While international mobility continues to attract global workers, they are increasingly cautious before signing their contracts. Today, expats have to contend with the ever-increasing cost of living in major cities. So, how can one consider living abroad under these conditions? What happens if you're looking to move abroad with your children? Are expats still able to negotiate their salaries, housing allowances, or their children's school fees? Let's have a look.
Do you have to be wealthy to move to a big city?
According to the , released on June 20, 2024, Hong Kong, Singapore, and Zurich remain the most expensive cities for expats this year. These cities already held this title last year. Following Zurich are three other Swiss cities, with two maintaining their 2023 positions: Geneva (4th) and Basel (5th). Bern is 6th, ahead of New York.
Last year, the skyrocketing cost of living in New York scared expats. A young banker on his first-time stay still can't believe it. Arriving in New York at the end of 2022, his employer helped him find housing. This assistance was useful but did not offset the high cost of living. 鈥淢y apartment is a financial sinkhole. Sure, I have a good salary. Some might say I'm rich, but everything is so expensive here that I feel like I'm not earning much.鈥� Returning to France for Christmas in 2023, he stocked up on food. 鈥淚t's much cheaper in France.鈥�
Indeed, prices in New York remain very high. Following it are London, Nassau in the Bahamas, and Los Angeles. These three cities have slightly risen in the rankings, but London's leap is particularly noteworthy, climbing nine places since 2023. Expats could have done without it. Inflation has burdened household budgets, peaking at 19% in March 2023. While inflation has dropped to 3.2%, living well in London remains a challenge for millions of residents.
Why does the cost of living keep rising in major cities?
The list of major cities with rising living costs seems endless: Dubai (15th, up 3 places), Miami (17th, up 5 places), Paris (29th, up 6 places), Berlin (31st, up 6 places), Mexico City (33rd, up 46 places), Dublin (41st, up 10 places).
Inflation and skyrocketing rents significantly contribute to the rising cost of living in major cities in a still complex international context, with the lingering effects of the COVID pandemic and the energy crisis. Added to this are the Russian invasion of Ukraine and the conflict between Israel and Hamas. Overall, expatriates and locals alike find themselves working more but earning less.
London's effort to reduce the pressure on residents
Aware of their difficulties, authorities are taking action. In January, Sadiq Khan, the Mayor of London, decided to freeze public transport fares. Transportation is also a significant expense in big cities. One hundred twenty-three million pounds will be allocated to freeze transport fares until 2025. This is the fifth time the mayor has frozen transport fares since his election in 2016. For Sadiq Khan, it's about 鈥減utting money back in people's pockets鈥� while encouraging Londoners to use public transport more.
Switzerland: Where salary increase means reduced purchasing power
In Switzerland, inflation remains a burden on purchasing power. Average salaries are affected, although they are higher than in other countries. According to the Federal Statistical Office (FSO), nominal wages (wages received by workers) increased by an average of 1.7%. However, real wages (income divided by the price index) decreased by 0.4%. This figure may seem insignificant, but it reveals that Swiss workers' purchasing power is declining due to inflation (2.1% in 2023), according to the FSO. Salary increases are not enough to offset rising prices.
How the rising cost of living affects expats
The constantly rising cost of living heavily impacts expats' finances. They may even reconsider, shorten, or reconsider their plans to move abroad. For instance, the young banker in New York is eager to leave the country. He confirms having seen other expats pack up for another city, another U.S. state, or another country. 鈥淚t's even harder for families," he says. Expats with families face a greater challenge in this context of inflation and housing crises. However, nothing is impossible, especially with your employer's support.
What can you negotiate as an expat?
Can expats negotiate or renegotiate their salary? Request a bonus? Ask for relocation assistance? Seek job search help for a trailing spouse? Can children's school fees be partially covered?
Foreign workers with detached or expatriate contracts
It all depends on the employment contract. Worker who are on a a detachment remain employees of the company sending them abroad. Therefore, the company is required to provide 鈥渄ecent housing鈥� for the expat during their mission. There is no such housing obligation in an expatriation contract, but the employee (expat in the strict sense) has the right to negotiate clauses to be included in the contract. These clauses can help offset any potential salary decrease.
We all know that lucrative expatriation contracts are no longer trending, except for directors and highly qualified professionals. For others, getting coverage for children's school fees, the trailing spouse's training, language courses, and relocation assistance is now very challenging. Negotiation will more likely revolve around marginal benefits: compensation if the cost of living is higher in the host country than in the home country, assistance with administrative paperwork, etc.
Foreign workers with 100% local contracts
Without a detachment or expatriation contract, the worker expatriates by their own means. They work under a local contract (without an expatriation contract in the background), with no ties to a company from their home country. In this case, salary renegotiation is possible, considering the host country's culture. Negotiations can also take place during the job interview. Of course, the employer has no obligation to agree to the requested salary increase, but it's worth a try.
Can you negotiate rent or receive housing assistance?
Again, it depends on the host country and the foreign worker's situation. As explained earlier, detached workers' housing is covered by the employer. Strictly speaking, expatriates (with an expatriation contract) can negotiate a housing assistance clause in their contract. To support their request, they can refer to the high cost of living in the host country, the scarcity of rental options, the difficulty in finding housing, etc.
Don't forget the possible assistance foreign workers might be eligible for. Many countries provide assistance (like housing aid) based on income conditions. Expats are advised to check their eligibility with local authorities. You are also advised to research the rental market well before moving. Finding affordable housing before moving abroad can help you a great deal. However, to avoid scams and unpleasant surprises, it's better to seek the help of a real estate agency in the host country.
Schooling: Choosing between an international and a local school for your kids
Today, expats think twice before enrolling their children in international schools. In New York, first-year tuition at an international elementary school can reach nearly US$50,000. Costs are lower in London (around $35,000) and Dubai (around $20,000) but increase for subsequent school years. In comparison, local school fees are much more affordable, which explains why expatriates are hesitant.
Besides cost, local schools have another advantage: they accelerate and facilitate the child's integration into the new country. If they don't know the local language yet, they will learn it quickly. They will better grasp the host country's culture. Parents choosing international schools emphasize their child's preparation for future diplomas. If planning a return home, for example, an international school ensures a similar education to that of their home country. There will be no gaps in learning, and their diploma will be recognized at home. While these are relevant arguments, they increasingly clash with the exorbitant costs of international school education. The good news is that some countries offer scholarships to expatriate parents who choose a school accredited by the Education ministry.
