Paris No Longer on Top, But That’s a Good Thing!
Tel Aviv overtook Paris as the world’s most expensive city for the first time according to the EIU’s (The Economist Intelligence Unit Limited) Worldwide Cost of Living (WCOL) report for 2021.
Tel Aviv jumped from fifth place to top of the heap, ahead of Paris and Singapore, now tied for second place. Damascus is the world’s least expensive city, but is that a place you might want to live?
The index tracks the cost of living in 173 cities across the world. Soaring inflation is contributing to the fastest rise in the cost of living for city dwellers in the last five years. Goods and services have risen by 3.5% year on year in local-currency terms, compared with an increase of just 1.9% this time last year. Transport costs rose because of rising oil prices driving a 21% increase in the price of unleaded petrol, but other industries, such as recreation, tobacco and personal care categories also showed strong increases. (Their numbers excluded four cities suffering from very high inflation: Caracas, Damascus, Buenos Aires and Tehran.)
The data was collected between August 16th and September 12th, 2021, in the midst of the Covid-19 pandemic, when freight rates and commodity prices were continuing to rise across the world. “Combined with fluctuating consumer demand and exchange-rate shifts, the resulting supply problems have fueled price rises in the world’s major cities.”
The expectation is that the cost of living will continue to rise as will interest rates to stem the inflation. Tel Aviv can attribute most of its rise to the strength of their Shekel against the US Dollar. But, European and Asian cities still dominate the index. If you want to live cheaply, head to the Middle East and Africa, or poorer parts of Asia.
Here’s the thing: I don’t believe the report. The report ranks 173 cities around the world based on their relative cost of living, comparing over 400 individual prices across 200 products and services, combined with current and past trends impacting the cost of living, including currency swings, local inflation and commodity shocks. But, I don’t believe it takes into account tax rates and benefits (or not) and how that influences the cost of living.
For example, it compares the cost of car ownership, but it doesn’t reflect the fact that you need a car living in Los Angeles where the public transportation system is limited, compared to Paris where the public transportation system is excellent and you don’t need a car to live well. That’s a $10,000 a year savings (according to AAA) that the EIU report fails to consider. And maybe it compares the cost of electricity by the kilowatt, but did it take into account that usage is much less in Europe thanks to ecological and economical appliances keeping the costs down? I’ll bet that it didn’t consider that education is free in France even through university, where as in the U.S. the average cost of a university annually is almost $50,000 (with room and board)!! (Source) And what about healthcare costs? I don’t see how they were able to compare the cost of insurance and healthcare when the U.S. is about 10 times more expensive than France, rendering it unaffordable for the average American! Another factor that may or may not be considered in the EIU’s report is how one can borrow money to purchase my home at an interest rate a lot lower in France than it was in the U.S. with European rates about half the U.S. rates.
In 1997 when I was at a crossroads to decide if I was going to stay in France as a single mother with a daughter, or move back to the U.S., even though my employment options were limited in France, the assessment for cost in each place put France ahead of the U.S. hands down. The car was a big expense, as was the cost of a quality education for my daughter. Add to that medical insurance and health care costs and there was no way I could afford it, even with more job opportunities in the U.S. Clearly I opted to stay in France and from a financial standpoint, that was the right decision.
On top of it all, what is not at all considered in the report is quality of life. So what if you spend a lot less in one place or another if your quality of life isn’t up to par? Money is what we accumulate to pay for that lifestyle, but that’s more about a “standard of living” rather than a “quality of life.” Even if your money buys you more food or more dining out in one city over another, what’s the quality of the food you’re digesting? Are you relinquishing your health as a result? And if I want to travel all over the world from the U.S., it will cost more in time and air fares than if I start from Paris, which is more centrally located. I doubt the report considers such situations.
So, don’t see these reports and think the worst of the cities that come in high, or best of the cities that come in low. One must consider all aspects of life in one place or another, and not just the costs of goods and services. Where I’m sitting, in Paris or Nice or anywhere in France, the quality of life is as great as one might imagine and I’d bet it would cost me double to try and even come close in the U.S….or impossible, really.
Download the free report “Worldwide Cost of Living 2021.“
The Adrian Leeds Group