1. Special Topics Workshop on the Post Adjustment System
Vienna, 23 January 2009

2. Q: What is post adjustment?
A: Post adjustment is an amount paid in addition to net base salary, to ensure that no matter where United Nations common system staff work, their net remuneration has a purchasing power equivalent to that at the base of the system, New York.
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

3. Special-Topics Workshop on the Post Adjustment System
UN Salary structure
Staff assessment
Net salary
Post adjustment
Gross base salary
Net base salary
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

4. Calculation of PA amount (P-4/step VI with Dependant, January 2009)
PA classification: Multiplier = 49.5
Post Adjustment = 49.5% of Net base salary
= * 76,823
= 38,027 (US$)
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

5. Salary structure Austria January 2009 P-4 step 6 (D), US$
Base salary (Gross): 100,475
Staff Assessment: 23,652
(internal taxation)
Post Adjustment: 38,027
(D status)
Net remuneration: 100,475-23,652+38,027=114,850
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

6. PA Classification (as of 14 Jan. 2009)
Exchange Rate
Index
Multiplier
Threshold dependant
Threshold single
As of
Geneva
1.122
179.0
73.2 21 23
Apr. 2006
London
0.684
154.0
36.0 27 30
Madrid
0.756
154.5
44.1 19
Nov. 2008
Montreal
1.219
143.4
32.8 17
Jul. 2001
New York
1.000
170.9
68.5 29 32
Aug. 2008
Rome
161.1
50.1 20 22
Paris
162.0
52.9
Jan. 2004
Vienna
160.0
49.5
Washington
148.3
43.7 25 28
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

7. Q: What is the Post Adjustment Index?
A: The cost-of-living difference between two locations can be expressed in the form of an index:
Cost-of-living (A)/Cost-of-living (B)
The PAI is a measurement of the living costs of staff at any given duty station compared to that at the base (New York)
For example: Vienna PAI = at a particular exchange rate. This means that Vienna is 60.0% more expensive than New York in September 1995.
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

8. Q: What is Cost-of-living Index?
The cost-of-living index for Britain, based on Big Mac prices in July 2008:
4.57 / 3.57 =
Britain is 28% more expensive than US!
According to ICSC this index, in July 2008, was 10.8%
(London was 10.8% more expensive than New York)
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

9. Q: Where to find the latest Post Adjustment classification
A: The ICSC WEB-site:
Post Adjustment reports are published at the beginning of each month
Web-site version and hard copy (PAC review)
Hard copy is sent to HQs of all organizations
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

10. Use of weights in Cost-of-Living measurements
Weights represent:
Importance attached to the price ratio of each item
Relative importance of an item can be expressed as:
Quantities consumed, or
Expenditure on the item in a given currency
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

11. Use of weights in Cost-of-Living measurements continued
PA index calculations are based on weighted geometric averaging
Geometric average of two parameters (P1, P2) is calculated according to the formula:
For three parameters the formula would be:
References to the use of geometric averaging:
- ICSC/ACPAQ/23/R7/Add.2 “Selection of Outlets”, para. 9 “In averaging prices and calculating the in-area component of the post adjustment index,
the geometric average is used . The use of a geometric average to calculate in-area relativity's has
a moderating effect on extreme values and assumes that some substitution in quantities among
high and relatively lower price items is taking place .”
- ICSC/ACPAQ/19/R7 “AN EVALUATION OF THE MODIFIED WALSH FORMULA”, para. 15 “The use of a geometric average to calculate in-area relativities assumes that some
substitution in quantities among high and relatively lower price items is taking place. No substitution is assumed in the housing, medical insurance, pension contribution and out-ofarea
components . The modified Walsh formula is, in this sense, robust as it incorporates components with different elasticities, thereby facilitating as closely as possible, the measurement of the cost-of-living phenomena in a duty station relative to the base of the system, New York .”
ICSC/ACPAQ/13/R2 various citations in relation to specific calculations
ICSC/ACPAQ/11/R2 “REVIEW OF THE COST-OF-LIVING METHODOLOGY”, para 40.b “The price comparison and the price ratio calculation are made for sub-items (and sometimes items) with similar specifications in New York and at the duty station. In order to calculate price ratios below the minimum level for which weights are available, a simple geometric average is used. A
geometric average is used because the inverse of the average is equal to the average of the inverse ratios, and hence, the same price ratios can be used in the calculation of the taspeyres and the Paasche indices.”
For weighted geometric average:
Or, alternatively,
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

12. Use of weights in Cost-of-Living Measurements
Item
Price
Ratio
Weight
2007
2008
(2)/(1)
2007 $
(1)
(2)
(3)
(4)
(3) X (4)
Milk
0.25
0.38
1.52 20
30.40
Meat
0.87
1.00
1.15
Bread
0.50
0.90
1.80
∑(sum)
100
Weighted average ratio
What happens when some of the weight for Bread is moved to Meat? 40 60
45.98
68.97 20 40
36.00
72.00
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

13. Calculation of the Post Adjustment Index Major Steps
Expenditure weights are established using Common weights and Household expenditures survey data.
Price ratios relative to New York are calculated.
Price ratios are aggregated using expenditure weights.
The result is the Cost-of-Living index or Walsh index.
Post Adjustment index = Walsh index * Rebasing factor
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

14. Prices for 323 Items (Goods & Services)
Household
Expenditure Survey
every 5 years (HQ)
Common Weights
Household
Expenditure Survey
(non HQ)
Housing Survey
Housing Index
Rent Data for
New York
MI Index
PC Index
O-A Index
Aggregation
of Indices
Duty Station
Prices for 323 Items (Goods & Services)
Price Ratios
Walsh Index
New York
Prices
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

15. Special-Topics Workshop on the Post Adjustment System
Walsh Index
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

16. Special-Topics Workshop on the Post Adjustment System
Calculation of PAI
Walsh Index is a multilateral index reflecting a comparison of prices
Rebasing factor is the New York PAI at the time of the price collection
As of now the Rebasing factor equals to NY June 2005 PAI =
WALSH INDEX =
REBASING FACTOR =
X =
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

17. Special-Topics Workshop on the Post Adjustment System
Calculation of PAI
Expenditure Group
% Weight
Index
Total In-Area
59.18
111.5
Food and non-alcoholic beverages
8.50
130.6
Alcoholic beverages and tobacco
1.07
92.0
Clothing and footwear
1.82
142.3
Housing, water, electricity, gas and fuels
22.57
77.2
Furniture, household equipment and routine maintenance of the house
4.22
125.3
Health
2.70
119.3
Transport
6.89
151.4
Communication
1.85
156.4
Recreation and culture
4.12
142.6
Education
0.97
84.1
Restaurants and hotels
2.25
129.4
Miscellaneous goods and services
2.23
128.3
Medical Insurance
6.54
107.2
Pension Contribution
10.77
116.6
Out-Of-Area
23.51
117.8
Total WALSH
100.00
113.3
Values for Vienna as of January 2009
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

18. Special-Topics Workshop on the Post Adjustment System
Rebasing Factor
PAI for New York at the beginning of the survey round (currently June 2005)
Converts the Walsh Index into a PAI
Determines salary levels worldwide
Changes over time through consolidation
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

19. Special-Topics Workshop on the Post Adjustment System
Walsh Index vs. PAI
Walsh index
Walsh index of 0.95 for a duty station means that the cost of living in the duty station is 5% less than that in New York in June 2005
Walsh index of 1.25 for a duty station means that the cost of living in the duty station is 25% higher than that in New York
Post Adjustment index
Post Adjustment index of 135 means that staff at the duty station are paid an additional 35% of the base salary to compensate for the cost of living
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

20. Components of the PA Index
Major Components:
In-Area
~40-57%
Out-of-area
~25-40%
Pension contribution
~10-12%
Medical insurance
~8%
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

21. Components of the PA Index
The In-Area component has a 3-level internal structure
Major Groups
Subgroups
Basic headings
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

22. Components of the PA Index
(In-Area major groups)
Food and non-alcoholic beverages
Alcoholic beverage and tobacco
Clothing and footwear
Housing, water, electricity, gas and fuels
Furniture, household equipment etc.
Health
Transport
Communications
Recreation and culture
Education
Restaurants and hotels
Miscellaneous goods and services
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

23. Components of the PA Index (Pension contribution)
Represents staff member’s share of pension contribution
Calculated for P4 step 6 with dependents
Reviewed annually
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

24. Components of the PA Index (Medical insurance)
Average staff member’s share of medical premium
Calculated for P4 step 6 with dependents
Reviewed annually
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

25. Components of the PA Index (Out-of-Area component)
Represents purchases made outside the country of duty station
Calculated as an average of U.S. dollar based inflation in 21 selected countries
Is a common factor for all duty stations
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

26. Out-of-Area component
Reflects expenditures incurred outside the country of the duty station
Examples:
Items imported directly by staff due to limitations of the local market (e.g. food, clothing and footwear)
Expense of private travel outside the country of duty station
Fees for education
Support of dependents abroad
Upkeep of a dwelling in the home country
Two parts:
OA weight
OA Index
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

27. Special-Topics Workshop on the Post Adjustment System
Out-of-Area Index
Average of US dollar-based inflation in 21 selected countries
Country
Group number
Effective weight
USA 1
9.0909
Italy 2
France 3
Belgium 4
3.0303
Netherlands
Luxembourg
Denmark 5
2.2727
Sweden
Norway
Finland UK 6
4.5455
Ireland
Germany 7
Austria
Switzerland 8
Japan 9
Hong Kong 10
Singapore
Portugal 11
Spain
Greece
Total
100.00
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

28. Steps in Calculating OA Index
Dollarize inflation in each country
Calculate average for each of 11 groups
Calculate average across groups for the month
Nine-month moving average
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

29. Special-Topics Workshop on the Post Adjustment System
OA Weight
Set by the Commission
Trade-off: stability vs. precision
Neither completely stable nor completely precise
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

30. Special-Topics Workshop on the Post Adjustment System
OA Weight – Group I
Time period
OA weights applied
Effective date
Before 1986
Actual OA expenditure
1986 – 1990
Actual weight OA + NCC
1 Jan 1987
1990 round
OA weight fixed at 10%
1989
1995 round
Actual OA weight + NCC
1 Jan 1996
2000 round
max {Actual OA weight, 20%NR} + NCC
1 Mar 1997
2005 round
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

31. Evolution of OA Index in Swiss Franc
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

32. Evolution of OA Index in Euro
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

33. Updating Post Adjustment Indexes
GOAL: Maintain equivalence of purchasing power of salaries over time
METHOD: By taking into account:
Local and dollar-based inflation
Exchange rate movements
Changes in medical insurance
Changes in pension contribution
Housing survey data =
Today
Tomorrow
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

34. Updating Post Adjustment Indexes
Net Take-Home Pay (NTP) = Net remuneration – Pension contribution
Duty station
PAI
Multiplier
P4, step VI base salary PA
Net Remuneration (US$)
Vienna
168.9
60.4
76,823
46,401
123,224
London
148.6
43.7
33,572
110,395
Geneva
188.1
84.7
65,069
141,892
New York
171.1
68.5
52,624
129,447
P4 step VI, D Net Salary level and PAI / multipliers– as of 1 January 2009
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

35. Updating Post Adjustment Indexes
Procedures for reviewing PAIs with regard to exchange rate fluctuations are different for the two groups of duty stations.
Group I
Group II
Aim: To stabilize NTP in local currency
Aim: To stabilize NTP in US $
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

36. Updating Post Adjustment Indexes (general framework)
P/P Survey Result
Group I
Group II
If Low P/P result
Group I or Group II
Gap Closure Measure
0.5% rule
1 Month Rule
5% rule
10 Points Rule
12 Month Rule
Post Adjustment Multiplier
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

37. Updating Post Adjustment Indices (0.5% rule)
Multipliers for Group 1 duty stations are reviewed on a monthly basis for exchange rate movement.
Take-home pay in local currency is maintained within a range of +/- 0.5% of established pay level.
Aim: To stabilize salaries in local currency
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

38. Updating Post Adjustment Indices (0.5% rule - Vienna)
Implementation Date
Exch. Rate
Salary (local)
Multiplier
NTP (local)
2008 Jan
0.686
68.2
65.0
Feb
0.676
67.2
Mar
0.661
70.7
Apr
0.634
77.3
May
0.642
75.3
Jun
0.643
77.0
Jul
0.636
78.8
Aug
0.672
70.1
Sept
0.718
60.2
Oct
0.742
55.6
Nov
0.773
50.0
Dec
0.772
50.2
2009 Jan
0.699
64.2
60.4
Consolidation 1.97%
5% rule
Pension contribution
US$
Consolidation 2.33%
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

39. Updating Post Adjustment Indexes (5%, 12-month rule, Group I)
Adjustment for inflation is made after:
A full 5% movement in the cost of living OR
12 months have elapsed from the reference date,
whichever comes first!
Reference date:
Date of last change in net take-home pay in local currency
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

40. Special-Topics Workshop on the Post Adjustment System
Updating Post Adjustment Indexes (5%, 12-month rule, latest changes at HQ duty stations)
When
Prior PAI
Prior multiplier
Reason for change
Resulting PAI
Resulting multiplier
Geneva
Jul. 2008
189.0
87.6
5% rule
192.0
92.0
London
Mar. 2008
182.4
74.4
183.5
83.5
Madrid
162.8
60.8
166.3
66.3
Montreal
Jun. 2008
160.6
59.3
164.6
64.6
New York
Aug. 2008
169.3
61.8
172.4
72.4
Rome
Apr. 2008
173.8
73.2
12-month rule
180.0
80.0
Paris
May 2008
182.3
83.1
181.4
81.4
Vienna
176.3
77.3
177.3
Washington
146.3
40.2
147.0
47.0
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

41. Factors Influencing Evolution of NTP (Reference Period)
Cost-of-living surveys
12-month and 5% reviews
Changes in methodology
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

42. Factors Influencing Evolution of NTP (Exchange Rates)
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

43. Factors Influencing Evolution of NTP (Exchange Rates)
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

44. Factors Influencing Evolution of NTP (Exchange Rates)
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

45. Factors Influencing Evolution of NTP (Exchange Rates)
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

46. Special-Topics Workshop on the Post Adjustment System
Evolution of CPIs
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

47. Special-Topics Workshop on the Post Adjustment System
Evolution of Rents
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

48. Evolution of Pension Contribution
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

49. Evolution of Medical Insurance
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

50. Evolution of Out-of-Area Index
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

51. Out-of-area weight (results of simulations)
PAI, Dec-2008, original and modified out-of-area weights
Redistribution to in-area excluding housing
Current
Scenario 1
Scenario 2
OA weight
PAI index
Geneva
23.06
175.65 10
177.29 6
177.81
London
23.28
162.74
159.68
158.77
Madrid
23.58
156.36
154.48
153.93
Montreal
23.49
146.01
141.33
139.94
New York
23.17
175.39
173.71
173.20
Paris
23.42
164.05
163.76
163.67
Rome
163.15
162.45
162.23
Vienna
23.51
161.62
161.80
161.87
Washington
23.62
152.27
149.55
148.74
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

52. Out-of-area weight (results of simulations)
PAI, Dec-2008, original and modified out-of-area weights
Redistribution to in-area including housing
Current
Scenario 1
Scenario 2
OA weight
PAI index
Geneva
23.06
175.65 10
175.23 6
175.11
London
23.28
162.74
159.68
158.77
Madrid
23.58
156.36
151.78
150.44
Montreal
23.49
146.01
139.26
137.27
New York
23.17
175.39
173.86
173.39
Paris
23.42
164.05
161.04
160.14
Rome
163.15
160.06
159.15
Vienna
23.51
161.62
157.90
156.78
Washington
23.62
152.27
146.74
145.11
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System

53. Latest developments for 2010 survey round
Review of items and specifications
New PAI structure with a reduced number of basic headings
New basket of 26 countries for Out-of-Area Index (including some Group II duty stations)
Re-design of the survey questionnaire
Real-time comparisons with New York
Increasing use of the Internet as a source of price data
Cooperation with other international agencies involved in cost- of-living measurement
Vienna, 23 January 2009
Special-Topics Workshop on the Post Adjustment System