Dubai Highly Expensive For Expatriates

The findings of the international cost of living comparison of 228 international locations, conducted by the international relocation calculator, shows that Dubai is the most expensive place in the world for Restaurants, Meals Out and Hotels, and is the 32nd most expensive city in the world overall for expatriates to live in.

The international cost of living comparison uses the prices of goods and services that expatriates spend their salaries on in each location, and calculates cost of living indexes (COLI) for 13 different basket groups using New York as the base (i.e. New York is equal to 100).

The most expensive city in the world for expatriates is London. On average, goods and services that cost an expatriate US$126.6 in London would cost US98.84 in Dubai.

Dubai Cost of Living Basket

For each aspect of cost of living Dubai is ranked by Xpatulator as follows (Out of 228 international locations, ranked from highest cost of living to lowest cost of living):

·         Alcohol & Tobacco (Alcoholic Beverages and Tobacco Products): 104th

·         Clothing (Clothing and Footwear Products): 4th

·         Communication (Telephone, Internet, and Mobile Communication): 221st

·         Education (Creche, Primary, Secondary and Tertiary Fees): 127th

·         Furniture and Appliances (Furniture, Household Equipment and Household Appliances): 159th

·         Groceries (Food, Non-Alcoholic Beverages and Cleaning Material): 91st

·         Healthcare (General Healthcare, Medical and Medical Insurance): 28th

·         Household (Rent, Mortgage, Water, Electricity, Household Gas, Household Fuels, Local Rates and Residential Taxes): 5th

·         Miscellaneous (Stationary, Linen, General Goods and Services): 32nd

·         Personal Care (Personal Care Products and Services): 97th

·         Recreation & Culture (Books, Cinema, DVD, Sports Goods etc): 50th

· Restaurants, Meals Out and Hotels: 1st

·         Transport (Public Transport, Vehicle Costs, Vehicle Fuel, Vehicle Insurance and Vehicle Maintenance): 159th

The large differences in the ranking of each aspect of cost of living has important implications for people negotiating an expatriate salary in Dubai.  Dubai has 3 basket categories that are ranked in the top 5 most expensive places in the world.  It would save an expatriate a great deal of money to try and include these items as benefits that are provided by the employer, over and above the salary.  Firstly, Dubai is the most expensive place in the world for restaurants, meals out and hotels.  Unless these costs are covered to some extent as, for example a paid business expense, eating out will be almost unaffordable to most expatriates.  Secondly it would be worth bringing clothing with you from where ever you are based prior to moving to Dubai, as the cost of clothing and footwear is ranked the 4th most expensive place in the world for expatriates.  Thirdly and probably most importantly, it is vital that accommodation be negotiated as a provided benefit.  The cost of accommodation (rent or mortgage and utilities) in Dubai is ranked 5th most expensive in the world for expatriates.  If you were to negotiate an expatriate package that does not include accommodation, you will find a large portion of your salary having to be spent on a house or flat, which will make it very difficult to save money while living in Dubai.

Expatriate Salary Approaches

Cost of living information is used by organisations to establish salary levels for expatriates undertaking international assignments.  How the cost of living information is used depends on the pay methodology adopted by the organisation.  There are 3 mainstream approaches to establishing salary levels for international assignments, the build-up approach, the salary purchasing power approach, and the cost of living allowance approach.

Salary Build-Up Approach

The build-up approach uses the expatriate’s home salary as the starting point and then builds up the salary package for an international assignment.  Typical elements added to the salary are for cost of living differences, hardship differences and exchange rate.  Hardship is the relative difference in the quality of living a person and their family are likely to experience.

For example a person earning AUD$100 000 in Sydney taking up an assignment in Dubai would have the following build-up:

Base Salary AUD$100 000 X COLI X Hardship Premium X Exchange Rate = Assignment Package in US Dollars.

Using Xpatulator a person earning AUD$100 000 in Sydney, would earn an assignment package of USD$89 710 in Dubai.

Salary Purchasing Power Parity (SPPP) Approach

The salary purchasing power parity approach seeks to achieve parity between international locations.  What would be the equivalent of a salary in Dubai in other places in the world in terms of purchasing power?  We compared purchasing power by comparing salary levels adjusted for cost of living differences, and relative hardship using Xpatulator. 

A salary of USD$75 000 in Dubai is equivalent to:

USD$67 980 in Beijing

USD$57 812 in Johannesburg

USD$96 089 in London

USD$71 239 in New Delhi

USD$79 533 in Paris France

This means that an organisation with a head office in Dubai, and an international office in New Delhi would pay a position that is paid USD$75 000 in Dubai, USD$71 239 in New Delhi in order to achieve the same salary purchasing power in each location.

Cost of Living Allowance (COLA) Approach

Organisations that make use of Cost of Living Allowances (COLA) use cost of living information to determine how much COLA to pay for international assignments.  A COLA is an allowance paid to an expatriate to ensure that they are compensated where the cost of living is higher than their home country.  Where the cost of living is lower, most organisations do not adjust the salary downwards, they would simply not pay a COLA in such cases.  For example of a person earning US$57 812 in Johannesburg sent on an international assignment to Dubai, they would be paid a COLA as follows:

USD$75 000 in Dubai less USD$57 812 in Johannesburg = USD$17 188 COLA in Dubai

The COLA is paid in addition to the individual’s current salary, for the duration of the international assignment, and is typically reviewed on an annual basis, or when the COLI changes by more than 10%.