International Rankings – Cost of Living 1 April 2009

Posted on April 21, 2009 by Xpatulator

This article is well worth the time taken to read as it looks at where your city lies within the cost of living rankings worldwide.

International Cost of Living Rankings

International cost of living rankings are the result of comparing the cost of an expatriate’s personal budget, using the local prices for the same defined quantities of the same goods and services in each country throughout the world.

Our findings show that the compound impact of the multifaceted global economic trends that impact each country in one way or another, are contributing to rapid substantial changes in the relative cost of living of countries around the world. The changes in relative cost of living are large and have occurred in a relatively short period of time. The reason for this is due to the fact that so many economic crises are occurring simultaneously. 2008 saw the housing bubble burst followed by the failure of a number of global fund / asset management, insurance and banking giants. Some have been liquidated or taken over; others have been bailed out with government funds. In 2009 we have seen the continued fall in house prices which many believe have yet to bottom out. Stock prices and market indexes are down to levels last seen a decade or more ago. The trend towards decreased inflation and lower interest rates continues in developed and developing markets. We are also experiencing exchange rate volatility with a number of large economies seeing their currency weaken considerably in the past year. The economic impact is continuing to spread around the globe. We are currently seeing a truly global recession with reduced demand for manufacturing inputs and outputs as well as reduced energy demand and large scale job losses.

This study of 276 global locations covered every country in the world. The study comprised the cost of several hundred items that expatriates typically spend their pay on, grouped into 13 Basket Groups. The findings as at 1 April 2009 have been compared to the previous findings of 1 December 2008. The Index uses New York as the base (New York = 100). An index greater than 100, means that the cost of living is higher than New York, an index less than 100, means that the cost of living is lower than New York.

Geneva has a cost of living index of 110 for example. That means that on average, goods and services that cost $100 in New York, cost $110 in Geneva. Each city is ranked according to their overall cost of living index which includes the cost of all basket groups.

A cost of living index increases or decreases based on the local price of the goods and services used in the study and the ruling exchange rate. As a general principle, a country with a currency that has increased against other currencies (stronger currency) and which has relatively high local inflation (rapid/large price increases), will generally experience an increase in cost of living compared to other countries. On the other hand, a country with a currency that has decreased against other currencies (weaker currency) and which has relatively low local inflation will generally experience a decrease in cost of living compared to other countries. It is important to note that we are talking about relative changes. Take London as another example. As recently as December 2008, London was still ranked the 6th most expensive place in the world for expatriates to live. As at April 2009 it is the 23rd most expensive place in the world for expatriates. That does not mean that the local cost of living for expatriates living in London has decreased. What it does mean is that relative to other places in the world, London is no longer as expensive as it was last year. What makes London’s cost of living relatively lower than it was is mainly due to the increase in the cost of living elsewhere together with the weaker British Pound.

These relative changes have a substantial impact on expatriate employees. An expatriate working in a high cost of living – strong currency country such as Hong Kong where the Hong Kong Dollar is pegged to the US Dollar illustrates this point. The high cost of living makes it difficult to save due to high local prices; Household (Accommodation including utilities) in particular is very expensive. However, an expatriate working in Hong Kong will now likely find that remitting money back home provides greatly increased spending power at home. In the past year the Hong Kong Dollar has increased 15% against the Malaysian Ringgit, and 30% against the Indonesian Rupiah and the Australian Dollar.

The Top 10 Most Expensive Places for Expatriates to Live

Tokyo has retained its status as the most expensive city in the world for expatriates to live. The cost of living index for Tokyo has increased from 126 in December 2008 to 143 as at 1 April 2009, and the Yen has strengthened against the US Dollar. At the other end of the scale, Harare has retained its status as the least expensive city in the world and is ranked 276 with an index of just 17 and a currency which is still in free-fall. Tokyo is ranked 1st for Healthcare expenses, 2nd for Groceries and 2nd for Household (Accommodation including utilities).

Hong Kong is now ranked 2nd overall having climbed from 33rd place in December 2008. Its cost of living index has increased from 103 to 121 and is ranked 1st for Household expenses and 2nd for Healthcare. It is interesting however to note that Hong Kong is not expensive in all categories. It is ranked 202nd for Alcohol & Tobacco, 226th for Recreation & Culture, 227th for Education, and 247th for Furniture & Appliances.

Lagos is the 3rd most expensive city in the world for expatriates, having previously been ranked 11th. It is ranked 1st for Groceries and for Furniture & Appliance expenses, 6th for Healthcare, and 18th for Restaurants, Meals Out and Hotels.

Caracas has moved substantially up the rankings to 4th, having been ranked just 32nd in December 2008. It is ranked 1st for Education expenses, 5th for Healthcare, and 6th for Household expenses (Accommodation including utilities).

Port Moresby in Papua New Guinea is the 5th ranked overall most expensive city for expatriates due to most goods and services being imported from Australia. Port Moresby is ranked 6th for Recreation & Culture, 7th for Communication and for Healthcare, and 8th most expensive for Clothing.

Geneva has dropped slightly to 6th, having been ranked 4th in December 2008. It is ranked 3rd most expensive for Transport expenses, 11th for Recreation & Culture, 15th for Healthcare, and 20th for Clothing.

Dubai has moved into the top 10 most expensive places in the world for expatriates to live for the first time. Dubai is now ranked 7th, substantially up from 34th in December 2008. Its cost of living index has increased from 103 to 109 since December 2008. It is ranked 1st for Restaurants Meals Out and Hotel expenses, 6th for Clothing, 11th for Healthcare, and 16th for Groceries. Dubai is currently ranked 4th for Household expenses (Accommodation including utilities), however evidence is emerging that this will decrease significantly in the next quarter as it has been hit relatively hard in the property sector with falling property prices and rentals.

Doha has moved up in the global rankings faster than any other city. In December 2008, Doha was ranked the 45th most expensive city for expatriates, it is now 8th. The overall cost of living index has moved up from 101 to 109, equal to that of Dubai. It is ranked 2nd for Restaurants, Meals Out and Hotel expenses, 3rd for Clothing, 7th for Household expenses (Accommodation including utilities), 8th for Groceries as well as for Recreation and Culture, and 10th for Healthcare.

Denmark has dropped slightly to being the 9th most expensive place in the world for expatriates, having been ranked 3rd in December 2008. It is ranked 3rd most expensive for Groceries, 5th for Transport, and 15th for Furniture and Appliances.

Hamilton in Bermuda completes the top 10 moving from 26th in December despite the overall cost of index remaining 108. Hamilton is ranked 4th most expensive for both Education and Healthcare, 10th for Personal Care, 11th for Household expenses (Accommodation including utilities), and 15th for Groceries.

The full overall cost of living ranking list, sourced from Xpatulator.com as at 1 April 2009 is as follows:

Rank and Location
1 Japan, Tokyo

2 China, Hong Kong

3 Nigeria, Lagos

4 Venezuela, Caracas

5 Papua New Guinea, Port Moresby

6 Switzerland, Geneva

7 United Arab Emirates, Dubai

8 Qatar, Doha

9 Denmark, Copenhagen

10 Bermuda, Hamilton

11 Angola, Luanda

12 Switzerland, Zurich

13 Russia, Moscow

14 Solomon Islands, Honiara

15 Cameroon, Douala

16 Chad, N’Djamena

17 Taiwan, Taipei

18 Liechtenstein, Vaduz

19 USA, New York NY

20 New Caledonia, Noumea

21 Greenland, Nuuk

22 Ireland, Dublin

23 United Kingdom, London

24 France, Paris

25 Norway, Oslo

26 Italy, Milan

27 San Marino, San Marino

28 USA, San Francisco Calif

29 Monaco, Monaco

30 Austria, Vienna

31 Bahamas, Nassau

32 Central African Republic, Bangui

33 Nauru, Yaren

34 USA, Boston Mass

35 Finland, Helsinki

36 Italy, Rome

37 Kazakhstan, Almaty

38 Cote D’Ivoire, Abidjan

39 Bahrain, Manama

40 Micronesia, Palikir

41 Isle of Man, Douglas

42 Haiti, Port-au-Prince

43 USA, San Jose Calif

44 Cameroon, Yaounde

45 Djibouti, Djibouti

46 Palau, Melekeok

47 Guinea-Bissau, Bissau

48 Azerbaijan, Baku

49 Benin, Cotonou

50 Slovakia, Bratislava

51 Belgium, Brussels

52 Netherlands, Amsterdam

53 Sao Tome and Principe, Sao Tome

54 Jersey, Saint Helier

55 Mali, Bamako

56 Gabon, Libreville

57 United Arab Emirates, Abu Dhabi

58 Croatia, Zagreb

59 Singapore, Singapore

60 Ghana, Accra

61 Spain, Madrid

62 Ukraine, Kiev

63 USA, Philadelphia Pa

64 Cayman Islands, George Town

65 Sierra Leone, Freetown

66 Germany, Berlin

67 Czech Republic, Prague

68 USA, San Diego Calif

69 Jordan, Amman

70 Trinidad and Tobago, Port-of-Spain

71 USA, Los Angeles Calif

72 USA, Washington DC

73 Estonia, Tallinn

74 USA, Baltimore Md

75 Falkland Islands, Stanley

76 Saudi Arabia, Riyadh

77 Guernsey, St Peter Port

78 Comores, Moroni

79 Sudan, Khartoum

80 Germany, Bonn

81 Vatican City, Vatican City

82 Canada, Toronto

83 Timor-Leste, Dili

84 Hungary, Budapest

85 USA, Seattle Wash

86 Brazil, Brasilia

87 Lebanon, Beirut

88 USA, Miami Fla

89 Vanuatu, Port Vila

90 Luxembourg, Luxembourg

91 Jamaica, Kingston

92 Australia, Sydney

93 Kuwait, Kuwait City

94 Moldova, Chisinau

95 Congo Democratic Rep, Kinshasa

96 Germany, Frankfurt

97 Tuvalu, Funafuti

98 Iceland, Reykjavík

99 Barbados, Bridgetown

100 Portugal, Lisbon

101 Mozambique, Maputo

102 Senegal, Dakar

103 Canada, Vancouver

104 Niger, Niamey

105 China, Beijing

106 Ethiopia, Addis Ababa

107 Turkey, Ankara

108 Togo, Lome

109 Equatorial Guinea, Malabo

110 Martinique, Fort-de-France

111 Armenia, Yerevan

112 USA, Chicago Ill

113 Liberia, Monrovia

114 Gibraltar, Gibraltar

115 Sweden, Stockholm

116 Somalia, Mogadishu

117 USA, Portland Ore

118 Israel, Jerusalem

119 Malta, Velletta

120 Puerto Rico, San Juan

121 Canada, Calgary

122 Rwanda, Kigali

123 Guam, Hagatna

124 Burkina Faso, Ouagadougou

125 Zambia, Lusaka

126 Andorra, Andorra la Vella

127 Cyprus, Nicosia

128 USA, Las Vegas Nev

129 Samoa, Apia

130 Saint Helena, Jamestown

131 Tanzania, Dar es Salaam

132 Greece, Athens

133 Poland, Warsaw

134 Maldives, Male

135 Malawi, Lilongwe

136 Thailand, Bangkok

137 Indonesia, Jakarta

138 USA, Jacksonville Fla

139 Antigua and Barbuda, Saint John’s

140 Gambia, Banjul

141 United Kingdom, Glasgow

142 Lithuania, Vilnius

143 Belarus, Minsk

144 USA, Dallas Tex

145 Australia, Canberra

146 India, Mumbai

147 Australia, Melbourne

148 USA, Denver Colo

149 Algeria, Algiers

150 Georgia Republic of, Tbilisi

151 Honduras, Tegucigalpa

152 USA, Atlanta GA

153 USA, Cleveland Ohio

154 Canada, Montreal

155 USA, Milwaukee Wis

156 Congo, Brazzaville

157 Guinea, Conakry

158 Saint Kitts and Nevis, Basseterre

159 USA, Detroit Mich

160 Panama, Panama City

161 Latvia, Riga

162 Uganda, Kampala

163 Korea Republic of, Seoul

164 USA, Charlotte NC

165 Marshall Islands, Majuro

166 Australia, Perth

167 USA, Phoenix Ariz

168 USA, Columbus Ohio

169 USA, Austin Tex

170 Madagascar, Antananarivo

171 USA, Tampa Fla

172 United Kingdom, Birmingham

173 Afghanistan, Kabul

174 Grenada, Saint George’s

175 Vietnam, Hanoi

176 USA, Indianapolis Ind

177 USA, St Louis MO

178 Saint Vincent and the Grenadines, Kingstown

179 Peru, Lima

180 Syria, Damascus

181 USA, Fort Worth Tex

182 Slovenia, Ljubljana

183 Mauritania, Nouakchott

184 USA, El Paso Tex

185 Philippines, Manila

186 China, Shanghai

187 USA, Memphis Tenn

188 USA, Pittsburgh Penn

189 Belize, Belmopan

190 India, New Delhi

191 Romania, Bucharest

192 Guatemala, Guatemala City

193 Iran, Tehran

194 Cape Verde, Praia

195 India, Chennai

196 USA, Houston Tex

197 Canada, Ottawa

198 Costa Rica, San Jose

199 Dominica, Roseau

200 Nicaragua, Managua

201 Guyana, Georgetown

202 Dominican Republic, Santo Domingo

203 Bulgaria, Sofia

204 237 Suriname, Paramaribo

205 Cuba, Havana

206 Oman, Muscat

207 India, Calcutta

208 Mongolia, Ulaanbaatar

209 Tajikistan, Dushanbe

210 India, Hyderabad

211 Burundi, Bujumbura

212 USA, San Antonio Tex

213 Myanmar, Yangon

214 Uruguay, Montevideo

215 Paraguay, Asuncion

216 Albania, Tirana

217 Brunei, Bandar Seri Begawan

218 Mauritius, Port Louis

219 Fiji, Suva

220 Egypt, Cairo

221 Australia, Brisbane

222 El Salvador, San Salvador

223 Korea Democratic Republic of, Pyongyang

224 Laos, Vientiane

225 Mexico, Mexico City

226 Morocco, Rabat

227 India, Bangalore

228 Saint Lucia, Castries

229 New Zealand, Auckland

230 Kiribati, South Tarawa

231 Kosovo, Pristina

232 Kenya, Nairobi

233 Serbia, Belgrade

234 Bangladesh, Dhaka

235 Pakistan, Lahore

236 Bolivia, La Paz

237 Colombia, Bogota

238 Botswana, Gaberone

239 Sri Lanka, Colombo

240 Pakistan, Islamabad

241 Turkmenistan, Ashgabat

242 Kyrgyzstan, Bishkek

243 Macedonia, Skopje

244 Pakistan, Karachi

245 Australia, Adelaide

246 Montenegro, Podgorica

247 Chile, Santiago

248 Malaysia, Kuala Lumpur

249 China, Macao

250 Eritrea, Asmara

251 Iraq, Baghdad

252 Argentina, Buenos Aires

253 Bosnia and Herzegovina, Sarajevo

254 Uzbekistan, Tashkent

255 Ecuador, Quito

256 Nepal, Kathmandu

257 Tunisia, Tunis

258 Yemen, Sanaa

259 Bhutan, Thimphu

260 South Africa, Johannesburg

261 China, Shenzhen

262 Tonga, Nuku’Alofa

263 China, Dalian

264 South Africa, Pretoria

265 Lesotho, Maseru

266 China, Wuhan

267 Namibia, Windhoek

268 Libya, Tripoli

269 South Africa, Cape Town

270 China, Guangzhou

271 Seychelles, Victoria

272 South Africa, Durban

273 Cambodia, Phnom Penh

274 Swaziland, Mbabane

275 China, Tianjin

276 Zimbabwe, Harare

Steven Coleman runs the most comprehensive global relocation calculator available, an internet service that is used primarily to calculate expatriate salary levels for global assignments, which can be found at http://www.xpatulator.com

Posted in cost of living, International cost of living comparison | 4 Comments

International Cost of Living Rankings 1 April 2009

Posted on April 21, 2009 by Xpatulator

International Cost of Living Rankings

International cost of living rankings are the result of comparing the cost of an expatriate’s personal budget, using the local prices for the same defined quantities of the same goods and services in each country throughout the world.

 

Our findings show that the compound impact of the multifaceted global economic trends that impact each country in one way or another, are contributing to rapid substantial changes in the relative cost of living of countries around the world. The changes in relative cost of living are large and have occurred in a relatively short period of time. The reason for this is due to the fact that so many economic crises are occurring simultaneously. 2008 saw the housing bubble burst followed by the failure of a number of global fund / asset management, insurance and banking giants. Some have been liquidated or taken over; others have been bailed out with government funds. In 2009 we have seen the continued fall in house prices which many believe have yet to bottom out. Stock prices and market indexes are down to levels last seen a decade or more ago. The trend towards decreased inflation and lower interest rates continues in developed and developing markets. We are also experiencing exchange rate volatility with a number of large economies seeing their currency weaken considerably in the past year. The economic impact is continuing to spread around the globe. We are currently seeing a truly global recession with reduced demand for manufacturing inputs and outputs as well as reduced energy demand and large scale job losses.

 

This study of 276 global locations covered every country in the world. The study comprised the cost of several hundred items that expatriates typically spend their pay on, grouped into 13 Basket Groups. The findings as at 1 April 2009 have been compared to the previous findings of 1 December 2008.  The Index uses New York as the base (New York = 100).  An index greater than 100, means that the cost of living is higher than New York, an index less than 100, means that the cost of living is lower than New York.

 

Geneva has a cost of living index of 110 for example. That means that on average, goods and services that cost $100 in New York, cost $110 in Geneva. Each city is ranked according to their overall cost of living index which includes the cost of all basket groups.

 

A cost of living index increases or decreases based on the local price of the goods and services used in the study and the ruling exchange rate. As a general principle, a country with a currency that has increased against other currencies (stronger currency) and which has relatively high local inflation (rapid/large price increases), will generally experience an increase in cost of living compared to other countries. On the other hand, a country with a currency that has decreased against other currencies (weaker currency) and which has relatively low local inflation will generally experience a decrease in cost of living compared to other countries.  It is important to note that we are talking about relative changes. Take London as another example. As recently as December 2008, London was still ranked the 6th most expensive place in the world for expatriates to live. As at April 2009 it is the 23rd most expensive place in the world for expatriates. That does not mean that the local cost of living for expatriates living in London has decreased. What it does mean is that relative to other places in the world, London is no longer as expensive as it was last year.  What makes London’s cost of living relatively lower than it was is mainly due to the increase in the cost of living elsewhere together with the weaker British Pound.

 

These relative changes have a substantial impact on expatriate employees. An expatriate working in a high cost of living – strong currency country such as Hong Kong where the Hong Kong Dollar is pegged to the US Dollar illustrates this point. The high cost of living makes it difficult to save due to high local prices; Household (Accommodation including utilities) in particular is very expensive. However, an expatriate working in Hong Kong will now likely find that remitting money back home provides greatly increased spending power at home.  In the past year the Hong Kong Dollar has increased 15% against the Malaysian Ringgit, and 30% against the Indonesian Rupiah and the Australian Dollar.

 

The Top 10 Most Expensive Places for Expatriates to Live

 

Tokyo has retained its status as the most expensive city in the world for expatriates to live. The cost of living index for Tokyo has increased from 126 in December 2008 to 143 as at 1 April 2009, and the Yen has strengthened against the US Dollar. At the other end of the scale, Harare has retained its status as the least expensive city in the world and is ranked 276 with an index of just 17 and a currency which is still in free-fall. Tokyo is ranked 1st for Healthcare expenses, 2nd for Groceries and 2nd for Household (Accommodation including utilities).

 

Hong Kong is now ranked 2nd overall having climbed from 33rd place in December 2008. Its cost of living index has increased from 103 to 121 and is ranked 1st for Household expenses and 2nd for Healthcare. It is interesting however to note that Hong Kong is not expensive in all categories. It is ranked 202nd for Alcohol & Tobacco, 226th for Recreation & Culture, 227th for Education, and 247th for Furniture & Appliances.

 

Lagos is the 3rd most expensive city in the world for expatriates, having previously been ranked 11th.  It is ranked 1st for Groceries and for Furniture & Appliance expenses, 6th for Healthcare, and 18th for Restaurants, Meals Out and Hotels. 

 

Caracas has moved substantially up the rankings to 4th, having been ranked just 32nd in December 2008. It is ranked 1st for Education expenses, 5th for Healthcare, and 6th for Household expenses (Accommodation including utilities).

 

Port Moresby in Papua New Guinea is the 5th ranked overall most expensive city for expatriates due to most goods and services being imported from Australia. Port Moresby is ranked 6th for Recreation & Culture, 7th for Communication and for Healthcare, and 8th most expensive for Clothing.

 

Geneva has dropped slightly to 6th, having been ranked 4th in December 2008.  It is ranked 3rd most expensive for Transport expenses, 11th for Recreation & Culture, 15th for Healthcare, and 20th for Clothing.

 

Dubai has moved into the top 10 most expensive places in the world for expatriates to live for the first time. Dubai is now ranked 7th, substantially up from 34th in December 2008. Its cost of living index has increased from 103 to 109 since December 2008. It is ranked 1st for Restaurants Meals Out and Hotel expenses, 6th for Clothing, 11th for Healthcare, and 16th for Groceries. Dubai is currently ranked 4th for Household expenses (Accommodation including utilities), however evidence is emerging that this will decrease significantly in the next quarter as it has been hit relatively hard in the property sector with falling property prices and rentals.

 

Doha has moved up in the global rankings faster than any other city. In December 2008, Doha was ranked the 45th most expensive city for expatriates, it is now 8th. The overall cost of living index has moved up from 101 to 109, equal to that of Dubai.  It is ranked 2nd for Restaurants, Meals Out and Hotel expenses, 3rd for Clothing, 7th for Household expenses (Accommodation including utilities), 8th for Groceries as well as for Recreation and Culture, and 10th for Healthcare.

 

Denmark has dropped slightly to being the 9th most expensive place in the world for expatriates, having been ranked 3rd in December 2008. It is ranked 3rd most expensive for Groceries, 5th for Transport, and 15th for Furniture and Appliances.   

 

Hamilton in Bermuda completes the top 10 moving from 26th in December despite the overall cost of index remaining 108. Hamilton is ranked 4th most expensive for both Education and Healthcare, 10th for Personal Care, 11th for Household expenses (Accommodation including utilities), and 15th for Groceries.  

 

The full overall cost of living ranking list, sourced from <a href=”http://www.xpatulator.com/”>Xpatulator.com</a&gt; as at 1 April 2009 is as follows: 

 

 

Rank

Previous Rank

Location

1

1

Japan, Tokyo

2

33

China, Hong Kong

3

11

Nigeria, Lagos

4

32

Venezuela, Caracas

5

40

Papua New Guinea, Port Moresby

6

4

Switzerland, Geneva

7

34

United Arab Emirates, Dubai

8

45

Qatar, Doha

9

3

Denmark, Copenhagen

10

26

Bermuda, Hamilton

11

36

Angola, Luanda

12

8

Switzerland, Zurich

13

10

Russia, Moscow

14

173

Solomon Islands, Honiara

15

17

Cameroon, Douala

16

15

Chad, N’Djamena

17

86

Taiwan, Taipei

18

18

Liechtenstein, Vaduz

19

50

USA, New York NY

20

13

New Caledonia, Noumea

21

7

Greenland, Nuuk

22

12

Ireland, Dublin

23

6

United Kingdom, London

24

14

France, Paris

25

2

Norway, Oslo

26

16

Italy, Milan

27

19

San Marino, San Marino

28

30

USA, San Francisco Calif

29

20

Monaco, Monaco

30

22

Austria, Vienna

31

84

Bahamas, Nassau

32

46

Central African Republic, Bangui

33

80

Nauru, Yaren

34

52

USA, Boston Mass

35

28

Finland, Helsinki

36

27

Italy, Rome

37

81

Kazakhstan, Almaty

38

31

Cote D’Ivoire, Abidjan

39

82

Bahrain, Manama

40

57

Micronesia, Palikir

41

24

Isle of Man, Douglas

42

87

Haiti, Port-au-Prince

43

48

USA, San Jose Calif

44

53

Cameroon, Yaounde

45

92

Djibouti, Djibouti

46

69

Palau, Melekeok

47

67

Guinea-Bissau, Bissau

48

75

Azerbaijan, Baku

49

55

Benin, Cotonou

50

23

Slovakia, Bratislava

51

37

Belgium, Brussels

52

38

Netherlands, Amsterdam

53

145

Sao Tome and Principe, Sao Tome

54

39

Jersey, Saint Helier

55

54

Mali, Bamako

56

58

Gabon, Libreville

57

100

United Arab Emirates, Abu Dhabi

58

35

Croatia, Zagreb

59

66

Singapore, Singapore

60

115

Ghana, Accra

61

47

Spain, Madrid

62

43

Ukraine, Kiev

63

79

USA, Philadelphia Pa

64

101

Cayman Islands, George Town

65

106

Sierra Leone, Freetown

66

56

Germany, Berlin

67

21

Czech Republic, Prague

68

83

USA, San Diego Calif

69

123

Jordan, Amman

70

135

Trinidad and Tobago, Port-of-Spain

71

68

USA, Los Angeles Calif

72

78

USA, Washington DC

73

64

Estonia, Tallinn

74

90

USA, Baltimore Md

75

49

Falkland Islands, Stanley

76

183

Saudi Arabia, Riyadh

77

44

Guernsey, St Peter Port

78

77

Comores, Moroni

79

102

Sudan, Khartoum

80

60

Germany, Bonn

81

61

Vatican City, Vatican City

82

59

Canada, Toronto

83

185

Timor-Leste, Dili

84

9

Hungary, Budapest

85

95

USA, Seattle Wash

86

5

Brazil, Brasilia

87

122

Lebanon, Beirut

88

110

USA, Miami Fla

89

133

Vanuatu, Port Vila

90

70

Luxembourg, Luxembourg

91

125

Jamaica, Kingston

92

29

Australia, Sydney

93

181

Kuwait, Kuwait City

94

114

Moldova, Chisinau

95

128

Congo Democratic Rep, Kinshasa

96

74

Germany, Frankfurt

97

151

Tuvalu, Funafuti

98

42

Iceland, Reykjavík

99

104

Barbados, Bridgetown

100

72

Portugal, Lisbon

101

136

Mozambique, Maputo

102

88

Senegal, Dakar

103

71

Canada, Vancouver

104

93

Niger, Niamey

105

147

China, Beijing

106

230

Ethiopia, Addis Ababa

107

65

Turkey, Ankara

108

85

Togo, Lome

109

107

Equatorial Guinea, Malabo

110

142

Martinique, Fort-de-France

111

140

Armenia, Yerevan

112

108

USA, Chicago Ill

113

176

Liberia, Monrovia

114

76

Gibraltar, Gibraltar

115

51

Sweden, Stockholm

116

189

Somalia, Mogadishu

117

105

USA, Portland Ore

118

119

Israel, Jerusalem

119

113

Malta, Velletta

120

153

Puerto Rico, San Juan

121

219

Canada, Calgary

122

223

Rwanda, Kigali

123

161

Guam, Hagatna

124

121

Burkina Faso, Ouagadougou

125

94

Zambia, Lusaka

126

96

Andorra, Andorra la Vella

127

112

Cyprus, Nicosia

128

131

USA, Las Vegas Nev

129

138

Samoa, Apia

130

89

Saint Helena, Jamestown

131

172

Tanzania, Dar es Salaam

132

103

Greece, Athens

133

25

Poland, Warsaw

134

190

Maldives, Male

135

208

Malawi, Lilongwe

136

144

Thailand, Bangkok

137

130

Indonesia, Jakarta

138

179

USA, Jacksonville Fla

139

200

Antigua and Barbuda, Saint John’s

140

99

Gambia, Banjul

141

91

United Kingdom, Glasgow

142

132

Lithuania, Vilnius

143

207

Belarus, Minsk

144

178

USA, Dallas Tex

145

63

Australia, Canberra

146

171

India, Mumbai

147

62

Australia, Melbourne

148

146

USA, Denver Colo

149

118

Algeria, Algiers

150

127

Georgia Republic of, Tbilisi

151

217

Honduras, Tegucigalpa

152

165

USA, Atlanta GA

153

174

USA, Cleveland Ohio

154

117

Canada, Montreal

155

167

USA, Milwaukee Wis

156

139

Congo, Brazzaville

157

124

Guinea, Conakry

158

209

Saint Kitts and Nevis, Basseterre

159

175

USA, Detroit Mich

160

224

Panama, Panama City

161

143

Latvia, Riga

162

198

Uganda, Kampala

163

41

Korea Republic of, Seoul

164

191

USA, Charlotte NC

165

111

Marshall Islands, Majuro

166

73

Australia, Perth

167

155

USA, Phoenix Ariz

168

170

USA, Columbus Ohio

169

177

USA, Austin Tex

170

157

Madagascar, Antananarivo

171

158

USA, Tampa Fla

172

116

United Kingdom, Birmingham

173

199

Afghanistan, Kabul

174

134

Grenada, Saint George’s

175

97

Vietnam, Hanoi

176

187

USA, Indianapolis Ind

177

201

USA, St Louis MO

178

218

Saint Vincent and the Grenadines, Kingstown

179

203

Peru, Lima

180

227

Syria, Damascus

181

188

USA, Fort Worth Tex

182

149

Slovenia, Ljubljana

183

194

Mauritania, Nouakchott

184

197

USA, El Paso Tex

185

126

Philippines, Manila

186

226

China, Shanghai

187

210

USA, Memphis Tenn

188

184

USA, Pittsburgh Penn

189

232

Belize, Belmopan

190

206

India, New Delhi

191

109

Romania, Bucharest

192

216

Guatemala, Guatemala City

193

186

Iran, Tehran

194

196

Cape Verde, Praia

195

211

India, Chennai

196

192

USA, Houston Tex

197

150

Canada, Ottawa

198

240

Costa Rica, San Jose

199

222

Dominica, Roseau

200

233

Nicaragua, Managua

201

225

Guyana, Georgetown

202

235

Dominican Republic, Santo Domingo

203

182

Bulgaria, Sofia

204

237

Suriname, Paramaribo

205

231

Cuba, Havana

206

246

Oman, Muscat

207

220

India, Calcutta

208

244

Mongolia, Ulaanbaatar

209

249

Tajikistan, Dushanbe

210

221

India, Hyderabad

211

213

Burundi, Bujumbura

212

215

USA, San Antonio Tex

213

152

Myanmar, Yangon

214

163

Uruguay, Montevideo

215

168

Paraguay, Asuncion

216

141

Albania, Tirana

217

162

Brunei, Bandar Seri Begawan

218

156

Mauritius, Port Louis

219

148

Fiji, Suva

220

241

Egypt, Cairo

221

120

Australia, Brisbane

222

242

El Salvador, San Salvador

223

204

Korea Democratic Republic of, Pyongyang

224

229

Laos, Vientiane

225

169

Mexico, Mexico City

226

166

Morocco, Rabat

227

238

India, Bangalore

228

247

Saint Lucia, Castries

229

137

New Zealand, Auckland

230

160

Kiribati, South Tarawa

231

205

Kosovo, Pristina

232

154

Kenya, Nairobi

233

159

Serbia, Belgrade

234

258

Bangladesh, Dhaka

235

248

Pakistan, Lahore

236

260

Bolivia, La Paz

237

164

Colombia, Bogota

238

195

Botswana, Gaberone

239

252

Sri Lanka, Colombo

240

253

Pakistan, Islamabad

241

274

Turkmenistan, Ashgabat

242

212

Kyrgyzstan, Bishkek

243

214

Macedonia, Skopje

244

255

Pakistan, Karachi

245

180

Australia, Adelaide

246

228

Montenegro, Podgorica

247

193

Chile, Santiago

248

202

Malaysia, Kuala Lumpur

249

261

China, Macao

250

268

Eritrea, Asmara

251

254

Iraq, Baghdad

252

257

Argentina, Buenos Aires

253

263

Bosnia and Herzegovina, Sarajevo

254

265

Uzbekistan, Tashkent

255

264

Ecuador, Quito

256

234

Nepal, Kathmandu

257

236

Tunisia, Tunis

258

273

Yemen, Sanaa

259

259

Bhutan, Thimphu

260

239

South Africa, Johannesburg

261

267

China, Shenzhen

262

98

Tonga, Nuku’Alofa

263

269

China, Dalian

264

245

South Africa, Pretoria

265

256

Lesotho, Maseru

266

270

China, Wuhan

267

251

Namibia, Windhoek

268

266

Libya, Tripoli

269

250

South Africa, Cape Town

270

271

China, Guangzhou

271

129

Seychelles, Victoria

272

262

South Africa, Durban

273

272

Cambodia, Phnom Penh

274

243

Swaziland, Mbabane

275

275

China, Tianjin

276

276

Zimbabwe, Harare

 

About The Author: Steven Coleman runs the most comprehensive international cost of living website available <a href=”http://www.xpatulator.com/”>Xpatulator.com</a&gt;  an internet service that provides free cost of living and hardship information for 276 global locations to registered users. The premium content calculators allow you to customise your own cost of living index by choosing your own basket groups.

Posted in cost of living rankings | Tagged , , , , , , , , , , , , | 1 Comment

Dubai

Posted on March 24, 2009 by Xpatulator


We have taken Dubai as our location to equate the cost of living to the rest of the world. Each emirate in the UAE have slightly different practices. Most companies provide, reimburse or provide an allowance, for benefits such as Healthcare, Housing, Schooling etc. These benefits are usually determined by your job and family status and varies by company and sector. When using the calculator, you need to select which of the basket groups is applicable to your circumstances and this will determine the equitable salary.

Dubai has an overall High Cost of Living. The overall cost of living index is comprised of the prices for defined quantities of the same goods and services across all 13 Basket Groups. Dubai is currently ranked 7 overall, most expensive place in the world for expatriates to live, out of 276 international http://www.xpatulator.com locations. The exact customised cost of living index for Dubai is based on the Basket Groups that you select in the Calculators.
In terms of the relative hardship people are likely to experience, assessed in global terms, Dubai is ranked as a minimal hardship location. The exact customised hardship index premium for Dubai is based on the comparison location that you select in the Calculators.

I will equate, a few more Middle East countries tomorrow…..

Posted in Cost of living in Dubai | 1 Comment

Dubai

Posted on March 24, 2009 by Xpatulator


We have taken Dubai as our location to equate the cost of living to the rest of the world. Each emirate in the UAE have slightly different practices. Most companies provide, reimburse or provide an allowance, for benefits such as Healthcare, Housing, Schooling etc. These benefits are usually determined by your job and family status and varies by company and sector. When using the calculator, you need to select which of the basket groups is applicable to your circumstances and this will determine the equitable salary.

Dubai has an overall High Cost of Living. The overall cost of living index is comprised of the prices for defined quantities of the same goods and services across all 13 Basket Groups. Dubai is currently ranked 7 overall, most expensive place in the world for expatriates to live, out of 276 international http://www.xpatulator.com locations. The exact customised cost of living index for Dubai is based on the Basket Groups that you select in the Calculators.
In terms of the relative hardship people are likely to experience, assessed in global terms, Dubai is ranked as a minimal hardship location. The exact customised hardship index premium for Dubai is based on the comparison location that you select in the Calculators.

I will equate, a few more Middle East countries tomorrow…..

Posted in Cost of living in Dubai | 1 Comment

Moving to The United Arab Emirates

Posted on March 19, 2009 by Xpatulator

I have had a lot of clients looking at moving to The Middle East, in my first blog on a country, I will focus specifically on The UAE.

It is a union of seven small Arab emirates.

LOCATION: The United Arab Emirates is in the Middle East, bordering the Gulf of Oman and the Persian Gulf, between Oman and Saudi Arabia.

CAPITAL CITY: Abu Dhabi

LARGEST CITY: Abu Dhabi

CURRENCY: UAE Dirham (AED)

ECONOMY: The United Arab Emirates has a highly industrialized economy. Although the UAE is becoming less dependent on natural resources as a source of revenue, petroleum and natural gas exports still play an important role in the economy. A massive construction boom, an expanding manufacturing base, and a thriving services sector are helping the UAE diversify its economy. There is currently approximately $350 billion worth of active construction projects. Although Dubai’s economy was built on the back of the oil industry, revenues from oil and natural gas currently account for less than 6% of the UAE’s revenues. The government’s decision to diversify from a trade-based, but oil-reliant, economy to one that is service and tourism-oriented has made real estate more valuable, resulting in extreme property appreciation. Large scale real estate development projects have led to the construction of some of the tallest skyscrapers and largest projects in the world such as the Emirates Towers, the Palm Islands and the world’s tallest, and most expensive, hotel the Burj Dubai.

Climate
From October to April (Winter) – moderate temperatures averaging 20 degrees.
The temperature peaks in Summer (May to September) up to 49 degrees.
Sandstorms and dustorms are common, while the eastern highlands are generally cooler and rainier.

HISTORY
The emirates had its beginnings in the 18th Century. The economy relied on pearl fishing and trading. In the 1820s, Britain forced the states to sign a series of treaties due to the conflict between ruling leaders and piracy along the coast. They took control of foreign affairs. In 1958, oil was discovered and in 1962 the first exports began. In 1952, the emirates set up a Trucial Council to increase cooperation between the various states and in 1968 Britain announced the withdrawal of its forces.

POLITICS
in 1971, he country became independent, when 6 of the 7 states agreed to form a single country – the United Arab Emirates. In 1972 the last state joined the emirates.
The emirates consist of the following states – Abu Zaby (Abu Dhabi), Ajman, Dubayy (Dubai), Al Fujayrah, Ash Shariqah (Sharjah), Umm-al-Qaywayn and Ras al Khaymah.
Each Emirate has its own Emir who controls internal affairs.
The federal government controls foreign affairs and defence and plays a leading role in the social and economic development of the country.
The 7 Emirs form a Federal Supreme Council, it elects the federation’s president and vice president who serve for five years.
The President appoints the Prime-Minister. The country is one of the most liberal and tolerant of the Persian Gulf countries, but is the only one without elected bodies.
It is the 6th largest oil exporter in the world.

Tomorrow I will discuss the Cost of living in the emirates in more detail….

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Being an Expat

Posted on March 16, 2009 by Xpatulator

Moving around the world has its ups and downs and we must be honest you never really quite know what you are letting yourself into. It takes at least 6 months to settle down into a kind of routine, then you need to learn the rules of the road, country and people (unless of course they are similar to yours), where are the best shops, restaurants, beaches or entertainment, places of interest, etc etc. Even after exploring, researching and talking to other expats and locals , you can still unfortunately get this horribly wrong.

6 months to a year down the road, and you are an expat local, you know where YOU like to go, what YOU like to do and how YOU like to relax. The city is now yours, but getting there takes time and it is this time that we need to give ourselves to settle. Unless you are a nomad or a gypsy, getting used to being an expat can be trying at best.

I would like to try and make this a blog where you can express yourself as an expat, how have you coped, what insight can you give to others on your experiences, how can you help people moving to your part of the world to settle? Do you have something to help people, let them know…….help is all that is needed.

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Expatriate Cost of Living India

Posted on March 3, 2009 by Xpatulator

When an expatriate moves from one geographic location to another, the change in cost of living they experience is relative to the change in the purchasing power of their salary. The basic principle is that a move to a higher cost of living city should be accompanied by a proportionately higher salary in order to maintain the same amount of purchasing power and vice versa.  If an expatriate is fortunate enough to move to a lower cost of living city without a decrease in their salary, their purchasing power increases proportionately to the decrease in the cost of living.

India still offers opportunity for expatriates moving to India to experience an increase in their purchasing power. The major cities of India offer a relatively low cost of living for expatriates.  Bangalore has an overall cost of living index (comprised of the prices for defined quantities of the same goods and services) of 64.6 (New York=100) and is the 38th cheapest place in the world for expatriates to live, out of our 276 international locations. In comparison Hyderabad has an index of 68.8 and is ranked 55th, Calcutta has an index of 69.3, and is ranked 56th, Chennai has an index of 70.7 and is ranked 65th,New Delhi has an index of 71.4 and is ranked 70th, while Mumbai has an index of 76 and ranked the 105th cheapest place in the world for expatriates to live.

Cost of living is however only half the story.  In determining how much to pay an expatriate the relative hardship they are likely to experience must also be taken into consideration.  An expatriate moving to a country with little hardship is unlikely to need much incentive. However in order to encourage an expatriate to move to a relatively high hardship country, compared to what they are used to, requires an incentive in the form of compensation for the hardship they are likely to experience. Hardship is one of the main differentiators between expatriate salary levels and local salary market levels.  As a rule of thumb an expatriate will always cost an employer more than a local hire.

In terms of the relative hardship expatriates are likely to experience moving to India, assessed in global terms, India is currently ranked as an extreme hardship location, which typically commands a 40% salary premium for hardship. Hardship is relative however; in the same way that cost of living is relative.  An expatriate moving from a country similar to India would experience less hardship than someone moving from a country that is completely different.

The global factors which are used to determine a relative hardship ranking world-wide include differences in:

·         Economic conditions such as poverty and service provision.

·         Political conditions such as tolerance of diverse views, life style and conformity to cultural norms.

·         Religious conditions such as religious prevalence, and tolerance of other religions.

·         Public Service conditions such as provision, administration and accessibility to water, electricity, sanitation, work permits etc.

·         Climatic conditions such as extremely hot or cold weather.

·         Safety conditions such as personal security and the threat of public violence.

·         Health conditions such as health standards and risk of viral outbreaks.

·         Education conditions such as state education standards, expenses, mother-tongue teaching, and school proximity to home.

·         Transportation conditions such as public transport availability, safety and efficiency.

Expatriate Salary Calculation

So what do cost of living and hardship differences mean in practical terms? Let’s consider an expatriate moving from New York to Bangalore.  In terms of hardship they would qualify for a 30% hardship allowance (40% for Bangalore less 10% for New York). The overall cost of living in Bangalore is 35.4% cheaper than New York given the Bangalore cost of living index of 64.6 versus New York’s 100.  A salary of $100,000 in New York adjusted for the negative difference in cost of living and the positive hardship premium would equate to 4,086,450 (INR).

Salary in New York X Cost of living difference X Hardship Premium X Exchange Rate = Salary in India

$100,000 X 0.646 X 1.30 X 48.6598 = 4,086,450 (INR)  

If however the salary was not adjusted downwards for the lower cost of living (a common practice amongst multinational organisations), and the hardship allowance was added, the Bangalore salary would equate to 6,325,774 (INR) which would mean the expatriate would be gaining from a 35.4% cheaper cost of living and a 30% hardship allowance, and as a result could afford a far higher standard of living in India. As recently as early last year, this sort of package would have been realistic.  However in today’s depressed global economy it is less likely.

In assessing how much to pay an Expatriate in India, it is important to take into account the relative difference in the cost of living as well as the relative hardship.

Steven Coleman runs the www.xpatulator.com website that provides a cost of living calculator and a cost of living allowance calculator used for cost of living comparisons between 276 international cities. www.xpatulator.com uses customisable cost of living indexes together with relative hardship, exchange rate and salary to calculate an equivalent salary or cost of living allowance to ensure similar purchasing power.

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A New Approach to Expatriate Pay

Posted on January 25, 2009 by Xpatulator

The challenges of ensuring expatriates are paid fair salaries across different countries, in the current economic climate, of the credit crisis together with rapid currency and inflation fluctuations are increasingly complex.

The current economic climate has made it necessary to constantly review expatriate salaries. Rapidly fluctuating exchange rates and inflation can increase or decrease the amount of salary paid, and significantly impact purchasing power both positively and negatively in a very short period of time. The approach many organizations have taken is to convert a spendable percentage (typically 60%) of the expatriate’s salary into the host country currency on a monthly basis and to provide non-cash benefits such as accommodation, transport, education of children etc. This can result in employers paying too much or too little salary in these volatile times.

Too Much: The expatriate experiences short-term upside, as a result of a change in the exchange rate. A fall in the value of the host country currency against the home country currency, without an increase in the prices of goods and services in the host country, results in the expatriate having increased purchasing power. It may appear for a while that all is well. The expatriate has an unexpected windfall. A wise expatriate will save this windfall knowing that the situation will not be permanent. Either the exchange rate will adjust back to where it was or prices and inflation will begin to increase until economic equilibrium is achieved. The reality is, that in the short-term the employer will be faced with increased overall salary costs, and will eventually have to deal with disappointed expatriates when the trend inevitably reverses itself and their purchasing power drops again to realistic levels.

Too Little: The expatriate experiences short-term downside as a result of a change in the exchange rate. An increase in the value of the host country currency against the home country currency, without a decrease in the prices of goods and services in the host country, results in the expatriate having reduced purchasing power. This is when the employer faces complaints from expatriates unable to make ends meet. Prices of goods and services have remained the same in the host country but as a result of the change in the exchange rate, the expatriate receives less salary in local currency. In the long term either the exchange rate will adjust back to where it was, or prices and inflation will begin to decrease until economic equilibrium is achieved. The reality is that in the short-term the employer will be faced with decreased overall salary costs and will have to deal quickly with unhappy expatriates.

Clearly the approach on converting a portion of the salary into host country currency on a monthly basis does not work any more.

The expatriate compensation questions that employers must consider:

-What amount of salary will ensure that the expatriate will have the same purchasing power overseas as they have at home?

-What process / tool will be used to ensure the salary retains its purchasing power when inflation and exchange rates change?

New Approach: The ideal approach is for the employer to decide on a process / tool that establishes and maintains the expatriate’s salary purchasing power. The Salary Purchasing Power Parity (SPPP) approach is one such approach and involves the following steps:

-Committed Salary: Decide what amount / portion of the current salary (in home currency) will remain in the home country to meet committed expenses such as mortgage commitments, retirement funding, savings etc.

-Home Gross Spendable Salary: Establish what amount / portion of the current salary (in home currency) is spent in maintaining the expatriates current standard of living / lifestyle. What will the expatriate need to spend their salary on in the host country? For example will accommodation be provided or will the expatriate pay rent, will healthcare be provided etc.

-Home Net Spendable Salary: Establish the net spendable salary by deducting the amount of tax, social contributions and any other statutory deductions applicable in the home country to the Home Gross Spendable Salary.

-Host Net Spendable Salary: Use the established amount of Home Net Spendable Salary in home currency, to calculate the amount of Host Net Spendable Salary required in the host country, in order for the expatriate to have the same amount of purchasing power as they have in their home country. The calculation comprises 4 factors:
1) The difference in the cost of living index for the same basket of goods and services between the home and host country applicable for the spendable salary.
2) The difference in hardship that the expatriate and their family are likely to experience.
3) The exchange rate between the home and host country.
4) The Net Spendable Salary

-Host Gross Salary: The Host Net Spendable Salary is “grossed up” by the amount of tax, social contributions and any other statutory deductions applicable in the host country, to establish the host gross salary that will provide the expatriate with the same standard of living as they had in their home country.

The Host Gross Salary is established in local host currency. As a result it is no longer subject to changes in the exchange rate. Over time the salary may be eroded by local inflation which will be reflected in the cost of living indexes. It is recommended that the Host Gross Salary be reviewed on a quarterly basis, to monitor the impact of any change in cost of living and the exchange rate.

Steven Coleman runs the most comprehensive international cost of living website available http://www.xpatulator.com an internet service that provides free cost of living and hardship information for 276 global locations to registered users. The premium content calculators allow you to customise your own cost of living index by choosing your own basket groups and includes a COLA calculator. Follow Steven on twitter
http://twitter.com/steveninseattle/.

Posted in compensation, cost of living, cost of living calculator, cost of living comparison, Expatriate Pay, moving, moving to, relocating, relocation, salary | Comments Off on A New Approach to Expatriate Pay

How to Calculate a Cost of Living Allowance

Posted on January 25, 2009 by Xpatulator

A Cost of Living Allowance (COLA) is a salary supplement paid to employees to cover differences in the cost of living, particularly as a result of an international assignment.

The amount of COLA should enable an expatriate to be able to purchase the same basket of goods and services in the host location as they could in their home country. The basis for calculating a COLA is the Cost of Living Index (COLI) which indexes the costs of the same basket of goods and services in different geographic locations. COLA is a simple accurate method of measuring fluctuating salary purchasing power and ensuring parity.

Cost of Living Index
Our cost of Living Indexes measure the cost of 230 products and services across 13 different basket groups in 276 cities across the globe. The data is gathered by a team of research analysts who survey comparable items that are available internationally. A minimum of 3 prices for the same brand/size/volume of product is used to determine the average price for each item in each location. The items are priced on a quarterly basis and tend to rise and fall with inflation. The 13 different basket categories are as follows:
· Alcohol & Tobacco: Alcoholic beverages and tobacco products
Alcohol at Bar
Beer
Cigarettes
Locally Produced Spirit
Whiskey
Wine
· Clothing: Clothing and footwear products
Business Suits
Casual Clothing
Children’s Clothing and footwear
Coats and hats
Evening Wear
Shoe Repairs
Underwear
· Communication
Home Telephone Rental and Call Charges
Internet Connection and service provider fees
Mobile / Cellular Phone Contract and Calls
· Education
Crèche / Pre-School Fees
High School / College Fees
Primary School Fees
Tertiary Study Fees
· Furniture & Appliances: Furniture, household equipment and household appliances
DVD Player
Fridge Freezer
Iron
Kettle, Toaster, Microwave
Light Bulbs
Television
Vacuum Cleaner
Washing Machine
· Groceries: Food, non-alcoholic beverages and cleaning material
Baby Consumables
Baked Goods
Baking
Canned Foods
Cheese
Cleaning Products
Dairy
Fresh Fruits
Fresh Vegetables
Fruit Juices
Frozen
Meat
Oil & Vinegars
Pet Food
Pre-Prepared Meals
Sauces
Seafood
Snacks
Soft Drinks
Spices & Herbs
· Healthcare: General Healthcare, Medical and Medical Insurance
General Practitioner Consultation rates
Hospital Private Ward Daily Rate
Non-Prescription Medicine
Private Medical Insurance / Medical Aid Contributions
· Household: Housing, water, electricity, household gas, household fuels, local rates and residential taxes
House / Flat Mortgage
House / Flat Rental
Household Electricity Consumption
Household Gas / Fuel Consumption
Household Water Consumption
Local Property Rates / Taxes / Levies
· Miscellaneous: Stationary, Linen and general goods and services
Domestic Help
Dry Cleaning
Linen
Office Supplies
Newspapers and Magazines
Postage Stamps
· Personal Care: Personal Care products and services
Cosmetics
Haircare
Moisturiser / Sun Block
Nappies
Pain Relief Tablets
Toilet Paper
Toothpaste
Soap / Shampoo / Conditioner
· Recreation and Culture
Books
Camera Film
Cinema Ticket
DVD and CD’s
Sports goods
Theatre Ticket
· Restaurants, Meals Out and Hotels
Business Dinner
Dinner at Restaurant (non fast food)
Hotel Rates
Take Away Drinks & Snacks (fast Food)
· Transport: Public Transport, Vehicle Costs, Vehicle Fuel, Vehicle Insurance and Vehicle Maintenance
Hire Purchase / Lease of Vehicle
Petrol / Diesel
Public Transport
Service Maintenance
Tyres
Vehicle Insurance
Vehicle Purchase

Each basket category does not count equally and are weighted in the final calculation based on expatriate spending patterns.

In order to calculate an accurate cost of living index for a specific individual the basket items that are not relevant to the individual should be excluded from the calculation. For example if education and housing is provided by the employer these basket categories would be excluded from the cost of living index calculation. This increases the accuracy of the cost of living index and makes it possible for each individual to have their own customized cost of living index based on their specific arrangements rather than using an overall “generic” index which is likely to contains costs that are not relevant to the individual.

The formula for calculating the specific cost of living index for an international assignment is as follows:

Cost of Living Index = Customized Cost of Living Index for Host City / Customized Cost of Living Index for Home City

When moving to a higher cost of living host city, the index will be greater than 1 (positive). When moving to a lower cost of living host city the index will be less than 1 (negative). Where the index is negative it means that in real terms the cost of living in the host city is lower than the home city. This means that if the negative index where to be applied to the employee’s salary, they would actually be paid proportionately less spendable salary in the host city. It is important to note that the majority of organizations do not apply a negative cost of living index because it makes it difficult to persuade an employee to take up an assignment as they tend to see it as a reduction in salary.
Examples of Cost of Living Index Calculations using our data:

Example 1) An Australian employee moving from Perth to London where healthcare and communication will be provided by the employer

More Expensive in London:
Alcohol & Tobacco +4.77%
Clothing +21.85%
Education +31.53%
Furniture & Appliances +16.03%
Groceries +16.35%
Household +50.72%
Miscellaneous +137.47%
Personal Care +11.18%
Recreation & Culture -6.82%
Restaurants Meals Out and Hotels +34.99%
Transport +19.80%

The overall difference in cost of living moving from Perth and London is +28.06%.

In this case the cost of living index is positive and would be applied as it is.

Example 2) A British employee moving from London to Mumbai where the employer will provide housing and education

More Expensive in Mumbai:
Alcohol & Tobacco -37.53%
Clothing -9.58%
Communication -44.92%
Furniture & Appliances -19.31%
Groceries -24.03%
Healthcare -31.24%
Miscellaneous -72.43%
Personal Care -24.94%
Recreation & Culture -35.73%
Restaurants Meals Out and Hotels -33.11%
Transport is -27.99%

The overall difference in cost of living moving from London Mumbai is -30.53%.

In this case the cost of living index is negative and would not be applied.

Net Spendable Salary

Differences in cost of living only impact the portion of the salary that is spendable in the host country. Items in the home country such as retirement funding, medical insurance and other home based costs are not impacted by the cost of living in the host country.

To determine the Net Spendable Salary establish what amount / portion of the current salary (in home currency) is spent in maintaining the employee’s current standard of living / lifestyle. What will the expatriate need to spend their salary on in the host country? For example will accommodation be provided or will the employee pay rent, will healthcare be provided etc. Deduct all items that are either provided in kind or are spendable in the home country. Deduct the hypothetical amount of tax, social contributions and any other statutory deductions applicable in the home country from the Spendable Salary. What is left is the Net Spendable Salary.

Cost of Living Allowance (COLA)
The formula for calculating the cost of living allowance using the above inputs is as follows:

(Net Spendable Salary X Cost of Living Index X Hardship Index X Exchange Rate) less (Net Spendable Salary X Exchange Rate) = COLA

Examples of COLA Calculations using our data

Example 1) An Australian employee with a net spendable salary of AUD$100,000 moving from Perth to London where healthcare and communication will be provided by the employer

($100,000.00 X 1.2806 X 1 X 0.4768) less ($100,000.00 X 0.4768) = COLA of £13,379.44 (GBP)

Based on all the above factors a person would require a Cost of Living Allowance of £13,379.44 (GBP), in addition to their current salary of 100,000.00 Australian Dollar (AUD) to compensate for relocating from Perth to London. This Cost of Living Allowance compensates for the overall cost of living difference of +28.06% and the relative difference in hardship of 0%.

Example 2) A British employee with a net spendable salary of £18,000 moving from London to Mumbai where the employer will provide housing and education

Note: Because the Cost of Living Index is negative it is not applied.

(£18,000.00 X 1 X 1.3 X 67.2852) less (£18,000.00 X67.2852) = COLA of 363,340.32 Indian Rupee

Based on all the above factors a person would require a Cost of Living Allowance of 363,340.32 (INR ), in addition to their current salary of £18,000.00 British Pound (GBP ) to compensate for relocating from London to Mumbai. This Cost of Living Allowance compensates for the overall cost of living difference of [-30.53%] and the relative difference in hardship of 30%.

COLA Payment
The COLA is paid as a salary supplement (i.e. as an additional allowance) net of tax in the host country. If the COLA is a taxable allowance in the host country it should be grossed up in order that the full amount of calculated COLA is paid net of tax given that the basis of the calculation is Net Spendable Salary. The COLA is often accompanied by other allowances and benefits such as flights home, relocation / settling in allowance, and furnishing allowance.

Exchange Rate Fluctuations
Significant changes in the exchange rate can make a considerable difference in the COLA calculation. In 2008 some of the major global exchange rates changed by as much as 30-40%.

The cost of living index reflects the changes caused by inflation and exchange rates. In the short-term there may be disequilibrium between inflation and the exchange rate (the one pushes the other), however over time the cost of living index provides the most accurate view of the cost of living.

It is important to remind expatriates that when the cost of living difference is negative, and the negative value has not been applied, they have higher purchasing power in the host country than they would at home.

Where a negative cost of living index has not been applied (our recommended approach), and a change in the exchange rate indicates an upward adjustment in COLA may be required, it is recommended that the COLA should not be adjusted upward until the cost of living index becomes positive i.e. the cost of living reflects that there is a “real” increase in cost of living between home and host countries. This may mean that their would be no increase in the COLA as a result of exchange rate fluctuations for some considerable time. During this time the employee’s purchasing power decreases. But it is important to remember that until the cost of living difference becomes positive, the individual will still have a higher purchasing power than they do in their home country.

It is advisable to stipulate a currency protection rule, rather than reacting to every fluctuation in the exchange rate. For example the rule may state that COLA will be reviewed if exchange rates or local inflation move by more than +10% during a year. It is important to keep in mind that the prices of goods and services are unlikely to drop in local currency. This would only occur in a period of deflation (negative inflation). Therefore the currency protection rule would normally make provision for upward adjustments in COLA and not downward adjustments during an employee’s assignment. Downward adjustments to an existing COLA due to exchange rate fluctuations without a corresponding drop in the prices of local goods and services puts immense pressure on an employee’s host currency budget commitments and can lead to the employee experiencing financial difficulty.

Using an independent service provider provides an independent, objective basis for determining an employee’s COLA.

We recommend therefore that a COLA is calculated by applying the specific (customized) cost of living index to the net spendable salary at the beginning of the assignment and monitoring exchange rate fluctuations thereafter in addition to the annual salary review.

Steven Coleman runs the most comprehensive international cost of living website available http://www.xpatulator.com an internet service that provides free cost of living and hardship information for 276 global locations to registered users. The premium content calculators allow you to customise your own cost of living index by choosing your own basket groups and includes a COLA calculator. Follow Steven on twitter
http://twitter.com/steveninseattle.

Posted in COLA, compensation, cost of living, cost of living allowance, cost of living calculator, cost of living comparison, cost of living index, international assignment, PPP, salary, salary survey | Comments Off on How to Calculate a Cost of Living Allowance

How to Calculate a Cost of Living Allowance

Posted on January 25, 2009 by Xpatulator

A Cost of Living Allowance (COLA) is a salary supplement paid to employees to cover differences in the cost of living, particularly as a result of an international assignment.

The amount of COLA should enable an expatriate to be able to purchase the same basket of goods and services in the host location as they could in their home country. The basis for calculating a COLA is the Cost of Living Index (COLI) which indexes the costs of the same basket of goods and services in different geographic locations. COLA is a simple accurate method of measuring fluctuating salary purchasing power and ensuring parity.

Cost of Living Index
Our cost of Living Indexes measure the cost of 230 products and services across 13 different basket groups in 276 cities across the globe. The data is gathered by a team of research analysts who survey comparable items that are available internationally. A minimum of 3 prices for the same brand/size/volume of product is used to determine the average price for each item in each location. The items are priced on a quarterly basis and tend to rise and fall with inflation. The 13 different basket categories are as follows:
• Alcohol & Tobacco: Alcoholic beverages and tobacco products
o Alcohol at Bar
o Beer
o Cigarettes
o Locally Produced Spirit
o Whiskey
o Wine
• Clothing: Clothing and footwear products
o Business Suits
o Casual Clothing
o Children’s Clothing and footwear
o Coats and hats
o Evening Wear
o Shoe Repairs
o Underwear
• Communication
o Home Telephone Rental and Call Charges
o Internet Connection and service provider fees
o Mobile / Cellular Phone Contract and Calls
• Education
o Crèche / Pre-School Fees
o High School / College Fees
o Primary School Fees
o Tertiary Study Fees
• Furniture & Appliances: Furniture, household equipment and household appliances
o DVD Player
o Fridge Freezer
o Iron
o Kettle, Toaster, Microwave
o Light Bulbs
o Television
o Vacuum Cleaner
o Washing Machine
• Groceries: Food, non-alcoholic beverages and cleaning material
o Baby Consumables
o Baked Goods
o Baking
o Canned Foods
o Cheese
o Cleaning Products
o Dairy
o Fresh Fruits
o Fresh Vegetables
o Fruit Juices
o Frozen
o Meat
o Oil & Vinegars
o Pet Food
o Pre-Prepared Meals
o Sauces
o Seafood
o Snacks
o Soft Drinks
o Spices & Herbs
• Healthcare: General Healthcare, Medical and Medical Insurance
o General Practitioner Consultation rates
o Hospital Private Ward Daily Rate
o Non-Prescription Medicine
o Private Medical Insurance / Medical Aid Contributions
• Household: Housing, water, electricity, household gas, household fuels, local rates and residential taxes
o House / Flat Mortgage
o House / Flat Rental
o Household Electricity Consumption
o Household Gas / Fuel Consumption
o Household Water Consumption
o Local Property Rates / Taxes / Levies
• Miscellaneous: Stationary, Linen and general goods and services
o Domestic Help
o Dry Cleaning
o Linen
o Office Supplies
o Newspapers and Magazines
o Postage Stamps
• Personal Care: Personal Care products and services
o Cosmetics
o Haircare
o Moisturiser / Sun Block
o Nappies
o Pain Relief Tablets
o Toilet Paper
o Toothpaste
o Soap / Shampoo / Conditioner
• Recreation and Culture
o Books
o Camera Film
o Cinema Ticket
o DVD and CD’s
o Sports goods
o Theatre Ticket
• Restaurants, Meals Out and Hotels
o Business Dinner
o Dinner at Restaurant (non fast food)
o Hotel Rates
o Take Away Drinks & Snacks (fast Food)
• Transport: Public Transport, Vehicle Costs, Vehicle Fuel, Vehicle Insurance and Vehicle Maintenance
o Hire Purchase / Lease of Vehicle
o Petrol / Diesel
o Public Transport
o Service Maintenance
o Tyres
o Vehicle Insurance
o Vehicle Purchase

Each basket category does not count equally and are weighted in the final calculation based on expatriate spending patterns.

In order to calculate an accurate cost of living index for a specific individual the basket items that are not relevant to the individual should be excluded from the calculation. For example if education and housing is provided by the employer these basket categories would be excluded from the cost of living index calculation. This increases the accuracy of the cost of living index and makes it possible for each individual to have their own customized cost of living index based on their specific arrangements rather than using an overall “generic” index which is likely to contains costs that are not relevant to the individual.

The formula for calculating the specific cost of living index for an international assignment is as follows:

Cost of Living Index = Customized Cost of Living Index for Host City / Customized Cost of Living Index for Home City

When moving to a higher cost of living host city, the index will be greater than 1 (positive). When moving to a lower cost of living host city the index will be less than 1 (negative). Where the index is negative it means that in real terms the cost of living in the host city is lower than the home city. This means that if the negative index where to be applied to the employee’s salary, they would actually be paid proportionately less spendable salary in the host city. It is important to note that the majority of organizations do not apply a negative cost of living index because it makes it difficult to persuade an employee to take up an assignment as they tend to see it as a reduction in salary.
Examples of Cost of Living Index Calculations using our data:

Example 1) An Australian employee moving from Perth to London where healthcare and communication will be provided by the employer

More Expensive in London:
• Alcohol & Tobacco +4.77%
• Clothing +21.85%
• Education +31.53%
• Furniture & Appliances +16.03%
• Groceries +16.35%
• Household +50.72%
• Miscellaneous +137.47%
• Personal Care +11.18%
• Recreation & Culture -6.82%
• Restaurants Meals Out and Hotels +34.99%
• Transport +19.80%

The overall difference in cost of living moving from Perth and London is +28.06%.

In this case the cost of living index is positive and would be applied as it is.

Example 2) A British employee moving from London to Mumbai where the employer will provide housing and education

More Expensive in Mumbai:
Alcohol & Tobacco -37.53%
Clothing -9.58%
Communication -44.92%
Furniture & Appliances -19.31%
Groceries -24.03%
Healthcare -31.24%
Miscellaneous -72.43%
Personal Care -24.94%
Recreation & Culture -35.73%
Restaurants Meals Out and Hotels -33.11%
Transport is -27.99%

The overall difference in cost of living moving from London Mumbai is -30.53%.

In this case the cost of living index is negative and would not be applied.

Net Spendable Salary

Differences in cost of living only impact the portion of the salary that is spendable in the host country. Items in the home country such as retirement funding, medical insurance and other home based costs are not impacted by the cost of living in the host country.

To determine the Net Spendable Salary establish what amount / portion of the current salary (in home currency) is spent in maintaining the employee’s current standard of living / lifestyle. What will the expatriate need to spend their salary on in the host country? For example will accommodation be provided or will the employee pay rent, will healthcare be provided etc. Deduct all items that are either provided in kind or are spendable in the home country. Deduct the hypothetical amount of tax, social contributions and any other statutory deductions applicable in the home country from the Spendable Salary. What is left is the Net Spendable Salary.

Cost of Living Allowance (COLA)
The formula for calculating the cost of living allowance using the above inputs is as follows:

(Net Spendable Salary X Cost of Living Index X Hardship Index X Exchange Rate) less (Net Spendable Salary X Exchange Rate) = COLA

Examples of COLA Calculations using our data

Example 1) An Australian employee with a net spendable salary of AUD$100,000 moving from Perth to London where healthcare and communication will be provided by the employer

($100,000.00 X 1.2806 X 1 X 0.4768) less ($100,000.00 X 0.4768) = COLA of £13,379.44 (GBP)

Based on all the above factors a person would require a Cost of Living Allowance of £13,379.44 (GBP), in addition to their current salary of 100,000.00 Australian Dollar (AUD) to compensate for relocating from Perth to London. This Cost of Living Allowance compensates for the overall cost of living difference of +28.06% and the relative difference in hardship of 0%.

Example 2) A British employee with a net spendable salary of £18,000 moving from London to Mumbai where the employer will provide housing and education

Note: Because the Cost of Living Index is negative it is not applied.

(£18,000.00 X 1 X 1.3 X 67.2852) less (£18,000.00 X67.2852) = COLA of 363,340.32 Indian Rupee

Based on all the above factors a person would require a Cost of Living Allowance of 363,340.32 (INR ), in addition to their current salary of £18,000.00 British Pound (GBP ) to compensate for relocating from London to Mumbai. This Cost of Living Allowance compensates for the overall cost of living difference of [-30.53%] and the relative difference in hardship of 30%.

COLA Payment
The COLA is paid as a salary supplement (i.e. as an additional allowance) net of tax in the host country. If the COLA is a taxable allowance in the host country it should be grossed up in order that the full amount of calculated COLA is paid net of tax given that the basis of the calculation is Net Spendable Salary. The COLA is often accompanied by other allowances and benefits such as flights home, relocation / settling in allowance, and furnishing allowance.

Exchange Rate Fluctuations
Significant changes in the exchange rate can make a considerable difference in the COLA calculation. In 2008 some of the major global exchange rates changed by as much as 30-40%.

The cost of living index reflects the changes caused by inflation and exchange rates. In the short-term there may be disequilibrium between inflation and the exchange rate (the one pushes the other), however over time the cost of living index provides the most accurate view of the cost of living.

It is important to remind expatriates that when the cost of living difference is negative, and the negative value has not been applied, they have higher purchasing power in the host country than they would at home.

Where a negative cost of living index has not been applied (our recommended approach), and a change in the exchange rate indicates an upward adjustment in COLA may be required, it is recommended that the COLA should not be adjusted upward until the cost of living index becomes positive i.e. the cost of living reflects that there is a “real” increase in cost of living between home and host countries. This may mean that their would be no increase in the COLA as a result of exchange rate fluctuations for some considerable time. During this time the employee’s purchasing power decreases. But it is important to remember that until the cost of living difference becomes positive, the individual will still have a higher purchasing power than they do in their home country.

It is advisable to stipulate a currency protection rule, rather than reacting to every fluctuation in the exchange rate. For example the rule may state that COLA will be reviewed if exchange rates or local inflation move by more than +10% during a year. It is important to keep in mind that the prices of goods and services are unlikely to drop in local currency. This would only occur in a period of deflation (negative inflation). Therefore the currency protection rule would normally make provision for upward adjustments in COLA and not downward adjustments during an employee’s assignment. Downward adjustments to an existing COLA due to exchange rate fluctuations without a corresponding drop in the prices of local goods and services puts immense pressure on an employee’s host currency budget commitments and can lead to the employee experiencing financial difficulty.

Using an independent service provider provides an independent, objective basis for determining an employee’s COLA.

We recommend therefore that a COLA is calculated by applying the specific (customized) cost of living index to the net spendable salary at the beginning of the assignment and monitoring exchange rate fluctuations thereafter in addition to the annual salary review.

Steven Coleman runs the most comprehensive international cost of living website available Xpatulator.com an internet service that provides free cost of living and hardship information for 276 global locations to registered users. The premium content calculators allow you to customise your own cost of living index by choosing your own basket groups and includes a COLA calculator. Follow Steven on twitter
steveninseattle.

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