Today, Mercer launched its 2022 Cost of Living Survey which ranks 227 of the world’s costliest cities for expatriates. While Hong Kong remains in the top spot, Zurich (2) and three other Swiss cities - Geneva (3), Basel (4) and Bern (5) - completed the top five world’s most expensive locations for expats.
Mercer’s cost of living data together with its mobility research and the learnings from Mercer’s work with clients, indicates that the rise of remote and flexible working, the war in Ukraine, exchange rate variations and widespread inflation are having a material impact on employees’ pay and savings, which may have serious consequences for employers in the global battle for talent.
Yvonne Traber, Partner at Mercer and Global Head for Mobility Business said: “The volatility triggered by COVID-19 and further worsened by the crisis in Ukraine, has fuelled global economic and political uncertainty.
“This uncertainty, coupled with significant rising inflation in most of the countries around the world, has international assignees concerned about their purchasing power and socio-economic stability.”
International assignees remunerated using a home-country approach (balance sheet) typically receive a cost-of-living allowance to maintain their purchasing power in their countries of destinations. This allowance is calculated by applying a cost-of-living index differential on part of the net salary of the employees (their ‘spendable income’ – i.e. the amount they spend on goods and services used on a daily basis in their host location).
Both inflation and exchange rate fluctuations directly influence the purchasing power of mobile employees. The rise of remote and flexible working has also caused many employees to reconsider their priorities, work-life balance and the choice of location to live in. These conditions have serious consequences for employers, who need to rethink their approach to managing a globally distributed workforce to stand a chance in the global battle for talent.
Conversely, this situation also offers an opportunity for cities to attract foreign business and for businesses looking to attract talent.
As Mercer’s data demonstrates, the working and economic conditions around the world are evolving faster than before. Companies need to carefully navigate international assignment costs/packages in times of uncertainty and adapt to the new world of work to ensure business resilience and sustainable futures for their mobile workforce.
“Employers need reliable data and clear strategies to navigate mobility packages for international employees in these unstable times, ensuring their employees’ financial wellbeing as well as business efficiency and transparency/equity,” said Narcisa Chelaru, Career business leader at Mercer Switzerland.
“Failing to adapt international compensation strategies to the new world of work undermines organisations’ ability to attract, develop and retain key talent.”
Mercer’s cost of living data, helps employers understand the importance of monitoring currency fluctuations and assessing the inflationary and deflationary pressures on goods, services and accommodation in all operating locations. The data also helps employers determine and maintain compensation packages for employees on international assignments and when working abroad.
Additionally, the cost of living in a location can have a significant impact on its attractiveness as a destination for talent, and influences site selection decisions for organizations expanding and transforming their geographic footprint.
Mercer’s 2022 Cost of Living Survey placed Copenhagen, Denmark just outside the top ten in 11th place with London, United Kingdom (15), Vienna, Austria (21) and Amsterdam, The Netherlands (25) the other leading Western European locations.
The most expensive city in Eastern Europe is Prague, Czech Republic which ranked 60th out 227 cities. It is followed by Riga, Latvia (79), Bratislava, Slovakia (105) and Tallinn, Estonia (140). The least expensive city in Eastern Europe is Sarajevo in Bosnia-Herzegovina ranked 209.
About Mercer’s Cost of Living Survey
Mercer's widely recognized ranking is one of the world’s most comprehensive, and is designed to help multinational companies and governments determine compensation strategies for their international assignees. New York City is used as the base city for all comparisons and currency movements are measured against the US dollar. The survey includes over 400+ cities throughout the world; this year’s ranking includes 227 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. The data collected provides all of the key elements employers need to design efficient and transparent compensation packages for international assignees. Learn more here.
The figures for Mercer’s cost of living and rental accommodation cost comparisons are derived from a survey conducted in March 2022. Exchange rates from that time and Mercer’s international basket of goods and services from its Cost of Living Survey 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 international assignee housing allowances. The choice of cities surveyed is based on demand for data from Mercer’s clients.
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 83,000 colleagues and annual revenue of nearly $20 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer and LinkedIn.