In my game the regular NPCs are mostly 1 level, some 2-3 and some even 4-5lvl. After that I consider NPCs to be rather remarkable persons with name, history and background.
I take it this is for common men, right? I'd be interested to know how much you vary that by race.
Using High Elves from C&T as an example, they are coded 5E which gives a distribution from level 0 to level 17. Although the table is probably intended for encounter groups rather than settlements (which would have higher percentages of young and elderly, the latter being irrelevant among the immortal races) it is interesting to map out the distribution.
0 - 10%
1 - 5%
2 - 5%
3 - 5%
4 - 10%
5 - 30%
6 - 10%
7 - 5%
8 - 5%
9 - 5%
10 - 5%
11 through 17 - 5%
Numbers are slightly simplified, but the implications are really clear with about a third of all High Elves falling outside the normal distribution (level 1-5) for humans and another third being at the top of the range for non-exceptional humans.
If, by human standards, level 0 is adolescence and level 1 is apprenticeship (with many humans failing to develop past that level), then levels 2-4 are probably journeymen of varying experience and level 5 are masters of their craft.
It follows that if humans at the master level visited an Elven settlement they could expect fully a third of the population to match their skills and another third to exceed it. Elven apprentices would craft as well as human masters! For the more average level 1-2 humans the culture shock would be even more enormous. Only the most exceptional humans (<1%) could come close to matching the skill of the top 10 or 20 percent of Elves.
Outlining racial differences like that really brings home the impact of longer life spans (which is correlated with higher levels in C&T) and highlights how, as DMs, we can differentiate places to make a visit to an Elven or Dwarven (or Orcish!) city truly memorable.