Mercer’s 2021 Cost of Living city ranking reveals the most and least affordable locations for international employees worldwide.
How to determine compensation for employees working from anywhere? What impact has the pandemic had on cost management for international assignments?
Mercer’s Cost of Living Survey helps employers navigate compensation strategies for an increasingly diverse and distributed global workforce.
Ashgabat tops this year’s list of most expensive cities for international employees, followed by Hong Kong and Beirut. The Lebanese capital city climbed 42 positions in the ranking as a result of the political turmoil of the last few years. The COVID-19 pandemic and the Port of Beirut explosion have all amplified the economic effects, causing record-high inflation.
Compared to last year, Tokyo and Zurich each dropped one spot to fourth and fifth positions, respectively. Other cities in the top 10 of Mercer’s Cost of Living city ranking are Shangai (6), Singapore (7), Geneva (8), Beijing (9) and Bern (10). The world’s least expensive cities for international employees according to Mercer’s survey are Tbilisi (207), Lusaka (208) and Bishkek (209).
UK cities see minimal price inflation despite the pandemic and Brexit; London is up one place to 18th and Birmingham up eight places to 121st.
Read our press release for more regional insights.
The COVID-19 crisis has accelerated changes in global mobility trends and practices, prompting companies to rethink their strategies for managing mobile workforces in the post-pandemic world. According to Mercer’s 2020 Worldwide International Assignment Policies and Practices survey, high costs remain among the main obstacles to mobility. Companies are looking for opportunities to replace traditional long-term assignments with alternative, less costly forms of mobility, such as one-way transfers, short-term assignments and internationally/locally hired foreigners. They’re also trying out virtual assignments.
Most and least expensive cities
At the same time, remote and hybrid working — initially forced by the pandemic — have been gaining popularity as the solutions of choice for many employees, who now expect to be able to work from anywhere. With the rise of remote working and the increasing demand for employee-requested moves, understanding the cost of living in different locations is crucial for companies setting up compensation packages and employees concerned about their purchasing power abroad.
Our Cost of Living Survey highlights the importance of monitoring currency fluctuations and assessing the inflationary and deflationary pressures on goods, services and accommodation in all operating locations. But the latest data show few significant price variances resulting from the pandemic as various measures were adopted by governments worldwide, such as lowering or refraining from collecting value-added tax for a period of time.
Mercer conducted special analyses on the categories of goods that saw a relative increase in demand as the pandemic crisis affected consumer buying habits. Our price analysis focuses on three special baskets of products, including popular “comfort food,” cleaning supplies and home entertainment.
The prices of these goods in selected locations worldwide and how they changed within a year’s time are shown in the video.
Mercer’s annual Cost of Living city ranking is based on our Cost of Living survey - one of the most recognised and comprehensive of its kind, with more than 400 cities included. Carried twice per year, the survey is designed to help multinational companies and governments around the world determine compensation strategies for their expatriate employees.
Which factors determine the cost of living?
In addition to evaluating more than 200 goods and services, Mercer’s Cost of Living Survey highlights essential factors — such as currency fluctuations, cost inflation and accommodation price instability — in determining the cost of expatriate packages.
The overall Cost of Living Index reflects the prices of over 200 items from the following categories:
Cost of living is one of the key factors influencing international assignment package rates.
However, to gain competitive advantage in the global war for talent, foreign investments and business, companies need to strike the right balance between cost containment, employee experience and business needs. There are many additional factors to consider when selecting a location. Factors such as disease and sanitation standards, safety, education, climate, and physical remoteness can often affect the success of a foreign assignment or investment.
Mercer’s Quality of Living Survey offers objective information about the standards of living for employees sent to work abroad. This survey provides key insights for employers, employees, governments and city authorities looking to improve their attractiveness to entice foreign talent, businesses and investments.
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The 2021 Cost of Living Ranking highlights the results for 209 cities across five continents, measuring the comparative costs of more than 200 items in each location.