The objective of expatriate pay programs is to ensure that employee spending power and standard of living is maintained irrespective of global location. How to achieve this has been an issue many organizations spend considerable time on.
Exchange rates are volatile as they are based on short-term factors and are subject to substantial distortions from speculative movements, economic outlook and government interventions. In the short term, exchange rates, even when averaged over a period of time such as a year, are not a good measure of the comparative value of a salary in relation to its comparative international purchasing power. In the short to medium term at least, apparent changes in the comparative level of remuneration between one country and another may be principally a function of changes in the exchange rate.
A far better measure is salary purchasing power parity (SPPP) which is the amount of salary that equalizes the purchasing power of different currencies given the relative cost of the same basket of goods (cost of living) at the exchange rate versus one US Dollar. This means that a given salary, when converted into different currencies at the SPPP rates, will buy the same basket of goods and services in all countries.
The basket of goods and services used in SPPP calculations is derived on an International basis and includes certain items often excluded from expatriate cost of living data (most notably housing costs), however any or all of the 13 basket groups can be included or excluded from a calculation. SPPP's provide a reasonably good picture of the differences in standards of living for individual’s resident and paid in different countries.
Internationally comparable data is crucial to forming sustainable expatriate pay policies and monitoring progress. Market exchange rates give misleading comparisons because they do not reflect salary purchasing power differences. Salary Purchasing Power Parities account for price differences between countries and so measure real quantities.
The ongoing impact of the credit crisis, slowing global economies, falling house prices, global stock market and exchange rate volatility, together with the US dollar and Euro strengthening against most currencies are all factors contributing to a major change in relative salary purchasing power, which can be seen from the global cost of living rankings as at January 2009.
London has already dropped from the most expensive place for expats to live to now rank 6th. New York has dropped to 50th but is now expected to begin to climb back up the ranking as the global recession impacts other parts of the world. Tokyo has reclaimed the title of the most expensive place in the world for expats in terms of salary purchasing power relative to all other international locations.
The salary purchasing power parity rank comprises cost of living indexes for each of 276 global locations. The indexes are calculated using the prices for specific quantities of the same goods and services in each location, based on expatriate spending patterns across 13 broad categories (Basket Groups).
The latest salary purchasing power parity ranking, together with the overall cost of living index, sourced from Xpatulator.com as at January 2009 is as follows:
Rank Location (Overall Cost of Living Index New York=100)
1. Japan, Tokyo (126.03)
2. Norway, Oslo (123.74)
3. Denmark, Copenhagen (121.11)
4. Switzerland, Geneva (119.59)
5. Brazil, Brasilia (118.53)
6. United Kingdom, London (118.23)
7. Greenland, Nuuk (117.14)
8. Switzerland, Zurich (116.18)
9. Hungary, Budapest (114.36)
10. Russia, Moscow (113.41)
11. Nigeria, Lagos (112.69)
12. Ireland, Dublin (112.65)
13. New Caledonia, Noumea (112.43)
14. France, Paris (112.38)
15. Chad, N'Djamena (111.3)
16. Italy, Milan (111.19)
17. Cameroon, Douala (111.06)
18. Liechtenstein, Vaduz (110.89)
19. San Marino, San Marino (110.78)
20. Monaco, Monaco (109.83)
21. Czech Republic, Prague (109.81)
22. Austria, Vienna (109.68)
23. Slovakia, Bratislava (109.31)
24. Isle of Man, Douglas (108.97)
25. Poland, Warsaw (107.63)
26. Bermuda, Hamilton (107.53)
27. Italy, Rome (107.29)
28. Finland, Helsinki (107.07)
29. Australia, Sydney (106.52)
30. USA, San Francisco Calif (104.53)
31. Cote D'Ivoire, Abidjan (104.4)
32. Venezuela, Caracas (104.02)
33. China, Hong Kong (103.43)
34. United Arab Emirates, Dubai (103.36)
35. Croatia, Zagreb (103.29)
36. Angola, Luanda (103.27)
37. Belgium, Brussels (103.19)
38. Netherlands, Amsterdam (102.33)
39. Jersey, Saint Helier (102.24)
40. Papua New Guinea, Port Moresby (102.22)
41. Korea Republic of, Seoul (101.94)
42. Iceland, Reykjavík (101.66)
43. Ukraine, Kiev (101.2)
44. Guernsey, St Peter Port (100.68)
45. Qatar, Doha (100.64)
46. Central African Republic, Bangui (100.58)
47. Spain, Madrid (100.26)
48. USA, San Jose Calif (100.13)
49. Falkland Islands, Stanley (100)
50. USA, New York NY (100)
51. Sweden, Stockholm (99.76)
52. USA, Boston Mass (99.63)
53. Cameroon, Yaounde (98.84)
54. Mali, Bamako (98.74)
55. Benin, Cotonou (98.6)
56. Germany, Berlin (98.18)
57. Micronesia, Palikir (97.98)
58. Gabon, Libreville (97.77)
59. Canada, Toronto (97.39)
60. Germany, Bonn (96.38)
61. Vatican City, Vatican City (96.23)
62. Australia, Melbourne (95.88)
63. Australia, Canberra (95.88)
64. Estonia, Tallinn (95.08)
65. Turkey, Ankara (94.87)
66. Singapore, Singapore (94.6)
67. Guinea-Bissau, Bissau (94.24)
68. USA, Los Angeles Calif (93.93)
69. Palau, Melekeok (93.85)
70. Luxembourg, Luxembourg (93.77)
71. Canada, Vancouver (93.48)
72. Portugal, Lisbon (92.84)
73. Australia, Perth (92.82)
74. Germany, Frankfurt (92.81)
75. Azerbaijan, Baku (92.76)
76. Gibraltar, Gibraltar (92.33)
77. Comores, Moroni (92.04)
78. USA, Washington DC (91.8)
79. USA, Philadelphia Pa (91.49)
80. Nauru, Yaren (91.16)
81. Kazakhstan, Almaty (90.99)
82. Bahrain, Manama (90.82)
83. USA, San Diego Calif (90.7)
84. Bahamas, Nassau (90.63)
85. Togo, Lome (90.11)
86. Taiwan, Taipei (90.07)
87. Haiti, Port-au-Prince (90)
88. Senegal, Dakar (89.57)
89. Saint Helena, Jamestown (89.26)
90. USA, Baltimore Md (89.25)
91. United Kingdom, Glasgow (88.88)
92. Djibouti, Djibouti (88.45)
93. Niger, Niamey (88.38)
94. Zambia, Lusaka (88.36)
95. USA, Seattle Wash (88.3)
96. Andorra, Andorra la Vella (88.13)
97. Vietnam, Hanoi (88.03)
98. Tonga, Nuku'Alofa (87.34)
99. Gambia, Banjul (87.23)
100. United Arab Emirates, Abu Dhabi (87.16)
101. Cayman Islands, George Town (86.81)
102. Sudan, Khartoum (86.64)
103. Greece, Athens (86.59)
104. Barbados, Bridgetown (86.5)
105. USA, Portland Ore (86.1)
106. Sierra Leone, Freetown (85.92)
107. Equatorial Guinea, Malabo (85.89)
108. USA, Chicago Ill (85.73)
109. Romania, Bucharest (85.55)
110. USA, Miami Fla (85.54)
111. Marshall Islands, Majuro (85.41)
112. Cyprus, Nicosia (85.26)
113. Malta, Velletta (84.99)
114. Moldova, Chisinau (84.89)
115. Ghana, Accra (84.89)
116. United Kingdom, Birmingham (84.76)
117. Canada, Montreal (84.37)
118. Algeria, Algiers (84.01)
119. Israel, Jerusalem (83.82)
120. Australia, Brisbane (83.29)
121. Burkina Faso, Ouagadougou (82.92)
122. Lebanon, Beirut (82.74)
123. Jordan, Amman (82.41)
124. Guinea, Conakry (82.16)
125. Jamaica, Kingston (82.11)
126. Philippines, Manila (82.07)
127. Georgia Republic of, Tbilisi (82.03)
128. Congo Democratic Rep, Kinshasa (81.84)
129. Seychelles, Victoria (81.78)
130. Indonesia, Jakarta (81.76)
131. USA, Las Vegas Nev (81.75)
132. Lithuania, Vilnius (81.67)
133. Vanuatu, Port Vila (81.35)
134. Grenada, Saint George's (81.23)
135. Trinidad and Tobago, Port-of-Spain (81.13)
136. Mozambique, Maputo (80.82)
137. New Zealand, Auckland (80.71)
138. Samoa, Apia (80.64)
139. Congo, Brazzaville (80.14)
140. Armenia, Yerevan (80.13)
141. Albania, Tirana (80.1)
142. Martinique, Fort-de-France (80.09)
143. Latvia, Riga (79.92)
144. Thailand, Bangkok (79.86)
145. Sao Tome and Principe, Sao Tome (79.79)
146. USA, Denver Colo (79.74)
147. China, Beijing (79.73)
148. Fiji, Suva (78.99)
149. Slovenia, Ljubljana (78.85)
150. Canada, Ottawa (78.82)
151. Tuvalu, Funafuti (78.78)
152. Myanmar, Yangon (78.51)
153. Puerto Rico, San Juan (78.49)
154. Kenya, Nairobi (78.4)
155. USA, Phoenix Ariz (78.26)
156. Mauritius, Port Louis (78.25)
157. Madagascar, Antananarivo (78.24)
158. USA, Tampa Fla (78.22)
159. Serbia, Belgrade (78.13)
160. Kiribati, South Tarawa (78.06)
161. Guam, Hagatna (77.8)
162. Brunei, Bandar Seri Begawan (77.72)
163. Uruguay, Montevideo (77.41)
164. Colombia, Bogota (77.23)
165. USA, Atlanta GA (76.99)
166. Morocco, Rabat (76.93)
167. USA, Milwaukee Wis (76.77)
168. Paraguay, Asuncion (76.49)
169. Mexico, Mexico City (76.13)
170. USA, Columbus Ohio (76.06)
171. India, Mumbai (76.04)
172. Tanzania, Dar es Salaam (76)
173. Solomon Islands, Honiara (75.93)
174. USA, Cleveland Ohio (75.84)
175. USA, Detroit Mich (75.74)
176. Liberia, Monrovia (75.63)
177. USA, Austin Tex (75.57)
178. USA, Dallas Tex (75.47)
179. USA, Jacksonville Fla (75.47)
180. Australia, Adelaide (75.39)
181. Kuwait, Kuwait City (75.22)
182. Bulgaria, Sofia (75.14)
183. Saudi Arabia, Riyadh (75.08)
184. USA, Pittsburgh Penn (74.54)
185. Timor-Leste, Dili (74.29)
186. Iran, Tehran (74.24)
187. USA, Indianapolis Ind (74.13)
188. USA, Fort Worth Tex (73.64)
189. Somalia, Mogadishu (73.49)
190. Maldives, Male (73.48)
191. USA, Charlotte NC (73.47)
192. USA, Houston Tex (73.36)
193. Chile, Santiago (73.01)
194. Mauritania, Nouakchott (72.99)
195. Botswana, Gaberone (72.86)
196. Cape Verde, Praia (72.81)
197. USA, El Paso Tex (72.61)
198. Uganda, Kampala (72.25)
199. Afghanistan, Kabul (72.13)
200. Antigua and Barbuda, Saint John's (72.04)
201. USA, St Louis MO (71.93)
202. Malaysia, Kuala Lumpur (71.82)
203. Peru, Lima (71.7)
204. Korea Democratic Republic of, Pyongyang (71.62)
205. Kosovo, Pristina (71.55)
206. India, New Delhi (71.4)
207. Belarus, Minsk (71.28)
208. Malawi, Lilongwe (71.24)
209. Saint Kitts and Nevis, Basseterre (71.07)
210. USA, Memphis Tenn (71.02)
211. India, Chennai (70.76)
212. Kyrgyzstan, Bishkek (70.29)
213. Burundi, Bujumbura (70.07)
214. Macedonia, Skopje (70.02)
215. USA, San Antonio Tex (70.02)
216. Guatemala, Guatemala City (69.74)
217. Honduras, Tegucigalpa (69.57)
218. Saint Vincent and the Grenadines, Kingstown (69.5)
219. Canada, Calgary (69.46)
220. India, Calcutta (69.31)
221. India, Hyderabad (68.85)
222. Dominica, Roseau (68.79)
223. Rwanda, Kigali (68.75)
224. Panama, Panama City (68.58)
225. Guyana, Georgetown (68.58)
226. China, Shanghai (68.48)
227. Syria, Damascus (67.99)
228. Montenegro, Podgorica (67.75)
229. Laos, Vientiane (67.43)
230. Ethiopia, Addis Ababa (66.87)
231. Cuba, Havana (66.61)
232. Belize, Belmopan (66.33)
233. Nicaragua, Managua (65.89)
234. Nepal, Kathmandu (65.67)
235. Dominican Republic, Santo Domingo (64.93)
236. Tunisia, Tunis (64.87)
237. Suriname, Paramaribo (64.75)
238. India, Bangalore (64.56)
239. South Africa, Johannesburg (64.51)
240. Costa Rica, San Jose (64.47)
241. Egypt, Cairo (64.18)
242. El Salvador, San Salvador (63.34)
243. Swaziland, Mbabane (63.11)
244. Mongolia, Ulaanbaatar (62.85)
245. South Africa, Pretoria (62.71)
246. Oman, Muscat (61.61)
247. Saint Lucia, Castries (61.2)
248. Pakistan, Lahore (59.48)
249. Tajikistan, Dushanbe (59.25)
250. South Africa, Cape Town (58.99)
251. Namibia, Windhoek (58.89)
252. Sri Lanka, Colombo (58.51)
253. Pakistan, Islamabad (58.33)
254. Iraq, Baghdad (58.25)
255. Pakistan, Karachi (57.72)
256. Lesotho, Maseru (57.49)
257. Argentina, Buenos Aires (57.46)
258. Bangladesh, Dhaka (57.03)
259. Bhutan, Thimphu (56.78)
260. Bolivia, La Paz (56.66)
261. China, Macao (56.41)
262. South Africa, Durban (56.07)
263. Bosnia and Herzegovina, Sarajevo (54.35)
264. Ecuador, Quito (53.83)
265. Uzbekistan, Tashkent (53.03)
266. Libya, Tripoli (52.74)
267. China, Shenzhen (51.65)
268. Eritrea, Asmara (50.72)
269. China, Dalian (50.54)
270. China, Wuhan (49.93)
271. China, Guangzhou (47.28)
272. Cambodia, Phnom Penh (45.65)
273. Yemen, Sanaa (45.6)
274. Turkmenistan, Ashgabat (38.77)
275. China, Tianjin (29.5)
276. Zimbabwe, Harare (17.12)
About The Author: 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.
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