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QUESTION:  When I enter an international Base City or an expensive US Base City, the spending pattern often exceeds the earnings level which I have specified, resulting in a negative miscellaneous value.  Why does the program display such a disparity between the 'Base City Total Cost of Living' and the 'Base City Earnings Level'?

 

All comparisons load with a default spending pattern (assumptions as to how the employee is spending his/her income) that mirrors a "typical" North American at that income level.

 

The majority of ERI's subscribers administer cost-of-living allowances to North American citizen transferees, expatriates and third party nationals. This methodology, therefore, is the most consistent and useful to the majority of our subscribers.

 

For comparisons that involve an international Base City or an expensive North American Base City, it is suggested that you lower the square footage of the home until the Base City "Total Cost of Living" more closely matches the Base City "Earnings" level which you have specified.  The relatively large home rentals which are common in the US are often unavailable in other countries.  For example, the average Canadian rental (and ownership) apartment and home size is smaller than its US counterpart.  Japan and European countries offer even more extreme comparisons, and the program applies maximum square footage limits specific to each country so that even if you raise the spending level, the square footage will hold to the maximum value.

 

The housing, consumables, transportation and health services costs are all useful if the employer is not providing them directly in the international destination.  Alternatively, some subscribers may look at them individually when setting COLAs.  For example, if the employer is providing housing, you may build your COLA from consumables and transportation differentials alone.

 

Another consideration for international comparisons is transportation costs.  While transportation differentials are relevant to many domestic relocations, you may wish to zero-out the automobile values, if, for instance, a company car will be provided in the destination city.

 

Please note: For third country national and expatriate purposes, the Geographic Assessor presumes a headquarters (US) life-style, along with a non-efficient spending pattern (as would be expected during the first year). See International Comparisons for more information.

 

See Two City Comparison - Background for more information.