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A new ranking of world cities by the quality of life they offer can help companies determine how much an expat assignment should pay.
Alix Stuart, CFO.com | US
June 4, 2010
As companies become more and more global, it's increasingly important for rising finance executives to have experience living overseas. For those who have the opportunity to work abroad, though, there's good reason to be choosy. An annual look by Mercer at the quality of life in more than 200 cities quantifies just how disparate living conditions can be from Sydney to Shenzhen.
European cities garnered 7 of the top 10 rankings in Mercer's latest survey, released in May, with Vienna, Zurich, and Geneva heading the list (see below). The highest-ranking U.S. city is Honolulu at 31, followed closely by San Francisco and Boston. New York, considered the "base" city with a quality of life rating of 100, ranks 49th on the overall list and 6th among U.S. cities. Singapore and Tokyo are the top-ranked cities in Asia. At the bottom of the list is Baghdad, with a rating of 15, with Port au Prince, Haiti, and several cities in Africa clustering near it.
The ratings are used primarily by organizations to determine appropriate compensation and support services for expatriates, says Rebecca Powers, a principal in Mercer's human-capital consulting group. The numbers are generally viewed in a broad sense, with little or no tinkering done in response to a change of a few ratings points. "Companies will typically wait until there's a fairly big drop in the quality of life before they adjust compensation," says Powers, who estimates a score of 90 as a rough threshold for when additional payment might be warranted. However, additional compensation for shorter-term or even project-based assignments is becoming increasingly common. In general, there's no decrease in pay for expats moving to greener pastures.
The ratings are based on 10 factors, with the political and social environment most heavily weighted, and medical and health considerations coming in second. "If you're living in a war zone or worried you're going to be a victim of crime, that's definitely a drop in the quality of life," says Powers. Traffic, climate, and education are also among the considerations.
China is the most popular destination for most U.S.-based expats these days, says Powers, based on anecdotal evidence. According to the survey, Shanghai is the top-ranked city in mainland China, at number 98, while Jilin is the bottom-ranked one, at number 160. Most U.S. cities do not constitute hardship assignments, although Los Angeles ranks only slightly above the 90-point mark.
Some companies may use the data to help choose among several possible locations, Powers says, the thinking being that "if all else is equal, why not go where it's pleasant?" However, the list may not necessarily work as a good travel guide. "Because we rate stability and safety, the places that score very high are not always the most exciting," she notes.