A Pragmatic Eye

The following is a summary to a long article here, from June 2009, when there seemed to be a fair amount of gloom around. It seemed to be inspired at least in part by a drip, drip, drip of news about salary freezes and cuts in the wider economy (e.g. Doncaster Council just yesterday; I’m sure it’s similar in many countries) being used as justification for agencies requesting/imposing rate reductions. In truth all sorts of other reasons are wheeled out (see also Lionbridge in Nov 2010). Did I say reasons? I probably mean excuses.

It is interesting to note how often it seems to be accepted that charging less is somehow the natural corollary to economic recession (I read an article in Translation Directory only today that took it as a given). I can only guess it is because people associate boom times with charging more, so it is seen as the other side of the same coin. I hope to show here (or in the article, really) this ain’t necessarily so for freelance translators (FWIW, although I haven’t analysed the idea properly, I suspect the same factors mean that translation rates do not automatically rise during good years for the economy, either.)

To get the obvious out the way first, it should be pointed out that freelancers are not paid for their labour in the way an employee is, but remunerated for providing a service to a business. So matters are evidently a little more complex.

The complex aspect is the whole supply/demand/prices relationship. So does it make logical sense, in terms of economics, to cut our rates?

Demand and prices.

What drives demand (i.e. end-client demand) for translation? Business activity (mainly at least – and if not directly, then arguably indirectly). If there is less business activity, then to some degree there will be less translation. Furthermore, in many (not all) cases, translation is not an optional extra – if an organisation is doing whatever it may be, it needs translations. If it doesn’t do it, it doesn’t need translations. In other words. while translation may be essential to many projects and situations, it is not typically the reason for a particular project’s existence, and furthermore, is usually a very minor component of total project costs, and unlikely to be of a proportion to influence a decision to proceed or not proceed with a given project (there are exceptions).

In general terms, therefore, my conclusion is that a general drop in “market rates” will not stimulate demand for translation volume per se.

Which is therefore a factor against individuals contributing to such a general drop by deciding on an individual drop (the market being the sum of its parts).

Supply and prices

Not affected by prices as it should be. There is undoubtedly already an excess of supply (i.e. hours of translators’ time) in the non-specialist market, as demonstrated by a) the overall level of rates in non-specialist work which is generally perceived to be barely acceptable to provide a living and b) the way that agencies are the party that set those rates (see longer explanation here, blog discussion here). By pure economic theory, suppliers should be leaving the market, but non-economic factors mean they are not – 50% not main bread-winners, and “half a loaf better than no bread” and “bird in the hand…” type attitudes, which do nothing to act against downward pressure.

Conclusion: general rates affect overall supply little if at all.

Agencies

Affect the market because for them, unlike for end-clients, the cost of freelance translators is a substantial proportion of their total costs as a business. In truth, if they suffer price pressure from end-clients, or are looking to maintain their turnover, they could adopt the above argument against dropping rates to their end-clients. In practice, too many are competing just on price, and as usual, the only long-term advice about competing on price alone is “don’t”.

For individual freelancers

Bluntly, all other things being equal, freelancers working for lower rates merely reduce their income, or work harder for the same income. What they do not do, typically, is stimulate demand, making for an increase in volume and thus more income (albeit also by working harder). I say typically, because there are specific circumstances where dropping a rate for a particular client could potentially work to increase income, but the freelancer would need to be fairly sure of his or her position before doing so.

So while raising rates can be a tactic to choke back demand for your services, this relates to demand for your services that is known to exist. Dropping rates in order to increase demand for your services will not spontaneously increase your volume; you have to know for a fact that there is latent volume waiting to come your way.

Finally….

There are no hard and fast rules. We all have to put food on the table, and it would be foolish to suggest that no-one, ever, should agree to a rate cut. As I say towards the end of the full article, while I don’t believe anything I have written is wrong per se, it could be incomplete, and I may have overlooked a crucial aspect.

If so, I would be delighted to read your comments. Truly. While I confess I sometimes find the (my) work less than stimulating, I do enjoy trying to work out how the economics of this business work, and how freelancers can use that knowledge to their advantage.