In a rapidly changing world, mobility has become a core component of multinational organizations’ global talent strategy. To support the growing number of international assignees working in an increased number of locations, organizations are focusing on evaluating assignments from a cultural perspective, preparing for regional and lateral moves, and modifying compensation approaches to stay competitive. As organizations grapple with these challenges, they are working hard to accommodate the needs of their workforce and to support employees’ careers. According to Mercer’s 2017 Global Talent Trends Study, fair and competitive pay as well as opportunities for promotion are top priorities for employees this year – not surprising given the current climate of uncertainty and change.

As a result, multinational organizations are carefully assessing the cost of expatriate packages for their international assignees. Mercer’s 23rd annual Cost of Living Survey finds that factors like instability of housing markets and inflation for goods and services contribute to the overall cost of doing business in today’s global environment.

“Globalization of the marketplace is well documented with many companies operating in multiple locations around the world and promoting international assignments to enhance the experience of future managers,” said Ilya Bonic, Senior Partner and President of Mercer’s Career business. “There are numerous personal and organizational advantages for sending employees overseas, whether for long- or short-term assignments, including career development by obtaining global experience, the creation and transfer of skills, and the re-allocation of resources.”

Mercer’s 2017 Cost of Living Survey finds Asian and European cities – particularly Hong Kong (2), Tokyo (3), Zurich (4), and Singapore (5) – top the list of most expensive cities for expatriates. The costliest city, driven by cost of goods and security, is Luanda (1), the capital of Angola (view the Top 15 Cities Ranking here: http://APO.af/hrS2vG). Other cities appearing in the top 10 of Mercer’s costliest cities for expatriates are Seoul (6), Geneva (7), Shanghai (8), New York City (9), and Bern (10). The world’s least expensive cities for expatriates, according to Mercer’s survey, are Tunis (209), Bishkek (208), and Skopje (206).

Mercer’s authoritative survey is one of the world’s most comprehensive, and is designed to help multinational companies and governments determine compensation allowances for their expatriate employees. New York is used as the base city and all cities are compared against it. Currency movements are measured against the US dollar. The survey includes over 400 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment.

“While historically mobility, talent management, and rewards have been managed independently of one another, organizations are now using a more holistic approach to enhance their mobility strategies. Compensation is important to be competitive and must be determined appropriately based on the cost of living, currency, and location,” said Mr. Bonic.

Europe, the Middle East, and Africa
Only three European cities remain in the top 10 list of most expensive cities for expatriates.

Zurich (4) is still the most costly European city on the list, followed by Geneva (7) and Bern (10). Moscow (14) and St. Petersburg (36) surged fifty-three and one hundred and sixteen places from last year respectively, due to the strong appreciation of the ruble against the US dollar and the cost of goods and services. Meanwhile, London (30), Aberdeen (146) and Birmingham (147) dropped thirteen, sixty-one and fifty-one spots respectively as a result of the pound weakening against the US dollar following the Brexit vote. Copenhagen (28) fell four places from 24 to 28. Oslo (46) is up thirteen spots from last year, while Paris fell eighteen places to rank 62.

Other Western European cities dropped in the rankings as well, mainly due to the weakening of local currencies against the US dollar. Vienna (78) and Rome (80) fell in the ranking by 24 and 22 spots, respectively. The German cities of Munich (98), Frankfurt (117), and Berlin (120) dropped significantly as did Dusseldorf (122) and Hamburg (125).

“Despite moderate price increases in most of the European cities, European currencies have weakened against the US dollar, which pushed most Western European cities down in the ranking,” explained Ms. Constantin-Métral. “Additionally, other factors like the Eurozone’s economy have impacted these cities.”

As a result of local currencies depreciating against the US dollar, some cities in Eastern and Central Europe, including Prague (132) and Budapest (176) fell in the ranking, while Minsk (200) and Kiev (163) jumped four and thirteen spots, respectively, despite stable accommodations in these locations.

Ranking 17, Tel Aviv jumped two spots from last year and continues to be the most expensive city in the Middle East for expatriates followed by Dubai (20), Abu Dhabi (23), and Riyadh (52), which have all climbed in this year’s ranking. Jeddah (117), Muscat (92), and Doha (81) are among the least expensive cities in the region. Cairo (183) is the least expensive city in the region plummeting ninety-two spots from last year following a major devaluation of its local currency (view the Bottom 15 Cities Ranking here: http://APO.af/4AAhwv).

“Egypt’s decision to allow its currency to float freely in return for a 12 billion dollar loan over three years to help strengthen its economy resulted in the massive devaluation of the Egyptian Pound by more than 100% against the US dollar, pushing Cairo down the ranking” said Ms. Constantin-Métral.”

Quite a few African cities continue to rank high in this year’s survey, reflecting high living costs and prices of goods for expatriate employees. Luanda (1) takes the top spot as the most expensive city for expatriates across Africa and globally despite its currency weakening against the US dollar. Luanda is followed by Victoria (14), Ndjamena (16), and Kinshasa (18). Tunis falls six spots to rank 209 as the least expensive city in the region and overall.

By Marc Philips