This time last year, the Economist Intelligence Unit (EIU) released its annual report into the cost of living for executives transplanted overseas, and I devoted a lot of effort to explaining how the report didn’t prove the cost of living was generally high for Australians, because it wasn’t remotely examining that question. Clearly no-one pays any attention to this sort of analysis, because the 2013 report is out now and exactly the same mistake is being made.
Sydney skyline picture from Shutterstock
To recap briefly what I reported in more detail last year (drawing heavily on an excellent analysis by Matt Cowgill): the EIU’s annual analysis is not a direct comparison of how expensive life is in a given city for locals in that city. It is “a relocation tool that compares the cost of living between 131 cities worldwide using New York as a base city”, as the announcement press release makes clear. Indeed, the report’s editor Jon Copestake points out that the fact that cities in our region dominate the list is because of economic prosperity:
Asian cities have also been rising on the back of wage growth and economic optimism. This means that over half of the 20 most expensive cities now hail from Asia and Australasia.
But that doesn’t stop news organisations over-simplifying the situation:
It's official..Australian cities rank among the most expensive in the world. Sydney comes in third behind Tokyo and Osaka, Melbourne is 4th
— News Breakfast (@BreakfastNews) February 4, 2013
A Reuters report manages to discuss the index extensively without once mentioning that the fact that it’s designed for relocating executives, presenting it as some kind of overall measure of the cost of life in different cities. That isn’t what the EIU has measured, and it’s deceptive to present it as such.
for relocating executives
Based on last year’s experience, I don’t expect commenters to absorb much of this. But let’s try and make it extremely clear: this report provides no evidence of whether the cost of living for Australian citizens working in Australia has gone up. It doesn’t factor in the level of tax that is paid, because workers employed from other countries will often be on very different tax arrangements, and it doesn’t factor in typical income levels for Australians. It doesn’t incorporate the overall cost of large government-run systems such as healthcare, and it doesn’t make any allowance for population density. It is designed purely to give HR executives in multi-national organisations a means of weighting expenses relative to a single currency (in this case, the US dollar).
It’s an election year, and we’re going to hear a lot about the cost of living. That’s a valid debate and one that should be informed by empirical data, not anecdotal experience. But that doesn’t change the fact that this particular set of data has no relevance to the cost of living for Australians. If you’re working in a job which might see you move overseas, it’s potentially interesting. But twisting it to mean something else doesn’t make you look more informed; it makes you look less informed.