Are you trying to decide whether living abroad is worth it? I recently quit my job after two years overseas, where I was working as a software developer at a highly-regarded multinational corporation. Actually, I was working in their “cost center” in Eastern Europe. A cost center is the outsource arm of a company whose headquarters is located in another country.
Overall, it was a lot of fun for my first year. I met new friends, drank some of the best (and inexpensive) beers I’ve ever tasted, and got to see a new part of the world. However, for those who are interested in a more long-term solution, I came to find that when all is said and done it is very difficult to come out ahead, at least compared to home, by living abroad on solely a monthly salary.
In this article I focus on negotiating your salary, as well as what you can expect at the office on a daily basis, working at a 9-5. I conclude by presenting a few solutions to ensure a smooth transition if, after all, you still plan on living abroad.
Table of Contents
- The “Cost of Living” Is Not Actually Lower
- Minimal and Infrequent Raises / Your Managers and Coworkers Will Come To Resent You
- Onerous Employer-Biased Labor Contracts / You Are Still An “Outsource Worker”
- A lower cost of living is actually just a lower quality of living, a sleight of tongue used to convince you to accept a lower real wage. You can pretend to reduce your standards, but that doesn’t last long. After a year, you’ll wish you didn’t move half way across the world for $1 pints and cheap flats that incidentally don’t have proper heating, or landlords that fake water bills to gouge you of your hard-earned money.
- You will be paid much more than the median salary at first, especially with a degree from North America and several years work experience, but that is just to get your foot in the door. Your salary increments and bonuses will be low, and rarely reflect your performance. Instead, raises and bonuses are awarded to your manager’s friends and accomplices. Nepotism, and social hierarchy determine your salary in the long run.
- Your managers will exaggerate the “incredible growth opportunity” at your company, as well as upcoming salary increments and bonuses to keep you from leaving (because your output per cost will be much higher than average), and if your coworkers find out about your salary they will conspire behind your back to ruin your time at work.
- I was always under the impression that any agreement could be reached between gentleman, but that’s not exactly true. Quitting is expensive (to the tune of several thousand dollars) because most other places in Europe, and essentially anywhere you work in the U.S. or Canada allow a two weeks notice. If you break your contract and refuse to offer two months notice, your employer can keep up to 45 days worth of salary. Recouping that money isn’t worth it because you’ll have to expend lawyers fees in a country in which you don’t speak the language, and that is doubly difficult to achieve in less than two weeks. Very few companies back home or elsewhere normal will wait two full months to hire you when they could award the spot to somebody else.
- You’re better off earning multiple, location-independent income streams online (either through affiliate marketing, consulting or freelance software development) as compared to working at a 9-5 salary job, or scraping by as an English teacher. In order to increase my non-salary income lately, I’ve been using Pro Niche Site, which teaches you to build a small, profitable website at low cost. Click here to get this exclusive FREE course.
The “Cost of Living” Is Not Actually Lower
A common myth used by employers abroad who seek to attract high-quality talent from North America and elsewhere in the Most Developed World is that the cost of living is lower, so that there is a labor arbitrage opportunity to be made living abroad as opposed to back home, especially if you can get the same salary or higher than average salary.
The first thing I do before considering the move to a new city for work is to check out a cost comparator online, such as Numbeo. This, and other websites like it show you how much money you would have to make to maintain a similar standard of living in a different city as compared to the one you currently live in. They use a Cost of Living Plus Rent Index to compare after-tax income in different cities. According to Numbeo, the cost of living in Prague, Czech Republic (which is where I moved to work for two years) was 1/3 lower. This is a significant number.
For example, at the time I was living in Vancouver, British Columbia, Canada. I was earning $6,000 CAD (or ~100,000 CZK, if you’re familiar with the Czech Koruna) per month, which is a typical starting junior salary in Vancouver, Canada (with a 4-year University degree and zero years formal work experience, i.e. at a well-known corporation—I don’t mean to discount my 5 years working at various startups, but when you’re applying for English-speaking multinationals abroad, they tend to discount that experience heavily).
In Prague, on the other hand, 100,000 CZK per month is the kind of salary you can expect to make as an “Advanced Developer” with 5-10 years of work experience. So right off the bat, getting your equivalent salary would be extremely difficult, if not impossible when you consider that you’re competing with very talented individuals willing to work for an amount of money that by comparison to Post-Soviet incomes does feel like a lot.
Anyway, Numbeo claims that you should be able to maintain a similar “standard of living (notice how they don’t use the word quality)” for 60,000 CZK (or $3,500 CAD per month/$42,000 CAD per year). This is 2/3 of what you’d earn in Canada as a junior front-end web developer. 60,000 CZK per month is the salary of an “Intermediate Developer” or somebody that has worked for over 2 and up to 5 years in the IT sector. This, I found was the minimum I could settle for to make the move worthwhile, so I accepted a salary close to that sum.
So herein lies the problem. If you’re a junior with, let’s say, up to 2 years of formal work experience and a 4-year North American University/College degree or 2-year Associate’s diploma from a smaller college, in a S.T.E.M. field which, by the way, already pays 1.6 times as much as the median salary for the Czech Republic, you’re going to have to ask for an Intermediate-level salary (2-5 years formal work experience) to even consider the move as a starting point.
Frankly, I have no idea how people who teach English or do other odd-jobs on temporary work and travel VISAs do it. Well, I do, but they don’t mind living like Gypsies, to put it lightly. For all the stories you might hear about expats who are living abroad teaching English on short-term VISAs while having the time of their lives, I would simply not recommend that lifestyle to people who have solid educational backgrounds and decent full-time employment prospects, i.e. people who want to expat for the long-term.
Now, granted that the cost of living in Vancouver is actually one of the highest in the world, it is also consistently known to have one of the highest quality of life ratings in the world as well, and even for a starting annual salary of $72,000 CAD, you’re getting a lot more bang for your buck in Vancouver, Canada than in Prague, Czech Republic over the long run at that salary level (it’s a different story if you’re making that much without having to work a 9-5).
Yes, yes, a pint of beer in Prague is $1 (sometimes 10 times cheaper than in Canada), it costs less than water even, but that tends to wear off in equal proportion to the growth of your gut. If cheap beer is the only reason you wanted to move abroad, then you’ve got another thing coming. Trust me on that one; I gained 20 lbs quite quickly after I moved to Prague, and if you want to embed yourself in the local culture and network efficiently, you just can’t avoid beer.
All things considered, there are some serious problems with the use of CPI, which is what most online price aggregators use, but I won’t get into it here. All you have to know is that while online cost of living aggregators are useful for getting a rough idea of your new city, they aren’t quite accurate in terms of measuring quality of living, and as a result sometimes undermine the true nature of how you can expect to live when you finally make the move. At the end of the day, it’s really up to you. If you can adjust the way you feel about your living situation, by downgrading your expectations, then perhaps austerity can serve as a functional delusion. But that’s not me. I’d rather pay more for higher quality than pretend to not be bothered by a lower quality of living just so that I can save money.
Either way, I would highly recommend making at least one trip to the city in which you intend to live, especially if you’ve already received a handful of job offers, or if you’re getting several interviews and you feel like it’s going to go through eventually. On top of this, join a few Expat Groups on Facebook (i.e. search for Job Opportunities in Prague, Budapest, Warsaw, etc.) and ask people currently living there what it’s really like before making your final decision. I didn’t do either of those things and I came to regret my decision, so I eventually decided to move back to Canada (if only temporarily).
When your prospective employer tells you that “the cost of living is lower”, you should always keep the following in the back of your mind: “There is a difference between the price of living (what you pay in dollars) and the cost of living (what you pay in terms of differences in lifestyle, health, happiness and more). Unfortunately, even the very best CPIs fail to measure these differences. The world is just too complex.
So, you should ask yourself: “Is my future employer actually saying that the cost of living is really lower or that the quality of living is lower so that I end up paying a lower price?” In reality, if you move abroad to somewhere like Eastern Europe, or Brazil or The Philippines, the result of labor arbitrage is often hyperbolic. There is much to be said about cheap beer, new life experiences, and the new friends you end up making (social capital) and for a while it will feel as though that makes up for the salary cut you’ve taken, but this only lasts for the first year, and usually drops off exponentially after that.
Minimal and Infrequent Raises / Your Managers and Coworkers Will Come To Resent You
Surely, a 4 year S.T.E.M degree from a North American University along with a couple years work experience in a big city like Vancouver increases your initial labor demand when seeking employment abroad. This is certainly true, and makes finding your first job abroad quite easy (my LinkedIn is still flooded with Czech recruiters), but overtime this tends to have a detrimental affect on your long-term salary increments and bonus pay.
This is something I only found out after a year of living abroad and working for my company. My first raise (which went along with a promotion) was okay, but not amazing (if it isn’t a titled promotion, it’s actually lower). I received a 9% raise with my promotion on a salary which was starting to feel much too low and $1,000 CAD in bonus pay (for you Americans, that’s little more than $750) after 12 months of really hard work. Inflation was 2%, so my raise was actually 7%. The raise wasn’t exactly the biggest problem, as the most I’ve ever received was a 10% real raise after a serious promotion (it’s the same pretty much anywhere); the big issue for me was the bonus pay.
The problem is that as a junior developer who required a relatively high salary (at one of the few multinational firms that could afford to pay it) to even consider the move overseas in the first place is that over time your employer tends to withhold performance-based raises and bonuses because to them they feel as though you’re already over-compensated compared to the rest of their employees. Why would they continue to regularly give someone at your pay level raises or high performance bonuses, especially if you are already being paid more than your co-workers and you have fewer years of work experience? In a nutshell, you’re a human keyboard. They just aren’t interested (or even in a position) to reward soft skills and creativity like they do back home.
The alternative is to find a new job, which typically results in a much higher raise than you would normally get by staying at the same company for several years. The problem is that since you’ve already been living abroad and working for a year, you’re going to now be treated like one of the locals. I attempted to find work at other companies, but only a handful of multinationals (Microsoft, Cisco, Expedia, etc.) could afford to raise my salary, and not by very much (10%). Needless to say, it’s an odd situation. They don’t typically expect to hear from a North American applying from within the country, so they move with suspicion, assume it’s too good to be true (or that you couldn’t hack it back home) and low ball you.
In countries where work ethic favors performance, this would not be the case. Pay should depend on performance, but in Prague, at least, and likely elsewhere in Eastern Europe, pay is related to your position in the overall social hierarchy, which is especially sensitive to how many years you’ve worked compared to your co-workers. I know this because despite my consistent work ethic, proactive contributions and several weekends per month of over-time work pushing important projects to completion, my manager decided to hire a lumpy, balding doofus with 15 years experience wasting away in a cubicle to lead the team instead of me.
This came to me as a shock, especially since he repeatedly, over several months, promised to me in private meetings that he was planning to “make me the team lead and allow me to begin recruiting new developers.” You can’t be seen getting too far ahead, apparently! I can’t count the number of times I’ve worked for people younger than me back home. I found it really strange, and extremely demotivating, that the prospect of my ambition bothered them.
Some say that the reason Canadians or Americans are paid higher than Europeans is because of our vast oil, timber and mineral reserves, and that because we are a “young Continent” we’re merely buying time by reaping the benefits of low-hanging economic fruit. This is pure non-sense, but happens to be a very common continental European attitude. The actual reason (and much to the chagrin of Europeans with whom I’ve had this conversation) is that we really are better educated, at least in a market orientation; our University system is much more closely aligned with corporate profit motives as compared to the largely libertine European tradition, which emphasizes philosophy and the liberal arts (excepting Germany, of course).
As North Americans, we simply “get it” with respect to what we need to do to earn money, because in North America, work is life. Don’t get me wrong. We play as hard as we work, and as a result we are actually more creative too (how many Unicorns have come out of Europe?), but we don’t relax nearly as much as our European cousins, who daily finish work at noon (at least mentally), take long cigarette breaks, drink beer and dine at restaurants during their 1 to 2 hour lunch breaks.
Such is life.
Onerous Employer-Biased Labor Contracts / You Are Still Just An “Outsource Worker”
So, you’ve been living abroad for a year and things are going great, until the lies your managers initially told you to convince you to travel half way across the world start to reveal themselves for what they are. You’re ashamed of the fact that the cheap beer is one of the reasons you’ve accepted a lower salary, and you’re tired of the fact that the locals and your manager’s close friends are getting raises ahead of you, despite absolute certainty of higher performance relative to them.
Not only did you go above and beyond the call of duty, holding and directing interdepartmental meetings to discuss the possibility of creating processes that would bootstrap investments in new technology for your team while optimizing the company at scale, but you’ve created whole new products for your company in your spare time just because you’re that excited. Should the joke really be on me for working that hard instead of just playing the game? It sounds funny, and you can call me a cuck, but in a professional setting that’s simply not acceptable.
Unfortunately, your efforts fall on deaf ears.
You begin to realize This Is Not North America.
You know all those jobs people back home ironically complain about going overseas? Ross Perot famously called this ” Giant Sucking Sound.” Yup, it may not have clued in until now but you’re definitely one of those guys: an “outsource worker”. This is why earlier I said labor arbitrage is “hyperbolic”, in that the benefits are front-loaded or at least seem to be that way. The beer was flowing, the foreign women were at your beck and call, all those trips to Medieval castles and the beautiful bucolic countryside with the other expats you’ve met along the way. Well, it’s year two now. You’ve made some good friends and had some great times, but you begin to realize that the “grass is always greener on the other side.”
Your salary increment was okay, but your bonus pay went down the toilet. There aren’t any companies around that pay a whole lot more, and it looks as if that in the long run you’ll be making a lot less than what you’d make by simply going back home, taking a junior position and working your way up to the ladder once more. You begin to realize that the much higher salary you’d be making back home would allow you to take your two week holiday in Europe and buy you a lot more fun anyway.
Why live here 24/7 if you’re too mentally exhausted to enjoy it?
What now? Okay, so you want to go home. But you didn’t realize that there was a stipulation in your contract that said you had to give your employer two months notice prior to quitting (unlike the standard two weeks) or else they dock 45 days of salary. Well, say goodbye to finding that higher paying job back home without throwing $5,000 in the trash. Though that might not be a lot overall, it’s a pretty sour move (considering that’s a 500% multiple of your first annual bonus), and especially when your manager promised you earlier to let it slide based on your proven track-record of commitment and contribution to the team (it’s also good to know that verbal agreements don’t hold water there like they do in Canada).
So, you still want to move to Eastern Europe despite everything I’ve just said?
Well, it’s not impossible and it’s not actually so rough in the grand scheme of things, especially if you have multiple, independent income streams and make money online, but I figure you’d be better off hearing the truth first.
Definitely don’t move on the basis of a “comparative standard of living” analysis calculated with a simple CPI measure, especially if you’re relying solely on online cost of living aggregators to form the bulk of your comparison efforts. Taking the salary they recommend just won’t cut it.
Again, the main thing to consider is that cost of living DOES NOT equal quality of living.
A lower cost (your employer means to say “price”) of living typically translates to a lower quality of living. This isn’t totally insurmountable, but unless you’re making close to the same salary you’re making at home, you’re really going to feel the hurt after about a year of living abroad and working at a 9-5, especially at a “cost center”.
What you really want to do is set up multiple, independent income streams, pretty much all of it online, so that in the long run you aren’t beholden to your monthly salary and end up being cornered into making the tough call of returning home. What you’ll want to do instead is calculate the minimum salary you’ll need to maintain a similar CPI-based standard of living (as indicated by Numbeo and other online price comparison tools), THEN make up the difference between what you would be earning back home and what you will be earning abroad. Aiming for 50% of that difference is typically just enough to make the move worthwhile, but I would personally prefer something closer to 75% of that gap.
For example, as a junior Java developer in Vancouver, Canada, I could expect to make $72,000 CAD per year. As a junior Java developer in Prague, Czech Republic, I made $42,000 CAD per year (or 60,000 CZK per month—the standard there is to quote your salary per month). Now, it’s entirely possible that you’re simply willing to accept a lower quality of living and that’s that, but in order to maintain a truly similar quality of living (without compromising on any of the differences between your new home and your old one) you would need to make up 50-75% of $30,000 CAD per year, or $15,000-25,500 CAD. That’s quite a significant gap!
That’s essentially half of another salary net of taxes and expenses, or about $1,250-$2,500 per month! So, during your salary negotiations, keep in mind that no matter how many years of experience you have, you’re going to have to ask for a premium to compensate you for the overall reduction in quality of living. Because your employer’s best strategy is to rely on hyperbolic discounting (“everything’s cheaper here!”) to convince you to accept a lower real wage, your counter-strategy should be the opposite. Given that there are a lot of “hungry” people out East who will happily undercut you (and because your employers aren’t exactly hiring for quality), I’ve come to the conclusion it’s best to try something radically different.
An extra $1,250-$2,500 per month is not impossible, but it’s not exactly easy unless you know what you’re doing. I just don’t believe it’s enough to rely solely on nominal price differences (or even simple CPI measures) in fundamentally different cities, in different parts of the world, to try to arbitrage your own labor. This is especially true when you’re moving from one of the world’s most developed countries to a country that is still in the process of developing.
There’s always something missing in the comparison. You future employer will not tell you this because it’s not in their best interest to let you benefit from a labor arbitrage opportunity that puts you in a position of significant leverage. Unfortunately, they need you to need them and this translates to a lot of headache for North American expats attempting to work abroad in Europe, and elsewhere, because of what they perceive at first to be a better lifestyle.
If you aren’t moving for a Management position, then forget about trying to negotiate for a higher salary. It won’t work. In Eastern Europe, they’re much more interested in hiring hyper-technical keyboard jockies compared to the thoughtful, creative, well-rounded team players that comprise a typical Canadian software development team. Given that most of the English-speaking multinationals that operate there are only interested in cost minimization (or are only there to avoid economic recessions elsewhere), the ball tends to be in your employer’s court.
That’s just life.
All this having been said, I couldn’t help but wonder if there was another way. Incidentally, just before I left to return home I met a friend who figured out how make up to thousands of dollars per month freelancing by working as an affiliate marketer, selling both physical product and other digital content online. Needless to say, I was extremely jealous, and wish I had heard about this earlier.
Lately, I’ve been increasing my non-salary income by working on my freelance software development, as well as by booting up a few affiliate marketing channels to sell product online—The Internet is huge, and if properly leveraged, you can sell just about anything. There are thousands of untapped niches for which to do this, so the choice is yours.
When I return to Europe I plan on living solely on location-independent online income, a mix of software freelancing and marketing funnels. At the end of the day, we all want to earn more by doing less. This is not to say to ditch a performance-based mindset altogether, but that by benefiting from scale, your best work will no longer be cubicle-prison, virtual slave labor that depends on how long you toil in order to sell your time for a wage. You always want to get more for less by working smart.
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