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The recent HSBC Expat Explorer Survey provides a ranking on locations for expat job opportunities. The over 27,000 participants chose San Francisco, London, New York City, Dublin, and Birmingham, UK, as the top five cities. The ranking in the survey was based on work/life balance, cost-of-living, and salary. In order to consider the merits of each location, a Top Talent expat will need to fully examine the cost-of-living differentials between his or her Base (home) location and these Destination cities. On the hiring side, Human Resource professionals must be prepared to provide these highly-sought-after candidates with granular details on the cost-of-living as part of a competitive offer. As shown below, ERI’s Relocation Assessor can provide comprehensive, defensible, and reliable estimates to meet this need.

Let’s assume the Human Resources professional has been tasked with providing management with metrics on cost-of-living differentials for Top Talent US employees that will relocate to one of these expat cities or one of fifteen additional important business cities. The assumption is the Top Talent candidate currently lives in a large US city. In the Relocation Assessor, we then use the US Large City Average (excluding NYC and San Francisco) as the Base location. This includes the average cost-of-living for the following cities:  Atlanta, Boston, Dallas, Chicago, Los Angeles, Miami, Philadelphia, and Washington, DC. (The Relocation Assessor also includes two other pre-calculated US Averages: a US Large City Average which adds NYC and San Francisco to the previous list of large cities and a US National Average which includes the average of the over 6,000 US locations in ERI’s database).

We use the following assumptions:

• The current annual earnings level is $100,000. (Please note that we do not use the expected earnings in the Destination.) The estimates from the Relocation Assessor answer the question, “What does it take to replicate the current location lifestyle in the Destination?”
• The employee rents a 900 sq. ft. (2 bedroom/2 bath) newer apartment in a desirable part of a large US city. The employee is married, and the family size is 2. (The annual earnings of the spouse are not included.)
• The employee has 1 car with an approximate value of $25,000 and drives 15,000 miles annually.
• The income and payroll taxes liability for accepting an international job will be assumed to be grossed up (i.e., the differentials will be zero). These taxes are complex and highly individual, requiring calculation by an experienced CPA for each specific individual situation. We assume the differential to be zero since the employee will remain “whole” in that expenditure category.

The US expat would pick Birmingham, UK, if the decision was purely based on cost-of-living. It is about 16% lower than the US Large City Average. Dublin, Johannesburg, and Mexico City also come in below the US Large City Average.

Istanbul and São Paulo are both close to the US Large City Average. Perhaps surprisingly, Mumbai’s COL is higher (17.3%) than the US Large City Average. It is expensive to purchase a westernized life-style in a developing country. (Remember we are replicating the home lifestyle.) Paris, London, and Tokyo all cost significantly more, with New York-Manhattan being close to 50% more. Consider these data sets when calculating cost of living differentials between locations.

We include monthly apartment rental comparisons. Housing costs have a significant impact on differentials; however, they do not tell the whole story in many international locations. Consumables (goods and services) are frequently significantly more expensive since it is assumed that the US expat is shopping in the International Districts and purchasing familiar brands of goods.

Cost-of-Living Differential from US Large City National Average (excludes NYC and San Francisco)
Apartment size of approximately 900 sq. ft.

The Relocation Assessor report provides detailed estimates on the expenditure categories so that Human Resources professionals can easily craft more generalized cost-of-living differentials for management decisions, as well as individualized, personalized data which improve their company’s attractiveness to top talent.

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