Impact of Cost of Living Abroad


The price of goods and services can greatly impact the economic competitiveness of a city or a country. Hence, this is also a great factor when it comes to cost of living expenses of expats abroad or more so, it greatly affects the attractiveness of a country or a city to an expat.

According to the World Economic Forum’s study for global economic competitiveness, there are 12 pillars of competitiveness for every type of economy. The full report for their study can be read in this link.

As an expat abroad, you would like to have a good balance of each of these 12 pillars that makes an economy competitive, however, there are some pillars that should have more weight in an expat’s perspective. For example, goods market efficiency provide great insights for expats to look into a certain location. Not only does it affect the cost of living calculations for an expat lifestyle, it also determines the availability of goods and services that expats need while living abroad.

Of course, the specific impact of cost of living depends again on the country and city you will be moving into. Most of the time, the impact can be greatly felt in housing. If your company does not include housing in your package and you are faced with arranging and paying for this yourself, you might want to check the rental prices and conditions in your new country of residence. Cities like Dubai, London, or New York have some of the world's highest housing costs and getting assigned to cities like this can be a cause for asking a raise or a cost of living (or housing) allowance in your contract.

Make sure you do the proper research using legitimate sources both local and international before you start negotiating the impact of cost of living in your life as an expat abroad. Mercer’s cost of living index is one of the best legitimate sources for research. The link for their ranking can be found here, and other cost of living rankings here

Consumer price index

Unlike the cost of living index, which measures the changes of prices based on a level or a set base, a consumer price index measures the average change in prices paid by customers over time. The consumer price index is usually a percentage change comparison over past periods. Both of these forms of measure use a certain market base of consumer goods and services.

Investopedia explores more about the Consumer Price Index in this youtube video

The fight against inflation

Countries and cities around the world struggle to remain competitive, and inflation is a major factor when it comes to global competitiveness. INSEAD, a global business school, recently released a global talent competitiveness index which shows the top countries that are most attractive to global talent, as well as the factors that make countries and cities attractive to businesses as well as global employees.

The top 5 things that make a country attractive to business and global talent are: Language and culture, opportunity, pay and lifestyle, management practices, and quality of educational opportunities. In the section for pay and lifestyle, the index outlines the value of inflation and how it plays in the cost of living factor for global companies and workers. From then it becomes a cycle of competitiveness; global competitiveness is driven by controlled economies, and controlled economies are achieved through global competitiveness.

You can read more about the Global Talent Competitiveness Index through INSEAD’s official website or explore our infographic highlighting the key factors of the index