Today, Mercer announced the results of its 2022 Cost of Living Survey with New York City remaining the most expensive city in the US for expatriates, ranking 7th worldwide, while Hong Kong SAR took the top spot globally. In addition to cost of living data, employee mobility research conducted by Mercer and the learnings from Mercer’s work with clients demonstrates that the war in Ukraine, exchange rate variations and widespread inflation are shrinking employees’ pay and savings.
Both inflation and exchange rate fluctuations directly influence the purchasing power of expatriate employees. The rise of remote and flexible working has also caused many employees to reconsider their priorities, work-life balance and the choice of location to live in. These conditions have serious consequences for employers, who need to rethink their approach to managing a globally distributed workforce, particularly in light tight labor markets. According to a June 2022 survey by Mercer, labor shortages rank as a significant or moderate HR priority for 82% of US employers.
Mercer’s cost of living data helps employers understand the importance of monitoring currency fluctuations and assessing the inflationary and deflationary pressures on goods, services and accommodation in all operating locations. The data also help employers determine and maintain compensation packages for employees on international assignments and when working abroad.
“The volatility triggered by COVID-19 and further worsened by the crisis in Ukraine has fueled global economic and political uncertainty. This uncertainty, coupled with significant rising inflation in most of the countries around the world, has international assignees concerned about their purchasing power and socio-economic stability,” said Yvonne Traber, Partner at Mercer and Global Head for the Mobility Business.
“Failing to adopt competitive international compensation strategies in times of uncertainty and adapt to this new world of work will undermine an organization’s ability to attract and retain top talent,” added Traber.
Conversely, this situation also offers an opportunity for cities and governments looking to attract foreign business, and for businesses looking to attract talent. The cost of living in a location can have a significant impact on its attractiveness as a destination for talent, and it can influence site selection decisions for organizations expanding and transforming their geographic footprint.
“After years of low inflation, the US is now seeing price increases in goods and services at greater rates compared to many other countries. This inflation is also manifesting itself at different levels across cities and regions in the US,” said Vince Cordova, Partner in Mercer’s Career practice. “Given the increased flexibility organizations and individuals have around work location options, understanding these differences and being able to measure how they change over time will be important in designing effective and responsive compensation and talent strategies.”