To provide that Federal employees in high-cost urban and suburban areas be compensated at rates of basic pay adjusted to reflect the generally higher costs of living within their particular areas.

Requires the Director of the Office of Personnel Management to report to the Congress on a plan to subject General Schedule employees to a locality pay system by October 1, 1990, to ensure that employees working in high-cost areas are compensated at basic pay rates commensurate with the costs of living in such areas. Requires such report to include: (1) the number of employees likely to receive locality pay and the implementation costs during the first three years of such plan; (2) any benefits resulting from such plan; (3) a description of which aspects of the plan may be implemented under existing law; and (4) proposals for any legal action which may be necessary.