The economics of expatriating around the world

world map I am an ex-pat in the strictest sense, but not the kind that comes with corporate expense accounts.  So contrasting my voluntary expat experience with some of my friends who have been ex-patted for work, here are some observations.

Few report a drop in their standard of living, regardless of their place of origin and their relocated cities.  The issues on hand are those of 1) income discrepancies, 2) tax burdens, 3) quality of life.

When it comes to income gaps between home and host countries, those moving from less-developed countries to more developed ones usually have their salaries bumped in accordance to the higher local salary levels and cost of living.  For places that suffer from severe housing shortage or exorbitant upward price pressures, i.e. London, New York, Moscow or Tokyo, companies usually have long-term lease or outright owns condo units to alleviate house-hunting pressures and contain costs.

Those moving in the opposite direction will more or less retain their salary level from back home. There we have the enviable case of someone on an European or American salary, but now facing costs as low as 1/10 of what they are used to back home.  In countries with low labour costs, many are equipped with live-in help.  In certain places where security is a concern, drivers are assigned.  Expats in a number of select countries also qualify for a “hardship allowance”, to compensate for real or imagined political and social uncertainties. On the upside, they are able to do all the things that young people are supposed to want to do.  Namely, carrying on the hedonistic lifestyle that ex-colonials indulged in from centuries ago.  On the downside, living in rapidly-growing urban centres come with the inevitably stress arising from noise and pollution, not to mention a myriad of social ills.

When it comes to paying taxes, most multi-nationals more or less pay their expats based on lower-taxed jurisdiction of an employee’s home base versus host state.  An employee ex-patted to a higher-taxed jurisdiction can be paid net salary based on her tax rates back home, if the company is able to maneuver her status as a consultant that works out of the country.  Should the same employee now be deployed to a low-tax country, then she will most certainly get signed on as a full-time employee by her new regional office.

Now let’s examine quality of lives in various region of the world.

1. Western Europe: It is high income, high cost of living, and high taxes.  So in that sense, taxes and cost of living strip away many benefits of having a higher income.  But on the bright side, living in Europe means you don’t necessarily need to have a car.  But you might get a brand-spanking new one from work anyway.  If you are so lucky as to not having a car, there’s walking, biking, bus and train.  And cheap airlines will take you around the continent and beyond for next to nothing. You also get 4-8 weeks of government mandated vacation a year to maintain your sanity. This is very important: you can visit your family back home, AND have a vacation elsewhere. On the other hand, you do need to watch your pennies, since cost of living can be high if you like to shop, party and dine out.  And forget about having nannies and cooks.  That concept does not exist, unless you live in the UK, or a multi-millionaire.

2. North America: It is high income, moderate cost of living, and moderate level of taxes (it’s all relative here).  You can save a bit of money, but you’ll need to dust off your piggy bank to pay for a number of things that are more or less mandatory.

First one on the list: a gym membership.  Because a measly 3 weeks of vacation is barely enough time to unwind from the rest of your over-worked and under-productive co-workers. But what are you complaining about, right?  Nobody goes to America and demands French-style vacation schedules.  Plus, crappy suburban (and in some cases, urban) planning means it’s next to impossible to walk to anywhere anymore.  Throw in some delightfully cheap and generous servings of calories masquerading as food and drinks when you dine out, you are going to want to hit that treadmill, pronto!

Depending on where you are ex-patted to, you might want to get your mitten-ed paws on a 4×4, because those Canadian/east coast/mid-west winters always last longer than you are led to believe.  As a corollary to the above, having a trusted bulging machine will make it even harder for you to want to move, especially when gas is this eye-poppingly cheap.  And you better get used to driving (or at least befriend someone who doesn’t mind it), because it takes ages to get anywhere. Someone who’s just across town?  That town may take an hour to cross.  A gem of a national park just outside of the city on a map?  Easily five hours away.

If you want to forego a car, the best bet is to get a house or condo in the downtown core.  It is little doubt that you will pay through the nose for, mostly, sub-par constructions that look bright and shiny on the outside, the lobby, and the elevator, but pure budget once you start living in it.  And yes, cutting corners in the name of affordability has been the unavoidable reality of real estate development for quite a while now.

But my stereotyping aside, ex-patting to North America is an experience that’s pretty much up to you.  You make good money, enjoy pretty good services, meets friendly people.  Your lifestyle choices are largely determined by your likes and dislikes.  If you are an active person and outdoor adventurer, then the wild, along with some pretty crazy fitness fanatics await you.  If you are by nature a sedentary person, then North America will turn your passivity into potentially serious health concerns.

3. Far East: Countries like Japan, South Korea, Singapore and Hong Kong had long been ex-pat favourites.  Then communist China and Vietnam reopened for business, making the Far East even more appetizing as the region cements its reputation as a consistent supplier of cheap food, always reliable nightlife, and adoring locals.  On the plus side, the pace of life picks up significantly.  In stark contrast to a work-life-balanced Europe, this is land where money speaks louder than almost everything else. If you measures your worth by the amount of hours worked and the amount of wealth pulled in, then there is no better fit.  If community-based organic farming and the idyllic countryside life is your dream, then stay the hell away.

On the cost side, eating out is cheap.  Considering most expats have paid housing complete with maids, your income will most likely be steered towards entertainment and status-signaling purchases.  Dining out is cheap as long as you stick with regular restaurants and street stalls.  As soon as one ventures into flashy western-style eateries or trendy bars, the prices multiply to just about what you would shell out back home.  Should you buy into the local mindset of materialism, status bags, shoes, and brand name accessories and clothes will proceed to eat a hole in your credit card.  You also need to get used to painfully obvious gap between the rich and the poor.  For those staunch liberals bothered by class and stratification of society based on obnoxious flaunting of material wealth, this might be a bit more difficult.

4. Middle East: One of two scenarios.  Either you work for a not-for-profit outfit spreading peace, democracy, or some health-care initiative, or you work on oil or service one of its many peripheral industries.  Let’s say you belong to the latter, and richer group.  Then you are most likely living within a compound in an oil rich Gulf country, fraternizing with other expats.  Soon enough, you are friends, and perhaps more.  You seldom see, never mind meet locals, except for your Pilipino nanny and other South-East Asian migrant workers building more condos in scorching heat along newly paved highways in the middle of the desert.  Things cost about the same, if not a little cheaper than back home.  But you are still so much richer than you would otherwise be.  Because there’s no tax.  So you pamper yourself with spas, complete with massages and facials and pedicures.  You defy nature by skiing and golf on engineering marvels.  You also debate whether you want to live in a condo or a villa.  Such discussion is not at all unreasonable.

I’m leaving out Africa, Latin America, South-East Asia and Russia out for another time.  Or until I know more about them.  Please share, if you have, or are currently ex-patted there.

source: evilpainter

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  • Brett J

    Appreciate the analysis. I spent some time in East Africa growing up (ex-patted from the US) so it was interesting to read this take on other areas.

  • Brett J

    Appreciate the analysis. I spent some time in East Africa growing up (ex-patted from the US) so it was interesting to read this take on other areas.