Good informative article, I always like to know that kind of information!!!
http://www.businessweek.com/lifestyle/content/jun2010/bw20100622_768389.htm
By Venessa Wong
Tokyo, Japan's busy center of government, culture, and the economy, has been an expensive place to live for decades. Going to a movie theater costs about $22 per ticket, and renting a two-bedroom apartment easily costs $5,000 per month. Even travelers pay about $50 per night to sleep in capsule hotels, where guests stay in a "room" measuring about 2 meters (6 ft., 7 in.) deep, 1 meter wide, and 1 meter tall. As the yen has strengthened against the dollar, from 110 yen in August 2008 to about 90 yen to the U.S. dollar this month, the cost of living for foreign nationals paid in U.S. dollars has become tangibly more expensive in Tokyo.
In a new ranking by global human resource company ECA International, Japan's capital rose to become the most expensive city in the world for American travelers for the first time since 2005. The city's return this year was due largely to currency appreciation. Tokyo was followed by Oslo, Norway, and Angola's capital, Luanda. Exchange rates were also responsible for the rise in the cost of living in Seoul and Sydney, which climbed to 20th and 30th place, respectively, from ranks below 100 last year. Meanwhile, Manhattan, N.Y., the most expensive place in the U.S., fell 10 spots, to 29th place, as the U.S. dollar weakened.
"One of the major reasons for the volatility from the 2009 to the 2010 [ranking] was currency volatility over the past 12 months," says Lee Quane, regional director of Asia for ECA International. "We did see [some prices] increase, but it was pretty much benign."
Don't Forget the Beer
ECA International, which is based in London, surveyed 399 locations in September 2009 and March 2010 based on a basket of 128 goods, including groceries, transport, dining out, clothing, electronics, and such miscellaneous services as haircuts. Expenses such as rent, utilities, and school fees that are not typically included in a cost-of-living allowance were not counted. The survey focused on internationally recognizable brands—such as Kellogg's (K) cereal or Sapporo (SOOBF:OTC) beer—commonly purchased by expatriates.
While less-expensive options, such as local alternatives, are available, companies typically base the cost-of-living allowance on the amount needed to support a lifestyle similar to what a person had in the home country. Companies do not want employees to feel they are taking a loss to work overseas, says E. James (Jim) Brennan, senior associate at ERI Economic Research Institute in Redmond, Wash. "Accessing a certain product that is normally not found in that economy can be very expensive," he says. Other times, "the difficulty is not what the costs are, but what goods and services are available."
Also, depending on the situation, cheap alternatives are not always advisable. For example, the Centers for Disease Control & Prevention says illnesses such as typhoid fever can spread through contaminated water and food, so the center encourages travelers to avoid food from street vendors.
Depending on One's Lifestyle
How much one spends, of course, is often as much a choice as as a necessity. Ohio native Michael King, president of virtual computing company Citrix Systems' (CTXS) Japan operations, has worked overseas for the past 15 years and has been at his most recent assignment in Tokyo since January 2009. "Japan is always expensive," he says. "If you're paid in local currency, then it's less of a problem."
King says he pays about $15 for a U.S. magazine and $50 for a DVD. While leisure is certainly not cheap, food constitutes a large portion of his expenses. For convenience, King shops at expatriate grocery stores, where goods sell at a premium, and it is not uncommon for him to pay $50 for a steak.
According to ECA International, the average price of 1 kilogram of rice in Tokyo is $8.47, and one dozen eggs cost $3.78. Dining in Western and Japanese restaurants is no cheaper—according to restaurant surveyor Zagat, dinner with a glass of wine plus tip in Tokyo costs $94, on average.
Seasonal Delicacies
"You can find reasonable things, but the quality expectation for food here is very high," King says. In addition to the careful preparation involved in much of Japanese cuisine, he says many people are willing to pay more when certain foods are in season—for example, peaches from Yamanashi in the summer.
Of course, Tokyo is not categorically expensive. The city is packed with noodle shops and yakitori stands offering grilled chicken on skewers. Midrange retailers such as Uniqlo and H&M (HNNMY:OTC) have become popular. The same is true in other cities: In New York, for example, hot dogs, pizza slices, and sandwiches are among the cheap eats in a city where Zagat estimates the average dinner with wine and tip costs $42.
Assignees can live on less, but when companies send talent overseas, "they don't want it to be a negative experience for anyone," says ERI's Brennan.
Scaling Down Benefits
Sending employees overseas (often along with their families) is a significant investment for any company, especially because compensation and benefit packages must cover employees' overseas expenses as well as such obligations as mortgage payments at home. Costly as cities such as Tokyo are, they often serve as regional commerce centers and remain critical to multinational companies; the need to move staff overseas remains fundamental.
Even in today's business environment, ECA International's Quane says, employers need to make compensation attractive enough for employees to take assignments, not move to competitors, while the employer can still make a return on investment. Many employers have recently tried to trim benefit packages while ensuring that the employee's core compensation remains attractive, he says.
Until about five years ago, overseas assignments were viewed by many as cash cows—an opportunity to enjoy a good standard of living overseas while saving some money. Today, "companies are striking the right balance," says Quane. Housing allowances and paid trips home, for example, have been scaled down, he says. Assignees who may have received an allowance for a two- or three-bedroom apartment may now receive an allowance for a smaller rental. Some packages are being localized to line up with local standards. In locations that have become unprofitable, some employees have been sent home.
"Talent is never in excess," says Brennan. "Anyone who is proficient and versatile and valued enough to go international is a valuable product." While paying for $90 meals and $50 DVDs may be expensive while the dollar is weak and business is soft, Brennan says in the long term, the right person can be the solution to turning things around.
New York ranks only No. 29
If you think $43 is too much to pay for lunch, you shouldn't live in Oslo. According to "ECA International", a global human resources company, that's how much an average lunch costs in Norway's capital. But Oslo is only the second-most expensive city on ECA's ranking of 399 global locations. And while the price of an average lunch in Tokyo is a comparatively modest $17.86, other costs, such as a $22 movie ticket and an $8.47 kilo of rice, earn it the dubious honor as the world's most expensive city.
ECA's ranking is based on a basket of 128 goods that includes food, daily goods, clothing, electronics, and entertainment, but not rent, utilities, and school fees, which are not typically included in a cost-of-living adjustment. ECA researchers and local partners gathered prices in September 2009 and March 2010 for domestic and imported brands that are internationally recognized—such as Kellogg's cereal or Sapporo beer. While lower-priced goods and services are available in these markets, the study estimated the cost of supporting the standard of living expected by expatriate employees, says Lee Quane, ECA's regional director for Asia. Some of the cities, such as Seoul and Stockholm, jumped up in the ranking as the local currency strengthened against the U.S. dollar. Quane says that while a slowdown in business may tempt employers to scale back compensation, "recessions only last so long" and retaining top talent in these places is critical to companies' success when the global economy recovers.
Source: "ECA International"
1. Tokyo, Japan
Rank in 2009: 2
Food: Lunch at a restaurant: $18
Can of beer from grocer: $3.37
One kg of rice: $8.47
One dozen eggs: $3.78
Entertainment: Movie ticket: $22
Appliances: Washing machine: $879
The strength of the yen has brought Tokyo back to the No. 1 spot on ECA International's ranking for the first time since 2005. In addition to the costs above, rent for a two-bedroom apartment for expats is typically more than $5,000 per month in Tokyo, according to data from EuroCost International. While visitors need more pocket money here than in any other city, the monthly consumer price index in Tokyo's wards has actually dropped year-on-year for 14 straight months as of May 2010, based on figures from Japan's statistics bureau.
2. Oslo, Norway
Rank in 2009: 8
Food: Lunch at a restaurant: $43
Can of beer from grocer: $4.71
One kg of rice: $5.66
One dozen eggs: $6.72
Entertainment: Movie ticket: $16
Appliances: Washing machine: $880
Oslo rose above Copenhagen as the most expensive city in Europe when the kroner strengthened against other currencies. ECA International says an upward trend in oil prices, a short recession, and Norway's reputation as a safe haven for investors contributed to the kroner's rise.
3. Luanda, Angola
Rank in 2009: 1
Food: Lunch at a restaurant: $47
Can of beer from grocer: $1.62
One kg of rice: $4.73
One dozen eggs: $4.75
Entertainment: Movie ticket: $13
Appliances: Washing machine: $912
Angola's capital slipped to third place this year as the kwanza depreciated. Prices in Luanda have actually increased in the past year, but currency changes offset any inflation, according to ECA International. In addition to everyday goods, EuroCost International estimates that the average expat pays more than $3,500 per month for a two-bedroom flat in Luanda.
4. Nagoya, Japan
Rank in 2009: 3
Food: Lunch at a restaurant: $19
Can of beer from grocer: $3.08
One kg of rice: $9.14
One dozen eggs: $3.33
Entertainment: Movie ticket: $20
Appliances: Washing machine: $621
Japan's fourth most populous city, Nagoya is also among the country's most expensive. The city ranks No. 1 for the cost of rice: $9.14 per kilogram, according to ECA International data. As Japan's auto hub, the Nagoya area is an important center of business: about 44 percent of automobiles produced in Japan are made here, according to the Greater Nagoya Initiative Center. Such companies as Toyota, Honda, Suzuki, Mitsubishi, Volkswagen, and General Motors have headquarters, manufacturing operations, or distribution points in the Nagoya region.
5. Yokohama, Japan
Rank in 2009: 4
Food: Lunch at a restaurant: $17.39
Can of beer from grocer: $3.26
One kg of rice: $6.54
One dozen eggs: $3.72
Entertainment: Movie ticket: $19.50
Appliances: Washing machine: $630
About half an hour by commuter train from Tokyo, this port city has active shipping, biotechnology, and semiconductor industries. Yokohama is one of the world's most expensive cities, but companies here enjoy lower operating costs compared with the nearby capital. Nissan opened a new headquarters in Yokohama this year and reportedly will sell its office in Tokyo to cut costs.
6. Stavanger, Norway
Rank in 2009: 14
Food: Lunch at a restaurant: $33
Can of beer from grocer: $4.76
One kg of rice: $5.71
One dozen eggs: $6.34
Entertainment: Movie ticket: $15.50
Appliances: Washing machine: $749
This small seaside city earned its riches from oil in the North Sea and has become known as Norway's petroleum capital. Stavangerexpats.com says food expenses in Norway are about 50 percent higher than the EU average: A can of soda is about $2.80, and a beer at a bar can be $12.
7. Kobe, Japan
Rank in 2009: 6
Food: Lunch at a restaurant: $16
Can of beer from grocer: $3.09
One kg of rice: $8.57
One dozen eggs: $2.81
Entertainment: Movie ticket: $20
Appliances: Washing machine: $470
The city has one of Japan's largest ports and has become home to many heavy machinery, iron and steel, and food product companies. According to the Japan External Trade Organization, 117 foreign and foreign-affiliated companies have offices in Kobe. As the price of Kobe beef, the style of high-grade meat named after the city, suggests, food is costly here, as are other living expenses.
8. Copenhagen, Denmark
Rank in 2009: 7
Food: Lunch at a restaurant: $36
Can of beer from grocer: $2.10
One kg of rice: $4.85
One dozen eggs: $6.99
Entertainment: Movie ticket: $15
Appliances: Washing machine: $1,196
A 2009 "survey" of 73 international cities by UBS found that employees in Copenhagen have the highest income. Places with higher salaries often have higher prices, but residents here enjoy good living standards overall. Some examples of the cost of living: Renting a DVD costs about $8 per night, a pair of women's jeans is more than $150, and a one-way ticket on public transport costs about $3.70.
9. Geneva, Switzerland
Rank in 2009: 9
Food: Lunch at a restaurant: $30
Can of beer from grocer: $2.02
One kg of rice: $3.81
One dozen eggs: $7.64
Entertainment: Movie ticket: $16
Appliances: Washing machine: $1,304
Geneva, home to many companies and U.N. organizations, is one of the most expensive cities for food and household appliances. Food prices in Switzerland are 45 percent more expensive than in the rest of Western Europe, and the cost of electronics and appliances in Geneva is among the highest worldwide, according to a 2009 UBS report.
10. Zurich, Switzerland
Rank in 2009: 10
Food: Lunch at a restaurant: $25
Can of beer from grocer: $2.01
One kg of rice: $3.36
One dozen eggs: $5.81
Entertainment: Movie ticket: $16
Appliances: Washing machine: $974
Zurich, Switzerland's largest city, is the country's main business center and the headquarters city for many financial companies, including UBS and Credit Suisse. Although Zurich had the greatest number of company bankruptcies in Switzerland last year, according to Dun & Bradstreet, the inflation rate started to increase again this year after falling in 2009.
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