Hong Kong, Singapore and Zurich are the most expensive cities for international employees this year, according to new data released by Mercer, an American consulting firm. More than a year after the escalation of the Russia-Ukraine crisis, many economies are still absorbing its aftershocks. Due to the recent introduction of aggressive national monetary policies and the tightening of global financial conditions, many economies are likely to see slower income growth this year, reports Mercer. Unemployment will also be on the rise. Debt levels among many countries remain high and core inflation has not yet peaked in many markets. Inflation and exchange-rate fluctuations are directly impacting the pay and savings of employees who are internationally mobile.
In 2022, Hong Kong topped Mercer’s Cost of Living City Ranking, and it did so again this year followed by Singapore, which jumped up six positions since last year, pushing Zurich to spot number three. The least expensive locations in the ranking include Havana, which dropped 83 spots, due in part to strong currency devaluations mid last-year, and two cities in Pakistan — Karachi and Islamabad. Only two out of 10 of the most expensive cities for international assignees to live in are located in Asia, compared to four last year.
The cost-of-living crisis affects both employees and businesses, who need to be more flexible.
Yvonne Traber, Global Managing Partner of Mobility at Mercer
The global top ten includes five European cities and four of those are in Switzerland, with the fifth being Copenhagen. Other most expensive cities in the region include London, Vienna, Amsterdam, Prague (up 27 spots in the global ranking since last year) and Helsinki.
“Competition in the global talent market is fierce, and the cost-of-living crisis affects both employees and businesses, who need to be more flexible,” Yvonne Traber, Global Managing Partner of Mobility at Mercer told the Spanish newspaper El Pais. “An equally important factor is the general quality of life that a city offers. Conversely, risks and other negative issues, such as natural disasters, political or economic turmoil, high crime rates, poor infrastructure, and inadequate international connectivity can be major deterrents for businesses and their employees.”
Tel Aviv remains the costliest city in the Middle East for international employees, ranked 8th on the global ranking. The next most expensive cities in this region are in the United Arab Emirates, namely Dubai (18) and Abu Dhabi (43), both of which have seen fairly significant increases in their rankings since last year. Saudi cities such as Riyadh (85) and Jeddah (101) have also jumped up the global list, by 18 and 10 spots respectively.
Within Central and South America, Nassau ranks as the most expensive location for international employees (number 10 globally), followed by San Juan (44) and Buenos Aires (45). It is worth noting that several locations within the region rank significantly higher than last year, with a move up of 76 spots for San Jose and 70 spots for Mexico City.
New York City (number six in the global ranking) continues to be the most expensive city in North America, followed by Los Angeles (11) and San Francisco (14). All US cities in the ranking have gone up since last year, with the largest changes being for Detroit (+27 positions), Houston and Cleveland (both +24 positions).
African cities placed highest in the global cost of living ranking are Bangui (26), Djibouti (27) and Luanda (30). The least expensive cities in the region include Windhoek, Durban and Tunis. These follow quite closely behind Cairo, which dropped 63 spots since last year.
1. Mercer’s methodology
New York City is used as the base city for all city ranking comparisons. Currency movements are measured against the US dollar. The survey includes over 400 cities.
This year’s ranking includes 227 cities from across five continents. It 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 information employers need to design efficient and transparent compensation packages for international assignees.
The figures used in Mercer’s cost of living and rental accommodation cost comparisons are derived from a survey conducted in March 2023. Exchange rates from that time, along with Mercer’s international basket of goods and services from its cost of living survey, were used for calculations and baselines.
2. The Economist’s Worldwide Cost of Living Index
Another Cost of Living Index is the one released by the Economist Intelligence Unit, which in 2022 showed that the world’s most expensive cities were New York and Singapore, followed by Tel Aviv.
In 2022, the average cost of living in the world’s largest cities rose by 8.1% this year, the survey reports. The war in Ukraine and the impact of Covid-19 on supply chains were also identified as factors behind the increase.
High inflation in the US was one of the reasons why New York topped the list. It was also high in Istanbul, with prices up 86%, Buenos Aires (64%) and Tehran (57%). Moscow and St. Petersburg rose in the rankings from 88th and 70th to 37th and 73rd respectively, partly as a result of Western sanctions following Russia’s invasion of Ukraine.
Los Angeles and San Francisco ranked among the top 10 most expensive: earlier this year, US inflation was the highest in more than 40 years in that country. Other US cities, including Atlanta and Boston, account for six of the top ten global movers up the rankings, the report stated. Mexico City has also jumped upwards by 33 places, with the peso supported by Mexico’s own interest-rate hikes, which are tracking ahead of the Fed’s. The strengthening dollar was also a factor in the prominence of US cities.
The survey compares the US dollar costs of goods and services in 172 cities. Kyiv was not included in this year’s review. More than 400 individual prices were compared on more than 200 products and services in 172 cities around the world.
“The war in Ukraine, Western sanctions on Russia and China’s zero-Covid policies have caused supply-chain problems that, combined with rising interest rates and exchange-rate shifts, have resulted in a cost-of-living crisis across the world,” said Upasana Dutt, head of worldwide cost of living at the Economist Intelligence Unit.
