Despite worldwide changes, multinationals focus on mobile workforces to support career growth and ensure global competitiveness Mercer’s annual Cost of Living Survey finds Asian, African, and European cities dominate the list of most expensive locations for working abroad
In a rapidly changing world, mobility has become a core component of multinational organisations’ global talent strategy. To support the growing number of international assignees working in an increased number of locations, organisations are focusing on evaluating assignments from a cultural perspective, preparing for regional and lateral moves, and modifying compensation approaches to stay competitive. As organisations grapple with these challenges, they are working hard to accommodate the needs of their workforce and to support employees’ careers. According to Mercer’s 2017 Global Talent Trends Study, fair and competitive pay as well as opportunities for promotion are top priorities for employees this year – not surprising given the current climate of uncertainty and change.
As a result, multinational organisations are carefully assessing the cost of expatriate packages for their international assignees. Mercer’s 23rd annual Cost of Living Survey finds that factors like instability of housing markets and inflation for goods and services contribute to the overall cost of doing business in today’s global environment.
“Globalisation of the marketplace is well documented with many companies operating in multiple locations around the world and promoting international assignments to enhance the experience of future managers,” said Ilya Bonic, Senior Partner and President of Mercer’s Career business. “There are numerous personal and organisational advantages for sending employees overseas, whether for long- or short-term assignments, including career development by obtaining global experience, the creation and transfer of skills, and the re-allocation of resources.”
Mercer’s 2017 Cost of Living Survey finds Asian and European cities – particularly Hong Kong (2), Tokyo (3), Zurich (4), and Singapore (5) – top the list of most expensive cities for expatriates. The costliest city, driven by cost of goods and security, is Luanda (1), the capital of Angola. Other cities appearing in the top 10 of Mercer’s costliest cities for expatriates are Seoul (6), Geneva (7), Shanghai (8), New York City (9), and Bern (10). The world’s least expensive cities for expatriates, according to Mercer’s survey, are Tunis (209), Bishkek (208), and Skopje (206).
Mercer's authoritative survey is one of the world’s most comprehensive, and is designed to help multinational companies and governments determine compensation allowances for their expatriate employees. New York is used as the base city and all cities are compared against it. Currency movements are measured against the US dollar. The survey includes over 400 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment.
“While historically mobility, talent management, and rewards have been managed independently of one another, organisations are now using a more holistic approach to enhance their mobility strategies. Compensation is important to be competitive and must be determined appropriately based on the cost of living, currency, and location,” said Mr. Bonic.
Five of the top 10 cities in this year’s ranking are in Asia. Hong Kong (2), which dropped from the top spot, is the most expensive city in Asia as a result of its currency pegged to the US dollar, which drove up the cost of accommodations locally. This global financial center is followed by Tokyo (3), Singapore (5), Seoul (6), and Shanghai (8).
Commenting on the Mercer 2017 Cost of Living Survey rankings, Connie Leung, Business Leader, Career Products at Mercer, said, “Though Hong Kong has slipped from the top spot, this doesn’t indicate that it has become less expensive. Prices in Hong Kong are still some of the highest in the world evident through soaring rental prices. However, the Hong Kong growth story still remains strong and we haven’t seen high living costs significantly impact companies’ plans to expand or relocate talent to Hong Kong. In addition, lower tax rates in cities like Hong Kong and Singapore and corporate relocation allowances incentivise international moves.”
“The majority of Chinese cities fell in the ranking due to the weakening of the Chinese yuan against the US dollar.” said Ms. Constantin-Métral. “And, the strengthening of the Japanese yen along with the high costs of expatriate consumer goods and a dynamic housing market pushed Japanese cities up in the ranking”.
India’s most expensive city, Mumbai (57), climbed twenty-five places in the ranking due to its rapid economic growth, inflation on the goods and services basket and a stable currency against the US Dollar. This most populous city in India is followed by New Delhi (99) and Chennai (135) which rose in the ranking by thirty-one and twenty-three spots, respectively. Bengaluru (166) and Kolkata (184), the least expensive Indian cities, climbed in the ranking as well.
Elsewhere in Asia, Bangkok (67) jumped seven places from last year. Jakarta (88) and Hanoi (100) also rose in the ranking, up five and six places, respectively. Karachi (201) and Bishkek (208) remain the region’s least expensive cities for expatriates.
Australian cities have all experienced further jumps up the global ranking since last year due to the strengthening of the Australian dollar. Sydney (25), Australia’s most expensive city for expatriates, gained seventeen places in the ranking along with Melbourne (46) and Perth (50) which went up twenty-five and nineteen spots, respectively.
Cities in the United States are the most expensive locations in the Americas, with New York City (9) ranked as the costliest city, climbing two spots from last year. San Francisco (22) and Los Angeles (24) follow, having climbed four and three spots respectively. Among other major US cities, Chicago (32) is up two places, Boston (51) is down four places, and Seattle is up seven places. Portland (115) and Winston Salem (140) remain the least expensive surveyed cities for expatriates in the US.
Nathalie Constantin-Métral, Principal at Mercer with responsibility for compiling the survey ranking, said, “Overall, US cities either remained stable in the ranking or have slightly increased due to the movement of the US dollar against the majority of currencies worldwide.”
In South America, Brazilian cities Sao Paulo (27) and Rio de Janeiro (56) surged 101 and 100 spots, respectively, due to the strengthening of the Brazilian real against the US dollar. Buenos Aires, the Argentina capital and financial hub ranked 40 followed by Santiago (67) and Montevideo, Uruguay (65), which jumped forty-one and fifty-four places, respectively. Other cities in South America that rose on the list of costliest cities for expatriates include Lima (104) and Havana (151). Dropping from 94th position, San Jose, Costa Rica (110) experienced the largest drop in the region as the US dollar strengthened against the Costa Rican colon. Caracas in Venezuela has been excluded from the ranking due to the complex currency situation. Depending on which exchange rate is being used, the city would arrive at the top or at the bottom of the ranking.
“Inflationary concerns continued to cause some South American cities to rise in the ranking, whereas the weakening of the local currencies in some of the region’s cities caused them to drop in the ranking,” said Ms. Constantin-Métral.
Up thirty-five places from last year, Vancouver (107) has overtaken Toronto (119) to become the most expensive Canadian city in the ranking, followed by Montreal (129) and Calgary (143). Ranking 152, Ottawa is the least expensive city in Canada. “The Canadian dollar has appreciated in value triggering the major jumps in this year’s ranking,” explained Ms. Constantin-Métral.
Europe, the Middle East, and Africa
Only three European cities remain in the top 10 list of most expensive cities for expatriates.
Zurich (4) is still the most costly European city on the list, followed by Geneva (7) and Bern (10). Moscow (14) and St. Petersburg (36) surged fifty-three and one hundred and sixteen places from last year respectively, due to the strong appreciation of the ruble against the US dollar and the cost of goods and services. Meanwhile, London (30), Aberdeen (146) and Birmingham (147) dropped thirteen, sixty-one and fifty-one spots respectively as a result of the pound weakening against the US dollar following the Brexit vote. Copenhagen (28) fell four places from 24 to 28. Oslo (46) is up thirteen spots from last year, while Paris fell eighteen places to rank 62.
Other Western European cities dropped in the rankings as well, mainly due to the weakening of local currencies against the US dollar. Vienna (78) and Rome (80) fell in the ranking by 24 and 22 spots, respectively. The German cities of Munich (98), Frankfurt (117), and Berlin (120) dropped significantly as did Dusseldorf (122) and Hamburg (125).
“Despite moderate price increases in most of the European cities, European currencies have weakened against the US dollar, which pushed most Western European cities down in the ranking,” explained Ms. Constantin-Métral. “Additionally, other factors like the Eurozone’s economy have impacted these cities.”
As a result of local currencies depreciating against the US dollar, some cities in Eastern and Central Europe, including Prague (132) and Budapest (176) fell in the ranking, while Minsk (200) and Kiev (163) jumped four and thirteen spots, respectively, despite stable accommodations in these locations.
Ranking 17, Tel Aviv jumped two spots from last year and continues to be the most expensive city in the Middle East for expatriates followed by Dubai (20), Abu Dhabi (23), and Riyadh (52), which have all climbed in this year’s ranking. Jeddah (117), Muscat (92), and Doha (81) are among the least expensive cities in the region. Cairo (183) is the least expensive city in the region plummeting ninety-two spots from last year following a major devaluation of its local currency.
“Egypt’s decision to allow its currency to float freely in return for a 12 billion dollar loan over three years to help strengthen its economy resulted in the massive devaluation of the Egyptian Pound by more than 100% against the US dollar, pushing Cairo down the ranking” said Ms. Constantin-Métral.”
Quite a few African cities continue to rank high in this year’s survey, reflecting high living costs and prices of goods for expatriate employees. Luanda (1) takes the top spot as the most expensive city for expatriates across Africa and globally despite its currency weakening against the US dollar. Luanda is followed by Victoria (14), Ndjamena (16), and Kinshasa (18). Tunis falls six spots to rank 209 as the least expensive city in the region and overall.
Mercer produces individual cost of living and rental accommodation cost reports for each city surveyed. For more information on city rankings, visit www.mercer.com/col. To purchase copies of individual city reports, visit https://mobilityexchange.mercer.com/multinational-approach-cost-of-living-data or call Mercer Client Services in Warsaw on +48 22 434 5383.
Notes for editors
The list of rankings is provided to journalists for reference and should not be published in full. The top 10 and bottom 10 cities may be reproduced in a table.
The figures for Mercer’s cost of living and rental accommodation costs comparisons are derived from a survey conducted in March 2017. Exchange rates from that time and Mercer’s international basket of goods and services have been used as base measurements.
Governments and major companies use data from this survey to protect the purchasing power of their employees when transferred abroad; rental accommodation costs data is used to assess local expatriate housing allowances. The choice of cities surveyed is based on the demand for data.
Mercer is a global consulting leader in health, wealth and careers. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in more than 40 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @MercerInsights.
Mercer also provides advice and market data on international and expatriate compensation management, and works with multinational companies and governments worldwide. It maintains one of the most comprehensive databases on international assignment policies; compensation practices; and data on worldwide cost of living, housing, and hardship allowances. Its annual global mobility conferences and other events provide companies with the latest trends and research on mobility issues. Visit https://mobilityexchange.mercer.com/ for details. Follow Mercer’s mobility news on Twitter @Mercer_Talent.