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The pitfalls of crowdsourced cost of living data

At a time when we have so much freely-available information at our finger tips, is it worth paying for cost of living data? It is no secret that free, crowdsourced cost of living information exists online and we commonly receive questions about how our data compares to such sources. Below we explain why free-to-access data should be used with caution and why you can rely on ECA’s cost of living data to calculate international assignee pay with confidence.

Price data

ECA
Free sources
Collected by ECA’s professional International Data Researchers, field research companies and expatriates working for client companies.
Almost exclusively crowdsourced from anonymous contributors.
Rigorous data validation and verification processes.
Little or no validation and open to manipulation.
Tailored to an expatriate lifestyle. Strict quality and item specifications ensure consistency worldwide.
Item descriptions are vague with few specifications about quality.
Transparency about where prices are collected.
No information on shops used for prices.

Websites that provide free cost of living data typically rely on crowdsourced information to make their comparisons. These sites allow visitors to contribute as much or as little information as they like about how much a basket of goods and services costs in a particular city. The prices they collect tend to undergo little or no data validation, often openly request estimated prices and could be easily manipulated. Similarly, they make little attempt to ensure that the goods priced are of a consistent quality, size and specification, and do not distinguish between prices contributed by locals, expats, tourists or even those with no experience of the city at all. 

The data that goes into ECA’s cost of living calculations is based on a multi-source approach, collected by our own International Data Researchers (IDRs), field research companies and expatriates working for client companies. Data from all our sources are collated and undergo rigorous analysis and verification before being used to calculate cost of living indices.

The stores visited, and the brands and services priced in ECA’s basket of goods are tailored specifically to the shopping habits of expatriates, taken from the recommendations of our clients’ assignees and our IDRs.  We target high quality items and international brands that meet strict item specifications. This ensures that we are making fair cost comparisons across all the locations we survey and that our data reflects the differences in living costs experienced by international assignees specifically.

Index quality

ECA
Free sources
Basket of goods consists of more than 160 items and is regularly monitored and adjusted.
Basket of goods is very limited, increasing susceptibility to extreme changes in results.
Basket covers a wide range of everyday expenditure including food and drink, electronics, household goods, leisure services and more.
Basket of goods is restricted to only a few areas, excluding major areas of expenditure.
Variety of indices available to match your requirements.
Only one index option.

Another issue to be considered when using crowdsourced websites is the extent to which the basket of goods used in the calculations truly reflects all areas of an assignee’s day-to-day expenditure. As mentioned above, such sites rely almost exclusively on user contributions to collect their price data. As a result, it is in their interest to use a restricted basket of goods to encourage contributions and to ensure enough prices are available to calculate an index. In practice this means that crowdsourcing sites tend to not only use a small basket of goods, but also one that neglects key areas of everyday expenditure and so cannot be relied upon to calculate a true representation of assignee living costs.

In contrast to this, ECA’s cost of living basket currently consists of 168 goods and services and counting. The basket of goods that goes into our calculations covers a wide range of areas of everyday expenditure including a large selection of food and drink items, electronics, household goods, leisure services and much more, allowing far more accurate comparisons of overall living costs between two locations.

Furthermore, ECA publishes three index types which use different assumptions about shopping habits and spending patterns so you can choose the one most appropriate for your assignments. Each one can be adjusted to include or exclude areas of expenditure such as motoring costs or utilities to match your company’s philosophy and policies. In comparison, crowdsourced indices tend to use a one-size-fits-all approach aimed at a wide target audience rather than focusing on the more nuanced needs of global mobility programmes.

Data updates

ECA
Free sources
Indices updated regularly ensuring they are current, relevant and comparable across locations.
Calculations based on long-term rolling averages which can quickly lose relevance.
Detailed information on how indices have changed and historic data available for all locations.
No information on how index has changed over time.

We recognise that it is important for clients to know their data is as up-to-date as possible and defensible should assignees have questions about their cost of living provision. This is why our cost of living indices are updated regularly, over a strict timeframe to ensure results are as current, relevant and comparable as possible. Surveys are conducted twice a year for all locations and more regularly in particularly volatile places, so you can always be sure our results provide an up-to-date snapshot of comparative everyday living costs. We also publish explanations of how price changes and exchange rate movements have caused the indices to change since the last survey to assist with assignee queries.

Sites that offer crowdsourced cost of living data usually base their calculations on long-term rolling averages to compensate for lack of reliable, consistent data. The published indices can change at any time, making it difficult to pinpoint how up to date the data is and when it will change again, and no explanations are given about the changes. This can make assignee queries challenging to deal with, especially as they may be able to present you with a different index while referring to the same free-to-view source.

Client support

ECA
Free sources
Account managers on hand to answer any questions.
No client support.
Advice and ongoing support on how best to use cost of living data in global mobility programmes
No client support.

Finally, in addition to the reliability and transparency that ECA offers it is important to consider the wealth of extra support that we can provide that is simply non-existent from free providers. Subscribers to ECA data have dedicated account managers on hand to help with all aspects of our cost of living data. Whether it is providing explanations for how results have been calculated, detailing how and why results have changed over time, or giving advice on how best to implement the results, we work alongside our clients every step of the way to ensure they get the most from our data.

  FIND OUT MORE

ECA publishes cost of living data for 479 cities around the world. It is available from ECA in several forms: as part of a subscription in a calculator which allows you to experiment with different types of index and review the outputs; in reports, providing background detail for specific indices; and as part of our Build-up Calculator for performing balance-sheet calculations. Cost of living data is also pre-populated in ECAEnterprise, our Assignment Management System, and in our Net-to-Net Calculator.

  Please contact us to speak to a member of our team directly.

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