Revisiting cost of living in European cities?

December 29, 2006 8:36 AM

I'm in a little bit of a bind determining the cost-of-living in European cities vs US cities...

I know this has been asked before, but some of the best tools (cost of living calculators) seem to have gone the way of the dodo recently. Basically, I have two questions that are closely related. I have a job offer in a European country of my choice. It's likely we'll choose Austria (Vienna) just for the good expat community and convenience, though other countries are certainly on my list. My challenge: I make pretty good money in the US, but I don't know how that money would translate to euros. I suppose one of the ways to figure this out is to manually determine rent, food, auto, petrol prices in the country of choice, but I guess what I really want to know is if I have a standard of living in the US that someone with a six figure salary would have, what is the equivalent standard in Europe? In other words, how comfortably will I live if my salary is translated appropriately?

Bonus points if you want to suggest some cities for a brand new expat with no language other than English to move to (though i've had better luck researching that).

posted by arimathea to work & money (8 comments total)

It costs a fortune to live like an American in Europe (car & ac), but it also costs a fortune to live like a European in America (real food). Live close to work & try life without the car.

You may also want to find out if Austria, like Germany, allows guest workers to get back some of their taxes when they leave. But it may differ in your tax bracket.
posted by jeffburdges at 8:48 AM on December 29, 2006

I'm an American who has been living in London for about ten years so I can offer a little insight.

Is this job offer with your current employer? Or is it with a large multinational? Most HR departments are providing a service to the hiring manager, and will want you to be happy with your deal After all, everyone loses if they incur the cost of relocating you to another country just to have you return in three months.

So transparency will be readily available. If they've put a figure on the table ask them to explain it. I'd demand the same level of transparency even if you're dealing with a new employer. Basically, ask them to prove to you how they've arrived at that figure and don't fall into the trap of them just converting your US salary into local currency equivalent.

In terms of London, a six figure (call it $100K) US salary will convert to about £52K Sterling. You can live well in London on that income - the average is about £30K.

Also as a US Citizen there are other deductions available to you while you work outside the United States. For example, the first $82,500 or so is tax free on the US side, although you are still taxed on the foreign country side. Also, you can deduct all the costs incurred with maintaining a residence abroad for the purposes of employment (this assumes you're not getting a housing allowance - they've recently cracked down on that).

Hope that helps!
posted by Mutant at 8:51 AM on December 29, 2006

Whoops! I somehow managed to leave out a paragraph --

I'd suggest that you see an accountant before undertaking any global relocation. Do this only after you've selected your host country or significantly narrowed it down; Europe wide tax harmony is far off and especially so for American ex-pats.

The accountant can suggest intermediate to longer term strategies that will help minimise any tax hits. This would be especially useful if you can negotiate some aspects of your compensation. For example, many of my ex-pats friends take only a portion of their compensation in the UK; part is paid to an off shore domiciled bank account under their control and thus not taxed in England. They are liable for UK taxes on this income if and ony if they bring it into the country.

If you're still negotiating and they want you badly enough they'll even pay for this consultation.
posted by Mutant at 8:57 AM on December 29, 2006

I work for an international NGO that calculates COLA for staff in other countries. We use the publicly-available COLA allowance calculations offered by the State Department. The rates are offered here. You then take your allowance rate and type it, your current salary and your family size into the Excel chart found here (under "How do I calculate my COLA allowance?"). That should give you a sense of how much more you'll need to earn in order to stay at a comparable rate of living. Keep in mind that a base COLA salary (i.e. rate of 0) is for Washington DC, and they don't calculate negative COLAs.
posted by one_bean at 9:04 AM on December 29, 2006

So, for example, if you moved to Austria, had a family size of 2 and earned $250,000, the State Department would increase your salary to $275,560.
posted by one_bean at 9:06 AM on December 29, 2006

I've been to Vienna this past year as a visiting American, without knowing a lick of German. No worries. Vienna is a city where basically everyone (not just hotel staff, but even the most menial workers in local shops) speak fluent English. You really don't have anything to worry about. And Vienna is absolutely gorgeous, clean, safe, and packed with museums, music, etc. So as far as suggesting European cities that well-absorb the English language barrier, Vienna is totally at the top of the list.

Sooo, what other cities are you considering?
posted by naxosaxur at 10:08 AM on December 29, 2006

Brussels, Copenhagen, Geneva, Bern, Dublin, Barcelona, and some cities in Italy are on my list.

It is what I would characterize as a large multinational and it is my current employer.
posted by arimathea at 4:00 PM on December 29, 2006

"It is what I would characterize as a large multinational and it is my current employer."

Ok, are they proposing a local contract or full American ex-pat? There are pluses and minuses to each. A local European contract would subject you - and the company - to local labour laws particularly pertaining to redundancy, holidays, etc. As an American ex-pat you're only going to be working in the host country for a set period of time. Your terms and conditions are largely (but not totally!) dictated by your contract, and you enjoy minimal protection under local laws. Almost always an ex-pat contract will have termination clauses that you'll have to look carefully after; some of my buddies working in Tokyo in the late 90's had to leave the Japan with less than one weeks notice due to the firm terminating operations in that country. Not pleasant. Full American ex-pat contracts almost always come with benies such as flights home, continued participation in US based pension schemes, housing allowances and tax equalization.

And no matter how large an offer they put on the table, it's the taxes that you've got to watch out for, particularly on a full US ex-pat contract. Housing allowances are subjected to different and rather unfavourable tax treatment on the US side now, so much so that many ex-pats I personally know have been forced for economic reasons to return to the US. If you were coming over an a full American ex-pat contract I'd suggest mingling any housing allowance up into base compensation.

But in any case, given the wide wide range of possible countries you've noted and the open questions (local contract or full American ex-pat) I don't think it's possible to resolve this question in the level of detail you clearly are asking for at this time.

I think this is best approached:

1. Arrive at a short list of two countries you'd like to live in.
2. Determine if your employer is offering full ex-pat or local contract
3. Get full details of any proposed compensation package on the table
4. Accountant up! This is not a simple undertaking, and you're going to need some informed advise that will look out for your best interests. As previously noted, the firm should pay for this advise.
5. Once the accountant has helped you to understand net pay in each of the two proposed domiciles, you'll be in a better position to determine quality of life issues - as structured, you're question is perfectly appropriate for US Domestic move; international relocations are much more complex
6. Renegotiate that proposed compensation package
7. Enjoy life in Europe!

About the only problem I can see with this approach is your employer may want you to decide upon a single host country before progressing with a formal offer. That is reasonable and just drops step one off this list. In any case, my email is avail on profile so feel free to drop me a line if I can offer any other help.
posted by Mutant at 1:09 AM on December 30, 2006