Vienna has been rated as the city with the best quality of living for the second consecutive time by Mercer’s Quality of Living rankings 2015 unveiled today. European cities dominate the rankings along with major cities in Australia and New Zealand. Zurich, Auckland, and Munich were rated second, third, and fourth place respectively. In fifth place, Vancouver is the highest-ranking city in North America, Singapore at 26 is the highest-ranking Asian city, whereas Dubai ranked 74 is first across the Middle East and Africa.

Mercer conducts its Quality of Living survey annually to help multinational companies and other employers compensate employees fairly when placing them on international assignments. Two common incentives include a quality-of-living allowance and a mobility premium. A quality-of-living or “hardship” allowance compensates for a decrease in the quality of living between home and host locations, whereas a mobility premium simply compensates for the inconvenience of being uprooted and having to work in another country. The report provides valuable information and hardship premium recommendations for over 440 cities throughout the world and the ranking covers 230 of these cities. The parameters taken into account for the survey include political and social environment, medical care and health considerations, public services, recreation facilities and natural environment amongst others. Top destinations where Indian companies send their employees include Australia, China, Indonesia, Malaysia, Philippines and Singapore in the Asia Pacific region; France, Germany and United Kingdom in Western Europe; Brazil in South America, South Africa in Africa; United States & Canada in North America and UAE in the Middle East.

Although Hyderabad, ranked at 138 was the top Indian city in the quality of living ranking, other cities rank much lower down the order with the next Indian city, Pune, ranked at 145*. The survey highlights that Indian cities haven’t made much progress on the quality of living scale, scoring nearly the same as they did last year. Over time, Hyderabad has emerged as a city of choice due to factors such as improved options for international schools and a fine choice of reputable English speaking schools. Additionally, Rajiv Gandhi International Airport is located 22kms from the city and offers a good range of international flights, which improves its ranking on account of public services.

Both Hyderabad and Pune cities rank higher for quality of living than the country’s more traditional business centres, Mumbai and New Delhi ranked at 152 and 154 respectively. “The World Health Organization (WHO) recently published data on pollution around the world suggesting that 13 of the world's 20 most-polluted cities are all in India, this impacts the overall scores of Indian cities” said Ruchika Pal, India Practice Leader, Global Mobility at Mercer. “While other factors have remained constant, considerable population increases in Mumbai and New Delhi, in the recent decades, have increased existing problems, including access to clean water, air pollution, and traffic congestion.”, she added.

Interestingly, the survey suggests that Indian cities are safer than most others in South Asia. While the ranking of Sri Lanka’s capital Colombo is above Hyderabad by 6 ranks, at 132, Dhaka in Bangladesh is ranked 211 and Pakistan’s Islamabad, Lahore and Karachi are ranked 191, 199 and 202 respectively.

Ms. Pal added “Most Indian companies send their employees on short term or long term assignments to developed nations. Low scores and rankings of Indian cities does not reckon a provision of hardship or quality of living allowance, as the differential tends to show marked improvement in quality of living from an Indian base city.” In case employees are sent to hardship locations, companies typically depend on data service providers’ recommendations to determine the hardship premiums.

Asia-Pacific

Asia is the region with the largest range in quality-of-living standards, with the highest-ranking city, Singapore, in 25th place and the lowest-ranking, Dushanbe, Tajikistan, in 214th place. Behind Singapore, the second highest-ranking city in Southeast Asia is Kuala Lumpur (84); other major cities here include Bangkok (117), Manila (136), and Jakarta (140). Other key cities in this part of the region include Hong Kong (70), Shanghai (101), and Beijing (118).

In the Pacific, New Zealand and Australian cities are some of the highest-ranked cities globally, with Auckland in 3rd, Sydney in 10th, Wellington in 12th, and Melbourne in 16th place.

Europe

Despite concerns about economic growth, the cities of Western Europe continue to offer a stable environment for employees and employers. Vienna (1) is followed by Zurich (2). With Geneva and Copenhagen in 8th and 9th places, respectively, Western European cities take seven of the top 10 ranks. The lowest-ranking cities in Western Europe are Belfast (63) and Athens (85). Cities in Central and Eastern Europe have a wider range of quality-of-living standards. The highest-ranking cities are Prague (68), Budapest, and Ljubljana (both ranked 75th). Emerging city Wroclaw (100), Poland, has a thriving cultural and social environment and good availability of consumer goods. The region’s lower-ranking cities are Kiev (176), Tirana (180), and Minsk (189), with Kiev experiencing a considerable drop in the rankings following political instability and violence in Ukraine overall.

Americas

In North America, Canada and the United States continue to offer a high standard of living. Vancouver (5) tops the list for this region, followed by fellow Canadian cities Toronto (15) and Ottawa (16), whereas San Francisco (27), Boston (34), and Honolulu (36) are the highest-ranking US cities. Mexico’s highest ranking city is Monterrey (109), while Mexico City is ranked 126th. The lowest-ranking cities in the North American region are Havana (193) and Port-au-Prince (228).

In Brazil, Mercer has identified Manaus as an emerging city –it is ranked 127th. The city is already a thriving industrial centre and has a free economic zone – its good supply of consumer goods and relatively advanced infrastructure partially counteract the impact of Manaus’ remote location, and lack of international schooling options for expatriates.

Middle East and Africa

In 74th place, Dubai ranks highest for quality of living across the Middle East and Africa region. It is followed by Abu Dhabi (77), also in the UAE, and Port Louis (82), Mauritius. In South Africa, Durban (85) is an emerging city and ranks higher than the country’s traditional business centres, Cape Town (91) and Johannesburg (94). Durban’s higher ranking is mainly due to its high-quality housing, plentiful recreational offerings and good consumer goods availability. However, the city’s crime problems keep it from reaching the top 50.

Ranking 230th, Baghdad is the lowest-ranking city in the region and on the overall list.

Expatriates in difficult locations: Determining appropriate allowances and incentives

Companies need to be able to determine their expatriate compensation packages rationally, consistently, and systematically. Providing incentives to reward and recognize the efforts that employees and their families make when taking on international assignments remains a typical practice, particularly for difficult locations.

*Two common incentives include a quality-of-living allowance and a mobility premium:

1. A quality-of-living or “hardship” allowance compensates for a decrease in the quality of living between home and host locations.
2. A mobility premium simply compensates for the inconvenience of being uprooted and having to work in another country.

A quality-of-living allowance is typically location-related, while a mobility premium is usually independent of the host location. Some multinational companies combine these premiums, but the vast majority provides them separately.

Quality of Living: City benchmarking

Mercer also helps municipalities assess factors that can improve their quality-of-living rank. In a global environment, employers have many choices as to where to deploy their mobile employees and set up new business. A city’s quality-of-living standards can be an important variable for employers to consider.

Leaders in many cities want to understand the specific factors that affect their residents’ quality of living and address those issues that lower their city’s overall quality-of-living ranking. Mercer advises municipalities through a holistic approach that addresses their goals of progressing towards excellence, and attracting multinational companies and globally mobile talent by improving the elements that are measured in its Quality of Living survey.

Mercer hardship allowance recommendations

Mercer evaluates local living conditions in more than 440 cities it surveys worldwide. Living conditions are analysed according to 39 factors, grouped in 10 categories:

1. Political and social environment (political stability, crime, law enforcement, etc.).
2. Economic environment (currency exchange regulations, banking services).
3. Socio-cultural environment (media availability and censorship, limitations on personal freedom).
4. Medical and health considerations (medical supplies and services, infectious diseases, sewage, waste disposal, air pollution, etc).
5. Schools and education (standards and availability of international schools).
6. Public services and transportation (electricity, water, public transportation, traffic congestion, etc).
7. Recreation (restaurants, theatres, cinemas, sports and leisure, etc).
8. Consumer goods (availability of food/daily consumption items, cars, etc).
9. Housing (rental housing, household appliances, furniture, maintenance services).
10. Natural environment (climate, record of natural disasters).

The scores attributed to each factor, which are weighted to reflect their importance to expatriates, allow for objective city-to-city comparisons. The result is a quality-of-living index that compares relative differences between any two locations evaluated. For the indices to be used effectively, Mercer has created a grid that allows users to link the resulting index to a quality of living allowance amount by recommending a percentage value in relation to the index.

Indian Cities Ranking*