Entrepreneurs and young businesspeople are spoiled for choice when it comes to choosing where to live and work. The three biggest American cities, New York, Chicago, and Los Angeles, offer uniquely appealing lifestyles to go along with access to capital, strong infrastructures, diversified industries, highly educated workers, and big customer bases. Then there’s the San Francisco Bay Area, the hub of the technology world. Increasingly, young businesspeople are taking advantage of the globally-integrated economy and looking abroad to further their careers. But like the saying goes, you’ve got to pay the costs to be the boss.
Swiss Bank UBS recently released a study measuring the cost of living in 72 cities around the world. While the broad results are unsurprising; New York, Oslo, and Tokyo are the costliest cities in North America, Europe, and Asia respectively, diving deeper into the data reveals some interesting information.
Salaries are always an alluring statistic. On average, workers in L.A. and Chicago earn 80% of their peers in New York, which was used as the baseline city for the wage table. Tokyo is the only Asian city that comes close to the average New York salary, with those in Hong Kong and Seoul earning almost 50% less. Beijing and Shanghai ranked near the bottom, barely above emerging cities such as Mumbai and Bangkok. UBS profiled a wide range of professions for its study; in one example, it found that while financial analysts grossed in the low six figures (in US dollars) in New York, Chicago, Tokyo, and Seoul, those in Beijing and Shanghai grossed only in the high four figures.
Taxes across different jurisdictions greatly affect actual take-home pay. Surprisingly, New Yorkers have a lighter average tax burden, 22%, than Angelenos (28%) and Chicagoans (25%). Tokyo’s and Seoul’s workers are taxed at a level similar to Americans, at around 25%, while those in Beijing and Shanghai see only 17% of their wages deducted. The further you go into the developing world, the lower the tax burden. Mumbai comes in at 11%, Taipei at 8%, and Bangkok at 6%. Then, of course, there are the tax-free, and social services-lite, Gulf cities such as Doha and Dubai.
High take-home pay is all well and good, but if common goods are uncommonly expensive, then what’s the point? It’s purchasing power which tells us more about quality of life than net earnings.
Owing to careers that can take them around the country and the world, as well as the shaky housing market, many young businesspeople are renters. Rent is far, far cheaper in L.A. and Chicago than in New York. New York is infamous for its six-floor walk-ups and murky closets posing as studio apartments; but such is the demand, and such is the lack of space, that its units go for the highest rent of any city in UBS’ survey. Rents in Seoul, Tokyo, and Hong Kong are higher than in L.A. and Chicago, while only a few hundred dollars a month can rent a place in Beijing, Shanghai, or Taipei.
UBS also calculated the net purchasing power among the cities it surveyed using a hypothetical ‘basket of goods’ consisting of typical consumer goods and expenses. Workers in Chicago and Los Angeles enjoy slightly better purchasing power than their counterparts in New York when viewed against net hourly wages. Tokyo, Seoul, and Hong Kong residents come closest in spending power. Those in Shanghai have significantly greater purchasing power than those in Beijing, which compares with Mumbai at about 28% of New York’s.
An easier way to think of purchasing power is the famous Big Mac index which looks at what McDonald’s ubiquitous burger costs in different parts of the world. UBS’s version posits the index in terms of how long it would take an average worker in each city to earn enough to buy one. A person in New York, L.A., or Chicago need only work about 11 minutes before earning a trip to the golden arches. Tokyo workers can get “two all beef patties, special sauce, lettuce, cheese, pickles, onions, and a sesame seed bun,” in only nine minutes. Hong and Taipei workers have it nearly as good, at ten and 17 minutes respectively while Beijing and Shanghai workers have to put in around half-an-hour before earning enough to chow down on a Big Mac.
Quality of life remains high in Western Europe, but so does the overall tax burden. The study shows that New York, Chicago, and Los Angeles remain alluring destinations, but there’s no doubt that the burgeoning cities of Asia are rapidly catching up. Entrepreneurs and young businesspeople can look at this study and feel confident that bountiful opportunities along with a great quality of life await abroad.
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