Cost of Living vs Quality of Life

In the last week, I’ve obtained two enlightening reports:

1. The Quality of Living Report by Mercer: Ongoing research on the practicalities of daily life for expatriate employees and their families forms the basis of their annual ranking of the quality of living in many prevalent assignment locations. See https://www.mercer.com/, watch a special video or download the official infographic. 

2. A report by The Economist Intelligence Unit, Worldwide Cost of Living 2018: Which global cities have the highest cost of living? Download the free summary Worldwide Cost of Living report for this year’s highlights. 

There is a distinctive difference between the cost of living and the quality of life that cost buys. This very discussion took place with clients Wednesday afternoon who are moving from Berlin to Paris, after having lived in the U.S. and other European cities.

Taxation is a BIG topic, as everyone is concerned with taxes as a major cost of living, but the question is: what do those taxes buy? If the taxes supplement other out-of-pocket expenses and increase the quality of life, then the trade-off is worth a serious look.

Those of us living in France permanently know the cost of high taxation, but we also know the benefits. We’ve made the choice to pay the price for a high quality of life.

According to Mercer’s Quality of Living Report, Vienna Austria ranked first, with Paris ranking 39th. Vienna came up as first for the ninth time in a row. Remember that this ranking has to do with a destination as attractive for expatriates on assignment. Therefore, the viewpoint is skewed by a city’s economic and political stability, as well as infrastructure, recreational facilities and housing, primarily for business purposes.

“Factors such as climate, disease and sanitation standards, ease of communications, and physical remoteness can often affect the success of a foreign assignment. Moreover, the local political and social environment, political violence, and crime may give rise to potentially uncomfortable, inconvenient, or even dangerous situations. To encourage mobility, reliable information is needed to help calculate fair, consistent expatriate compensation for hardship locations.”

This year, Mercer reported a separate ranking on City Sanitation, “which analyses cities’ waste removal and sewage infrastructure, levels of infectious disease, air pollution, water availability and quality — all important aspects of a city’s attractiveness for both talent and businesses. Honolulu tops the City Sanitation ranking, followed by Helsinki and Ottawa in joint second, whereas Dhaka and Port au Prince fill the bottom places.

In all honesty, I’m not so sure that using Mercer’s report is a fair basis for evaluating a true “quality of life” for the average expat. There is intrinsic value that cannot be measured. For example, there is not a city on the list I’d personally say was as beautiful as Paris — an asset that we live with every waking minute of every day. I’m sure some of you might argue this, as it’s totally subjective, but would I give that up for cleaner streets? Probably not.

Here are the top 50 on Mercer’s Quality of Living Report — and there are some pretty important and highly desirable cities at the bottom!:

1 Vienna Austria
2 Zürich Switzerland
3 Auckland New Zealand
4 Munich Germany
5 Vancouver Canada
6 Düsseldorf Germany
7 Frankfurt Germany
8 Geneva Switzerland
12 Amsterdam Netherlands
13 Berlin Germany
14 Bern Switzerland
15 Wellington New Zealand
16 Melbourne Australia
17 Toronto Canada
18 Luxembourg Luxembourg
19 Ottawa Canada
20 Hamburg Germany
21 Perth Australia
22 Montreal Canada
23 Stockholm Sweden
24 Nurnberg Germany
25 Singapore Singapore
26 Oslo Norway
27 Brussels Belgium
28 Stuttgart Germany
29 Adelaide Australia
30 Canberra Australia
31 San Francisco, CA United States
32 Helsinki Finland
33 Calgary Canada
34 Dublin Ireland
35 Boston, MA United States
36 Honolulu, HI United States
37 Brisbane Australia
38 Lisbon Portugal
39 Paris France
40 Lyon France
41 London United Kingdom
42 Milan Italy
43 Barcelona Spain
44 Seattle, WA United States
45 New York, NY United States
46 Edinburgh United Kingdom
47 Chicago, IL United States
48 Washington, DC United States
49 Madrid Spain
50 Tokyo Japan

In terms of Cost of Living 2018, as reported by The Economist, Singapore remains the most expensive city in the world, after Paris as second (!), comparing more than 400 individual prices across over 150 products and services. This is their basis of their ranking of the world’s major cities by cost of living.

Paris is the only euro area city in the top ten. According to the report, only alcohol, transport and tobacco offer value for money compared with other European cities. (Funny…what if you don’t smoke and you don’t drive in Paris?) Keep in mind that currency fluctuations are a major cause for changes in the rankings. “In the past year a number of markets have seen significant currency movements, which have in many cases countered the impact of domestic price changes.”

See The Economist’s analysis of France online:

“La République en marche, the party of the centrist president, Emmanuel Macron, has a comfortable majority in the National Assembly, along with its ally, the Mouvement démocrate. Mr Macron is therefore well placed to implement plans to reform the social welfare system, amend immigration laws and simplify the complex fiscal compact. On the international scene Mr Macron will focus on bolstering his status as a champion of the fight against climate change and revive the Franco-German partnership.”

Let’s go back to this idea of questioning Cost of Living vs Quality of Living. According to these two reports, Paris is neither cost effective nor provides a high quality of life…to which I would disagree!

So, can you explain why so many Americans are moving here right now…and not just from the U.S., but from other cities around the globe? If it’s not because of low cost of living or high quality of life, then do we have Emmanuel Macron’s open arm policy to thank? Or Donald Trump’s closed arm policy…or both?

A bientôt,

Adrian Leeds
Adrian Leeds Group

Respond to Adrian:
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P.S. For all you Southern Californians, I’ll be in Los Angeles and open to meeting with clients for two-hour property consultations in person sometime between April 30th and May 4th. Special rate $350. To book your consultation, email me at [email protected].