The ATA Chronicle - January/February 2018 - 11

FEATURE

Why Can't I Raise My Rates?
An Introduction to the Economics
of Language Services
Freelancers often feel constrained when setting their rates.
Why can't they charge more? Value, scarcity, competitive markets,
and limits on differentiation offer some insight into this issue.
Note: In compliance with U.S. antitrust law,
no specific rate recommendations are made
in this article. This text is based on an ATA
webinar presented in May 2017.

F

or millennia, humans have struggled
with the concept of value. Why
are some things more valuable
than others? Who decides? Why, Plato
pondered, are rare things so valuable,
when others, like water, are not?
Scottish philosopher Adam Smith,
in his seminal work, Wealth of Nations,
formalized this thought exercise, which
has come to be known as the diamondwater paradox. No one needs a diamond
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to live, he wrote, yet its scarcity seems to
lend it value. On the other hand, everyone
needs water to survive, but its relative
abundance makes it cheap.
As such, Smith concluded, there
must be more than one type of value. He
differentiated between value in use and
value in exchange. Water is very useful,
but it won't buy you much, whereas
diamonds are relatively useless, but in
exchange, they buy quite a bit. Thus,
value in exchange must depend on both
scarcity and a concept that has come to be
known as marginal utility, which shall be
discussed in more detail later.

BY JOHN M. MILAN

Before delving any further into modern
economic theory, though, it's important
to mention what this has to do with the
language services industry. The astute
freelancer may realize that these concepts
can be readily applied to our reality. How
are our services valued? What is their
marginal utility? Are we offering something
that has value in use, value in exchange, or
perhaps both? This article explores these
concepts to provide a framework aimed
at helping language services professionals
understand the market better, where
they stand in it, and what they can do to
improve their current position.
To answer the titular question regarding
rates, we first need to establish a few
premises. For starters, our analysis will
be limited to the translation market,
although this same analysis could easily be
applied to the interpreting market. More
specifically, we shall examine the situation
of professional freelance translators
currently working in this market, who
understandably would like to earn more,
but don't have a lot of options to improve
their income. In general, they can: 1) work
more hours, 2) increase their output of
words per hour, or 3) increase the money
they earn per word. For now, let's assume
that said freelancers are already working
as many hours as possible and producing
as many words per hour as they can. That
leaves one option: raising their rates.
Is that even possible? If so, how? And
what are the constraints? To answer
these questions, we need to define a few
economic concepts, starting with value.
Value: Value, in our case, comes from
offering a service that someone wants and
is both willing and able to pay for. There
are many language pairs out there that
aren't commercially "valuable" because
there isn't enough demand or enough
consumers willing and able to pay for
them. For instance, Navajo>Hungarian is
a language pair unlikely to offer a feasible
career path. English>Spanish, on the other
hand, is a different story.
Scarcity: Scarcity of translators refers
to the number of qualified professionals
who can provide the service offered
in a valuable language combination.
And scarcity on the market will tend to
vary with the barriers to entry for new
translators. These "barriers" may include
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11
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Table of Contents for the Digital Edition of The ATA Chronicle - January/February 2018
