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A comparison of purchasing power around the globe, 2005
update
Oslo, Copenhagen, Tokyo and Zurich are among the most
expensive cities in the world. If rents are included in the comparison of living
costs, London tops the list.
This update to the Prices and Earnings
survey from UBS compares purchasing power in 71 cities around the world,
recalculated to reflect exchange rate, inflation and growth trends.
Meanwhile, as the US dollar has lost value, US cities
have become cheaper since 2003.
Since UBS conducted its most
recent price and earnings survey in spring 2003, there has been a big shift in
the relative values of currencies. And as exchange rates change, so do relative
price levels in the countries concerned. The weak US dollar has seen US cities
fall in the global price rankings, so that a shopping spree in the US is now an
attractive proposition for Europeans. Similarly, Hong Kong is no longer among
the costliest locations. Meanwhile, on the back of the rise in the Danish krone,
Copenhagen has moved up in the rankings to become the world's second most
expensive city. The latest price comparison uses the detailed statistics on
living costs gathered in the spring 2003 survey, updated to reflect exchange
rates and inflation as at end-2004.
1. Net hourly pay divided by the cost of the total basket excluding rent. 2. Price of product divided by weighted average net hourly pay across 13 occupations
Higher earnings thanks to economic growth
As well as accounting for exchange rates and inflation, the
recalculated earnings index also recognises that a slice of economic growth is
passed on to the workforce in the form of real wage increases. In the updated
index, the highest gross wages are paid in Scandinavia and Switzerland. The city
with the highest gross wage level is now Copenhagen, ahead of Zurich, Basel and
Oslo. But owing to higher taxes and social security contributions, the
Scandinavian cities have all moved down the rankings on net wages.
1. The calculations are based on wage figures, social security contributions and working hours for 13 occupationss
Big difference in purchasing power between old and new EU
members
On a global comparison, people now have to work one or two minutes
less on average than in 2003 to earn a Big Mac or a kilo of rice or bread. Real
wage increases have boosted purchasing power across most of the new EU states in
eastern Europe, so Lithuanians, Poles and Czechs now have to invest less working
time to pay for a Big Mac. However, the accession of ten new member states from
eastern Europe in spring 2004 cut the average purchasing power in the EU by
around 20%. There is still a gulf in purchasing power between the old and new EU
member states, mainly because of the big difference in wage levels. On a global
comparison, net purchasing power is highest in Swiss cities and in Luxembourg,
Los Angeles and Miami.
1. Cost of a basket of 115 goods and services weighted in favour of Western European consumer habits (excluding rents)
Prices and Earnings is a survey
published by the economists at UBS every three years. It compares the prices of
goods and services, wages, wage deductions and working hours, along with the
resulting purchasing power, in 71 cities across all continents. More than 35,000
data items are collected and analysed during research for the publication.
Exchange rates and differences in inflation have a crucial impact on the
comparison over time, and this update is simply based on the statistics from the
2003 analysis, adjusted for relative inflation and recalculated to reflect
current exchange rates (as at end-2004). In addition, differing rates of
productivity growth are factored into the recalculated figures for wages. The
next full survey, collecting original data on prices and earnings, is scheduled
for spring 2006.
