UBS News Alert
UBS study: «Prices and Earnings» 2009
An international comparison of purchasing power in 73 cities around the globe
Oslo, Copenhagen, Zurich and Geneva named the most expensive cities; wages highest in Switzerland, Denmark and the US
Oslo, Copenhagen, Zurich, Geneva and Tokyo are the world's priciest cities
Employees in Zurich and Geneva have the highest net wages in the world
People in Cairo and Seoul work the longest - roughly 600 hours more per year than their peers in Western Europe
Crisis-driven currency fluctuations cause shifts in the rankings
UBS's "Prices and Earnings" study has dubbed Oslo, Zurich, Copenhagen, Geneva, Tokyo and New York as the world's most expensive cities based on a standardized basket of 122 goods and services. When rent prices are factored into the equation, New York, Oslo, Geneva and Tokyo emerge as especially pricey places to live. The basket costs the least in Kuala Lumpur, Manila, Delhi and Mumbai. The study was based on data collected in 73 cities around the world between March and April of this year.
Earnings highest in Switzerland, Denmark and the US
The survey of 73 international cities found that employees in Copenhagen, Zurich, Geneva and New York have the highest gross wages. Zurich and Geneva - the two Swiss cities in the study - top the rankings in the international comparison of net wages. By contrast, the average employee in Delhi, Manila, Jakarta and Mumbai earns less than one-fifteenth of Swiss hourly wages after taxes.
Zurich and New York: nine hours of work for an iPod nano
One vivid way to illustrate the relative purchasing power of wages is to replace the abstract basket of goods and services with a specific, highly uniform product that is available everywhere with the same quality, and then calculate how long an employee would have to work to be able to afford it in each city. The study determined that employees have to work a global average of 37 minutes to earn enough to pay for a Big Mac, 22 minutes for a kilo of rice and 25 minutes for a kilo of bread. For the first time, a non-food product was used in the study to compare working hours.
The iPod nano with 8 GB of storage is an ideal example of a globally uniform product. An average wage-earner in Zurich and New York can buy a nano from an Apple store after nine hours of work. At the other end of the spectrum, workers in Mumbai, need to work 20 nine-hour days - roughly the equivalent of one month's salary - to purchase an iPod nano.
Long working hours in the Middle East and Asia - shortest in France
People work an average of 1,902 hours per year in the surveyed cities but they work much longer in Asian and Middle Eastern cities, averaging 2,119 and 2,063 hours per year respectively. Overall, the most hours are worked in Cairo (2,373 hours per year), followed by Seoul (2,312 hours). People in Lyon and Paris, by contrast, spend the least amount of time at work according to the global comparison: 1,582 and 1,594 hours per year respectively.
A dollar earned in the US is worth more after deducting taxes and social security contributions than in neighboring Canada. While the basket of 122 goods and services is somewhat cheaper in Montreal and Toronto, the net hourly wage in these Canadian cities is also lower than in the surveyed US cities of New York, Los Angeles, Miami and Chicago.
In no other continent is the price spread between the most expensive and the cheapest city as wide as in Asia. While Tokyo ranks as one of the world's five costliest cities, Kuala Lumpur, Manila, Delhi and Mumbai are all at the bottom of the price range. Workers in Tokyo earn the highest wages in Asia. Likewise, consumers in Tokyo, Hong Kong and Taipei have the greatest purchasing power in the continent. Sydney ranks among the top ten cities in the international comparison.
Prices in Eastern and Western Europe have converged very little despite the EU's enlargement in 2004 and Slovenia's adoption of the euro as its official currency in January 2007 and Slovakia's in January of this year. A basket of 95 goods and 27 services was roughly 35% cheaper in the cities of Eastern European EU member states than in Western European metropolises. As a comparison, UBS's 2006 study found that the price differential between Eastern and Western Europe was around 38%. On average, workers in Western European cities receive gross wages more than three times higher than their colleagues in Eastern Europe. The lowest incomes are paid in Bulgaria (Sofia) and Romania (Bucharest). The wage level in these two countries, which joined the European Union in January 2007, is comparable to that of Colombia or Thailand.
London, the second most expensive city in the 2006 review, plummeted nearly twenty places following the pound's precipitous devaluation in March and April 2009 when the data was collected, landing in the middle in terms of Western European countries. During this time the GBP reached a low point of roughly 1.40 against the USD from which it recently appreciated to around 1.70. This rebound in the GBP exchange rate increased London's price level by 21% in USD terms, which would lift London from twenty-first to fifth in our global price ranking.
Rail travel is most expensive in the United Kingdom and Germany. A second-class, one-way ticket for a 200 km rail journey in Germany (average price: EUR 51.40 or USD 67.20) costs approximately 1.5 times as much as in the rest of Western Europe. Only the United Kingdom is more expensive. In London, passengers have to be willing to pay EUR 68.20 (USD 89.10) - double the fare charged in other Western European cities.
Residents of Geneva and Zurich in Switzerland pay around 20% more on average for products, services and accommodation than people in other Western European cities. With its extremely high gross wages and comparatively low tax rates, Switzerland is a very employee-friendly country. No other city allows workers to take home more income at the end of the month than Zurich and Geneva. Average gross hourly wages (before taxes and social security contributions) can purchase the most in Copenhagen, Zurich and Geneva. Bringing up the tail are Jakarta, Manila, Mumbai and Nairobi, where average gross hourly wages have between 11% and 15% of the purchasing power of a salary in Zurich. The basket of 39 food products is the priciest in Tokyo. Food prices are only marginally lower in Switzerland: Zurich occupies second place, Geneva third. Food prices in Switzerland are around 45% more expensive than the average in the rest of Western Europe.
Mike Ryan, Head Wealth Management Research Americas
UBS Wealth Management Research Tel. +1-212-713 4671
Yonghao Pu, Head Wealth Management Research Asia Pacific
UBS Wealth Management Research Tel. +852-2971 8693
Europe and Switzerland
Andreas Höfert, Chief Economist
UBS Wealth Management Research Tel. +41-44-234 6796
Daniel Kalt, Head Economic Research
UBS Wealth Management Research Tel. +41-44-234 2560