In the wake of COVID-19, social and economic disruption has spurred organizations to reassess their global mobility programs with a focus on the well-being of their expatriate employees. As employers leverage new working arrangements, changing technology and adaptive ways of thinking, Mercer analysis revealed they are considering alternate forms of international assignments in addition to traditional mobility programs to sustain their overseas operations and workforces.
Despite an appetite to grow and scale globally while navigating the uncharted waters of a health and economic crisis, reductions in staff and salaries as well as changes to benefit programs have challenged overseas expansion strategies. As organizations re-examine talent portfolios, mobility programs and remuneration packages with a keen eye that balances empathy with economics, accurate and transparent data is essential to compensate fairly for all types of mobility assignments, taking into account changes resulting from the current pandemic and subsequent market volatility.
Mercer’s annual “Cost of Living Survey” finds that specific factors such as currency fluctuations, cost inflation for goods and services, and instability of accommodation prices, are essential to determining the cost of expatriate packages for employees on international assignments.
“The COVID-19 pandemic reminds us that sending and keeping employees on international assignments is a huge responsibility and a difficult task to manage,” said Ilya Bonic, career president and head of Mercer strategy. “Rather than bet on a dramatic resurgence of mobility, organizations should prepare for the redeployment of their mobile workforces, leading with empathy and understanding that not all expatriates will be ready or willing to go abroad.”
In the short-term, preparation for this new approach to global mobility may involve re-relocating assignees who have been repatriated. In the medium-term, the priority will be about realigning the mobile workforce with new economic models centered on shortened supply chains, more regional moves and a renewed need to train talent. In addition to these concerns, relevant information about the cost and location of assignments worldwide will be a critical factor post-crisis.
Mercer’s survey revealed the top 10 most expensive cities for expatriates are:
- Hong Kong (China)
- Ashgabat (Turkmenistan)
- Tokyo (Japan)
- Zurich (Switzerland)
- New York City
- Shanghai (China)
- Bern (Switzerland)
- Geneva (Switzerland)
- Beijing (China)
New York City is used as the base city for all comparisons and currency movements are measured against the U.S. dollar. The survey includes more than 400 cities throughout the world; this year’s ranking includes 209 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.
Properly vetting locations and compensating employees on international assignments is as important as it can be costly. Mercer’s survey shows that costs of goods and services shift with inflation and currency volatility, making overseas assignment costs sometimes greater and sometimes smaller.
“Sudden changes to exchange rates has been mainly driven by the impact COVID-19 is having on the global economy,” said Vince Cordova, partner at Mercer. “This volatility can affect mobile employees in a variety of ways, from shortages and price adjustments for goods and services, to supply chain disruptions or when employees are paid in home country currency and need to exchange funds into the host country for local purchases.”
United States and Canada
New York (6) is the highest-ranked city in the country followed by San Francisco (16), Los Angeles (17), Honolulu (28) and Chicago (30). Winston Salem, North Carolina (132) remains the least expensive U.S. city surveyed for expatriates.
The Canadian dollar has appreciated in value, triggering jumps in this year’s ranking. Up 18 places from last year, Vancouver (94) is the most expensive Canadian city in the ranking, followed by Toronto (98). Ranking 151, Ottawa is the least expensive city in Canada.
San Juan, Argentina (66) ranks as the costliest city, followed by Port of Spain (73), Trinidad and Tobago, San Jose, Costa Rica (78) and Montevideo, Uruguay (88). Managua, Nicaragua (198) is the least expensive city in South America. Caracas in Venezuela was excluded from the ranking due to the complex currency situation; its ranking would have varied greatly depending on the official exchange rate selected.
Three European cities are among the top 10 list of most expensive locations. At number four in the global ranking, Zurich remains the most costly European city, followed by Bern (8), up four spots from last year. The next European city in the ranking, Geneva (9), is up four places from last year. As France and Italy's economies shrank at the end of 2019, Eurozone growth came close to zero. Yet, there are no signs of crisis when it comes to inflation in any of the leading European Union countries. The region saw cities like Paris (50), Milan (47) and Frankfurt (76) drop in this year’s ranking.
A decision by the United Kingdom to leave the EU has not impacted its local currency, which remains strong, gaining value to all major global currencies. London (19), Birmingham (129) and Belfast (149) jumped four, six and nine places, respectively.
Middle East and Africa
The United Arab Emirates continue to diversify the economy, subsequently reducing the impact of oil industry on GDP. With this ongoing process, there has been negative price movement in both Dubai and Abu Dhabi. Just like UAE, Saudi Arabia is seeking to limit the impact of oil exports and move to a more diversified economic model. Prices have remained stable over the course of the last six months; however, with the upcoming value-added tax increase, there is an expectation to see prices change. Tel Aviv, Israel (12) continues to be the most expensive city in the Middle East for expatriates, followed by Dubai (23), Riyadh, Saudi Arabia (31), and Abu Dhabi (39), UAE. Cairo, Egypt (126) remains the least expensive city in the region despite rising 40 places.
Ndjamena, Chad (15) is the highest ranked city in Africa while Tunis (209) in Tunisia ranks as the least expensive city in the region and globally.
Six of the top-10 cities in this year’s ranking are in Asia. Hong Kong (1) retained its spot as the most expensive city for expatriates both in Asia and globally due to currency movements measured against the US dollar and driving up the cost of living locally. This global financial center is followed by Ashgabat (2), Tokyo (3), Singapore (5), Shanghai (7) and Beijing (10). Mumbai (60) is India’s most expensive city while Kolkata (185) is the least expensive Indian city ranked.
Australian cities have fallen in the ranking this year as the local currency has depreciated against the US dollar. Sydney (66), Australia’s most expensive ranked city for expatriates, experienced a drop of 16 places. The least expensive city in the region, Adelaide fell 17 places to rank 126.