The Problem with the Cost of Living Index
It’s pretty hard to find good data on travel costs for far-flung destinations around the globe, so I was excited to take a look at Mercer’s Cost of Living Survey. Mercer is a global consultancy, and the cost of living survey provides information to corporations, governmental organizations, and NGOs to help them determine cost of living allowances for employees stationed worldwide.
One cool thing about the Mercer cost of living survey is that it is city-based, so it avoids the problem of cost differences within countries (which are often even greater than cost differences between countries). Let’s take a look at some of the highlights from the 2009 edition of the Mercer cost of living index.
Most expensive cities:
- Tokyo, Japan
- Osaka, Japan
- Moscow, Russia
- Geneva, Switzerland
- Hong Kong
- Zurich, Switzerland
- Copenhagen, Denmark
- New York City, US
- Beijing, China
- Singapore
Least expensive cities (of the 143 selected cities):
- Johannesberg, South Africa
- Monterrey, Mexico
- Asuncion, Paraguay
- Karachi, Pakistan
- Wellington, New Zealand
- Auckland, New Zealand
- Mexico City, Mexico
- Quito, Equador
- Chennai(Madras), India
- Tunis, Tunisia
- Bangalore, India
- San Jose, Costa Rica
- Montevideo, Uruguay
- Adelaide, Australia
- Glasgow, UK
- Santiago, Chile
- Winston Salem, US
- Manila, Philippines
Now, if some of these results look a little odd to you, you’re not alone. Auckland cheaper than Chennai? Beijing more expensive than Adelaide? Sounds like Australia and New Zealand are the new budget travel paradises!
Delving deeper into the rankings, some even stranger findings emerge. Ho Chi Minh City(Saigon), Vietnam is ranked 69th most expensive, whereas Seattle is ranked 84th. Sorry, but it doesn’t take an olfactory savant to smell something fishy going on here. Seattle is an expensive city even by US standards. And although Saigon must be getting more expensive every year as the Vietnamese economy enjoys its own China-syle mini-miracle, it’s hard to believe that costs there are anywhere near Western levels yet.
I suspect that that what’s at the bottom of these enormous discrepancies is a focus on western and luxury items. This makes sense given the the purpose of the index is to help calculate the expenses of highly paid, largely western personnel.
Take a look at some of the goods in the price index basket:
- Spaghetti, 1000g. Paris $1.95, New York $2.74, Beijing $3.65
- Luxury 2bd Apartment. Paris $1952. New York $2977. Beijing $2532.
Now, if you’re living on a budget in Beijing, you learn quickly that if you eat Chinese noodles instead of Italian pasta, you cut your food bill by about 90%. You can also find a cheap apartment in Beijing for a fraction of the price of cheap, rat-infested New York dive. So while these numbers may be relevant to the wealthy expat, or even luxury tourist, they bear little resemblance to the type of deals available to the creative and flexible budget traveler.
I guess the search for the holy grail of the perfect cost index must continue!
