Between the end of March and end of April 2015, we completed a standardized survey on prices of 122 goods and services, and earnings for 15 professions in 71 cities worldwide. The survey was conducted locally by mutually independent observers. More than 68,000 data points were collected and included in our calculations of the indicators in this report.
To effectively compare cities, we converted all prices and earnings in local currencies to a common currency, the US dollar (USD). Average exchange rates from the data collection period were used to minimize the effect of daily price fluctuations.
While we originally started the survey with 72 cities, we needed to remove Caracas, Venezuela. Due to the current complex political and economic situation in the country, with large fluctuations in inflation and exchange rates, we decided that the results for it would not represent current circumstances.
Reference basket of goods
To make an effective comparison of purchasing power worldwide, a standardized basket of goods and services is required, even though consumer habits and preferences vary greatly. Our reference basket of 122 goods and services is based on the monthly consumption habits of a European three-person family. If products were not available in some cities, or deviated too far from our parameters, local representative substitutes were sometimes used. To make up for the missing coverage, individual items were weighted differently as a correction. We attained a coverage level of almost 70% of the EU’s harmonized index of consumer prices (HCIP) this year.
Changes in consumer habits stemming from technological developments were accounted for by updated specifications for electronic products. The iPhone 4S from 2012, for instance, was replaced with an iPhone 6. We also expanded data collection possibilities for our housing section to get a more accurate picture of local accommodation worldwide. Also, the furnished four-room apartment was changed to a furnished two-room apartment.
Reference profile of working populations
As with our prices section, we created a reference profile of 15 professions, representing the structure of the working population in Europe. We included profiles of workers of varying ages, family status, work experience and education levels. To offer a fuller picture, we introduced the profession of a hospital nurse to replace the financial analyst. This change affected our weighting of the other professions, a fact to consider when comparing this version of the report to those of previous years. We also expanded our social security contributions section considerably to encapsulate both employee and employer contributions, providing a more realistic cost of the global workforce.