ECA’s Location Ratings: are global living standards improving or worsening?
Using ECA's Location Ratings as a measure, has life improved or declined since the turn of the millennium? And how do the longer-term trends compare to the changes we saw in the latest Location Ratings survey?
Are living standards getting better or worse? We often see news headlines with grand statements that life around the world is improving, or that global standards of living have gone down. It is of course totally dependent on the measures being used to make such claims, and a wide variety are used, each with pros and cons, but always providing food for thought. ECA’s Location Ratings measure the quality of life in cities around the world, so that organisations can pay appropriate location allowances to their international assignees. Though assessed from the perspective of how easy it is for expatriates to adapt to life in their new location, the trend often follows the general standard of living experienced by the wider local population. So, using ECA’s Location Ratings as a measure, has life improved or declined since the turn of the millennium? And how does this longer-term trend compare to the changes we saw in the latest Location Ratings survey?
Twenty years ago, ECA published Location Ratings scores for 223 locations around the world (since then coverage has more than doubled, with 487 locations currently published). Comparing the 223 locations in 1999 to the same 223 in 2019 we see that the scores for 58% of them got worse, meaning that by ECA’s measure, quality of living has declined over the last 20 years. Only 39% of locations have seen scores improve, indicating better living conditions, with 3% seeing no change in score. So, on the surface it would seem that on a global scale life has been getting worse over the two decades.
Of course, as with any measure of change, we need to take a closer look at the data before drawing any conclusions. One of the first things to point out is that the geographical distribution of improvement or decline is not particularly even. It is clear that in terms of declining living conditions there has been one region which unfortunately stands out – Africa. In the last 20 years the scores of 84% of ECA’s published African locations have worsened. Civil conflict, health epidemics such as Ebola, increasing terror threats in many countries, poor air quality and spiralling crime levels have all contributed to such conditions, with locations in countries such as Chad, Zimbabwe and Cote d’Ivoire seeing the most pronounced declines.
This 20-year trend showed no signs of changing in the 2018 survey, with a range of negative incidents and, as a result, worsening Location Ratings associated with the African continent. One of the highest profile locations was South Africa, where issues both natural and man-made have hit the headlines and impacted the lives of expatriates and locals alike. This was especially true in Cape Town where drought levels of rainfall in recent years have put a severe strain on water supplies. Strict water saving measures were implemented amid fears that the city would run out of water altogether, a potentially catastrophic scenario dubbed Day Zero. The success of the measures and the arrival of winter rains meant that Day Zero did not ultimately occur last year, but the potential for it to happen in 2019 cannot be ruled out. Along with the resignation of President Zuma amid allegations of corruption, government sanctioned land appropriations and xenophobic violence, it has been a difficult period for the continent’s most developed country.
Neighbouring Zimbabwe has also had a turbulent year. Optimism abounded after the departure of Robert Mugabe after 30 years of rule and the subsequent elections. However, a currency crisis has seen significant shortages of many goods, including fuel and medical supplies, and soaring prices. Sudan has experienced similar issues with runaway inflation and import restrictions and many expatriate respondents to the Location Ratings Survey reported significant shortages of certain items, with the Goods and Services score for Khartoum rising as a result.
Other African locations saw increasing socio-political tensions scores as deteriorating security situations created even more dangerous environments for international assignees. Cameroon is one such country, where violence between Anglophone secessionists and the authorities has escalated, contributing to further instability in a location which was already struggling with a growing terror threat in some parts of the country. Burkina Faso also suffered from terror-related incidents in 2018, where perhaps the most high-profile incident was an attack on the French Embassy in the capital Ouagadougou - showing that expatriates and Western interests are still very much at risk.
There have, however, been a few glimpses of positive developments in some parts of Africa over the last year. While its neighbour to the north struggled with economic problems, South Sudan saw some movement towards a peaceful settlement in its civil conflict, following the signing of a peace agreement between the government and opposition groups. That peace is holding for now, but its fragility means we may not see significant improvements in Juba’s Location Ratings score for a while yet.
Another long-running feud, between east African neighbours Ethiopia and Eritrea, also appeared to be at an end in 2018 after leaders of the two countries signed a peace deal to end two decades of animosity. The border between the two countries was also reopened. As a result of these developments the Socio-Political Tensions scores for both countries have improved and hopefully these positive developments can bring some stability to a historically unstable region. A further good news story in Africa came in Liberia which during the last survey period experienced its first truly democratic transfer of power following elections that saw ex-footballer George Weah named president.
Given these latter examples, could it be that we are beginning to see a reversal of the negative trend in African locations over the last 20 years? Ethiopia’s is now one of the world’s fastest growing economies and this growth could see improvements to other aspects of the Location Ratings scores in the future. With the economies of countries such as Ghana also expanding rapidly, perhaps the future will be bright for African nations – providing the benefits of such growth are invested in the infrastructure and well-being of the general population. Unfortunately, high corruption scores for many African countries suggest this may not necessarily be the outcome.
Perhaps we can also take encouragement from the example of Rwanda, one of the very few African success stories over the last two decades, with a significantly improving Location Ratings score during that period. Who would have dared to think that this was a possibility in the aftermath of its brutal civil conflict in the 1990s? Perhaps technological advances and peace initiatives will see prosperity and living standards increase more broadly and Africa become a better-established destination for international assignments.
Elsewhere in the world, the country experiencing the largest increase in Location Ratings score was Nicaragua where civil unrest and political turmoil have significantly destabilised the country. The problems erupted in April with protests against reforms proposed by President Ortega. Violent unrest has continued with the authorities carrying out brutal crackdowns and arresting many protestors, as well as increasing censorship and carrying out human rights violations. As a result, the Culture, News and Media and Socio-Political Tensions scores for the capital city have all gone up, meaning that in most instances, the location allowance for expatriates going into Managua has increased.
In another part of Latin America, Venezuela’s rapid decline has continued due to effects of the government’s disastrous economic programme. Violent crime is at epidemic proportions and the utilities infrastructure is also falling apart. Caracas now receives the highest possible location allowance from some regional bases. Further afield, Sri Lanka’s Location Ratings score also worsened as, over the time period that the survey data was collected, there was considerable political instability owing to a constitutional crisis over the prime minister’s position. This led to a significant amount of violent unrest, in addition to other unrelated ethnic violence earlier in 2018. However, the political situation has now cooled somewhat, and it may be that we see a score reduction in the next survey.
In terms of natural disasters 2018 was less eventful for our published locations, unlike 2017 when we saw hurricanes Harvey, Irma and Maria wreaking havoc and devastation across the Caribbean and southern United States. However, Hong Kong experienced the most intense storm since records began when Typhoon Mangkhut caused widespread disruption and considerable damage in September. Fortunately, there was no direct loss of life but given that the costs of the damage were estimated to be around USD 1bn the natural phenomena scoring for Hong Kong was increased. In the Pacific, Cyclone Gita caused significant destruction in February, with Tonga especially impacted. Samoa and American Samoa also saw some score increases due to the storm’s effects.
On a more positive note, one of the great success stories over the last 20 years has been China. Since the turn of the millennium all ECA’s published Chinese locations have seen their Location Ratings scores improve, some by a significant amount. This has been the result of a rapidly developing economy increasing the quality of facilities, infrastructure and goods and services available to expatriates assigned there. This trend has continued in 2018 with many Chinese cities continuing to see improvements in quality of living. In the past, positive developments in China have been somewhat tempered by extreme levels of air pollution, which are often associated with rapidly developing economies and, in some cases, have even contributed to the failure of expatriate assignments in cities like Beijing. However, 2018 saw some positive indications that extreme air pollution levels have peaked and may now be starting to improve. In recent years the Chinese authorities have introduced measures to combat air pollution, such as reducing the number of coal-fired power plants and reducing traffic, and it now appears that these efforts are paying off. In the recent survey we were able to reduce the air pollution score for Shenzhen and we may be able to do so for other Chinese cities in future surveys.
Continuing the theme, the other regional success story of the last 20 years has been Eastern Europe. All ECA’s published locations from that area have seen decreases in Location Ratings scores during this period, and location allowances have decreased as a result. Following the collapse of Communism and the region’s emergence from behind the Iron Curtain, with some countries becoming members of NATO and the European Union, investment into the region has brought considerable improvements in infrastructure and facilities. Perhaps the most extreme examples are Croatia and Estonia – for Western Europeans the recommended location allowance has decreased by 15% to Zagreb and Tallinn over the last 20 years. There can be no doubt that Eastern European living standards in general have improved during that time.
Many Eastern European locations saw score improvements in the 2018 results too, suggesting that the long-term trend is ongoing. One of the locations which improved the most, perhaps surprisingly, was Moscow where facilities and infrastructure have got better in recent times, while crime levels have also declined. However, the scoring still recognises that there are significant challenges in Russia, with increasing censorship in recent years and numerous socio-political tensions present.
So, we’ve seen which locations have changed in 2018, and those that have changed over the past 20 years. But what can we expect in 2019? Will we see any other African conflicts coming to an end? The recent terror attack in Nairobi, Kenya suggests that some of the underlying threats have not gone away. Will the civil conflict in Syria finally draw to some sort of conclusion and provide much-needed stability in the Middle East? Past experience suggests it’s difficult to be optimistic, although government forces are now in control of most of the country. In Europe, will the large-scale protests and disruption caused by the Gilets Jaunes movement in France continue or even spread to other parts of an increasingly unsettled continent? Elsewhere, elections in countries such as India, Nigeria and South Africa could be flashpoints. Whatever happens, ECA’s Location Ratings team will be keeping a close eye on events to ensure expatriates are appropriately compensated for the difficulties they may face on assignment.
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ECA's Location Ratings are delivered through ECA's Location Allowance Calculator which offers a transparent and detailed system for calculating location allowances for expatriates relocating to a new country. The system recognises that where an employee is coming from as well as going to can affect the level of adaptation required. Users can select region-to-city allowances or city-to-city allowances, so that depending on a company's policy the system reflects the level of detail required.