Moscow Times August 25, 2003 Muscovites Get Relatively Rich By Denis Maternovsky Staff Writer
Muscovites are getting richer, both absolutely and relatively.
Not only are incomes rising, they are rising at a rate that far outstrips the incremental increases in the cost of living, financial house UBS found in a recent study.
Since 2000, the last time such a study was undertaken, salaries in Moscow have almost tripled, while the price of a standardized basket of goods and services has inched up 12.7 percent.
These factors give Moscow its title as the world's 46th most expensive city.
UBS calculations for the capital gave Moscow 53.6 points against a baseline of 100, which the bank assigned to its headquarters of Zurich, Switzerland.
At 46th, Moscow is less expensive than Istanbul, but more expensive than its Eastern bloc sisters of Warsaw, Tallinn, Vilnius, Riga and Kiev.
The ranking does not constitute much of a change since 2000, when Moscow ranked only slightly higher, at 44th with 59.1 points.
UBS conducted its study of 70 cities worldwide in the first quarter of this year.
In each city, members of 13 professions were surveyed to find out their salaries, working hours, and the prices they paid for 111 goods and services.
Moscow's 46th place ranking echoes a similar cost of living study run by the Economist Intelligence Unit last December, where Moscow ranked 42nd in the world and was the costliest in Eastern Europe.
It is a far cry, though, from Geneva-based Mercer Human Resource Consulting, whose calculations place Moscow among the top 10 most expensive cities to live in.
Last year's Mercer survey placed Moscow as the second most expensive in the world after Hong Kong.
Analysts criticize Mercer's methodology, saying the firm uses inaccurate numbers.
For example, the Mercer survey claims that Moscow newspapers cost $3.30, while in reality, the number is 10 times less.
On UBS's list, the world's most expensive city this year was Oslo, UBS said, whereas in 2000, when only 58 cities were researched, Tokyo led the pack.
To a large extent, this has to do with the change in exchange rates, UBS analyst Thomas Kaegi was quoted by Vedomosti as saying. "The yen is now cheaper than it was three years ago and Japan is seeing deflation, while the Norwegian kroner is now relatively more expensive," he said.
By gross wage level, Moscow ranked 52nd, putting salaries in a league with the capitals of East European countries set to join the European Union in 2004, like Vilnius and Prague, but well above Kiev, for example, where an hourly wage is $1.10, less than half of what a Muscovite earns.
However, in terms of net wages, due to relatively low taxation and social security contribution levels, Moscow came in ahead of all other East European capitals, with the exception of Slovenia's Ljubljana and Hungary's Budapest.
"In countries with high taxes and social contributions, net pay levels are significantly below the gross level," said Simone Hofer, UBS economic research analyst.
A comparison of UBS's 2000 and 2003 studies illustrates the pace at which quality of life in Moscow is increasing.
In 2000, an average Muscovite had to work 25 minutes to earn enough money to buy 1 kilogram of bread and 74 minutes to buy a Big Mac, according to the report.
Today it takes less than half as much time: 12 and 30 minutes, respectively.
For an average New Yorker, Big Macs are relatively cheaper: In the Big Apple, it takes 12 minutes, rather than 30 minutes, to buy a Big Mac.
In 2000, the average Muscovite earned 90 cents per hour. Now he is making $2.60 an hour -- almost 3 times more, the study said.
Over the same three-year period, the cost of goods and services in Moscow increased only 12.7 percent, rising from $973 to $1,097.
By comparison, the average person in Budapest earns slightly more ($3 per hour), but pays slightly more -- $1,143 -- for standard goods and services.
In Warsaw, the opposite is true: The average person earns 40 cents per hour less, but pays $61 less for things than he would in Moscow.
"This spectacular increase in purchasing power is hardly surprising," said Natalya Zagvozdina, a consumer goods analyst at Renaissance Capital. "We were anticipating an even higher increase."
In 2000, Russia was still recovering from the 1998 financial crisis and ruble devaluation, whose brunt was borne by wage earners.
"This huge jump [in wages] is mostly due to an extremely low starting position. But it is finally time for Moscow to surpass other Eastern European capitals," she said.
As for industriousness, Muscovites are about as productive as their European peers, working 1,784 hours per year, comparable to the figures for London and Madrid.
But they appear relatively lazy against their peers in Hong Kong or Seoul, where their counterparts work 30 percent longer hours.
Economizing on goods and services aside, Moscow retains the dubious honor of being one of the most expensive cities in the world where clothing and home electronics are concerned.
A complete women's wardrobe in the expensive price range costs $1,270 in Moscow, according to UBS.
The same selection will cost 7 percent less in Paris, 40 percent less in Helsinki, and 57 percent less in Prague, at $550.
Meanwhile, a standard set of household appliances costs $2,980 in Moscow, 35 percent more than in New York and 56 percent more than in Budapest.
When it comes to food prices, though, Moscow is inexpensive, and here the city gains back some of its lost ground. Thirty-nine standard food items together cost some $232 here, as opposed to $453 in Paris and $612 in New York.
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