Annual Survey Examines Costs of Living Around the World

Mercer’s Cost of Living index provides vital data employers must consider for relocation.

Hong Kong has been named the most costly city to live and work abroad in this year. This was revealed in a new study detailing the impact of pricey living expenses and deteriorating macroeconomic trends on the expatriate market.

After being pushed to second place by Ashgabat, Turkmenistan, in 2021, Hong Kong has reclaimed pole position in Mercer’s 2022 Cost of Living index. It is the fourth time in five years that the Asian financial hub has been named the most expensive destination for overseas workers.

Inflationary pressures worldwide have accelerated, increasing living expenses in Hong Kong and elsewhere. Meanwhile, ongoing Covid limitations and rising political uncertainty have made it more expensive to compensate staff who are sent to Hong Kong.

Expatriate packages are getting more expensive, owing to the fact that desirable housing has become more expensive. "Part of it is the real estate market,” said Mercer partner Vince Cordova told CNBC Make It. “The other part is the cost of goods and services and also the political uncertainty. The people who are going to be there will need to spend more to live well,” he said.

Mercer's cost of living index is used by businesses and governments to set compensation for expatriate workers. The index attempts to compare accommodation expenses and the price of goods and services in local markets against their relative cost in New York City.

The index compares the costs of more than 400 goods, including housing, food, and domestic items, in hundreds of cities worldwide to assist employers with pay packages. The report also observed a rise in the use of remote work, with more firms employing it as a factor when developing flexible employment policies.  Many businesses now allow their staff to work from anywhere, so the index also ranks the locations where your money may go furthest.

Mercer also said in a statement that its employee mobility research found that the war in Ukraine, currency fluctuations, and price increases have reduced employees' earnings and savings. Inflation is playing a more significant role in rising prices in some regions of the United States, while rental housing costs are increasing faster in some locations.

Many businesses are adopting the local-plus pay approach to compensate foreign workers. Instead of being used as a fill-in solution to compensate for personnel shortages in certain areas of the company, mobility programs are better utilized by firms to develop their high potential talent.

The balance between employees and employers has changed as both realize that they don't need to be at the office to be efficient. Remote work has remained popular, and some experts think it could benefit less expensive cities or outlying regions in major metropolitan areas. Baltimore, for example, may become more appealing to people who only work in Washington D.C. on occasion.

While the statistics reveal price information for various cities, employees are more concerned with the quality of their lives in those locations than city prices. If companies want to increase their worldwide and national staff, they must also take those problems into account.Because inflation is at its highest level in 40 years, and more people can pick up and relocate with less connection to the workplace, a city's cost may outweigh everything. Employees are more concerned about the overall cost of living now than ever.