and seasonal workers, which can suppress the average in cities with significant seasonal recreation or maintenance staffing.