Reply
cancel
Showing results for 
Search instead for 
Did you mean: 
Reply

why are the prics so low?

Active Member
Mostafa S Member Since: Jun 22, 2015
1 of 21

HI all, i work as a translator and i was wondering why are the translation prices are so low? one client asked me to translate 400 article of 360  words each for 1.3$ per article. i do not have a degree in translation, but i do not think that this is the reason.

 

Community Guru
Preston H Member Since: Nov 24, 2014
2 of 21
Mostafa, basic laws of economics. Supply and demand.
Many prices on Upwork are NOT low.
Things that are in high demand but low supply are higher priced.

Not everyone should work as a translator.

You don't have to work for low-paying jobs if you don't want to.
But if many, many translators are willing to work for small amounts of money, then prices will likely be low.
Ace Contributor
Ehsan K Member Since: May 22, 2015
3 of 21

Hi Preston,

 

I agree only in parts with you.

 

---"basic laws of economics. Supply and demand"----

 

Basic laws of economics don't apply here or at least not 100%. If you would analyze the pricing here on Upwork you would need to use Network Economics which is a completely different game than basic economics. Supply and demand (price effect) are one part of Network Economics, the other part is the network effect. Both effects compensate each other and depending on which effect is stronger prices move either up or down. Then you also have the effect of price vs quality which is another topic.

 

You can't really say wether prices are too low (or too high as a matter of fact; yes that's the other side of the coin) without a proper analysis of the network dynamics. What we know is that prices are based on a market solution since Upwork doesn't intervene or at least since recently. To analyze wether the price is too high,low or "fair" one would need to look for the stable equlibrium solution and the underlying market structure which influences the pricing dynamics.

 

However in general in such a large network the price effect is usually stronger since a lot of members of the network are willing to give a lower bid in order to land a job or a least members who are at the lower price end of the market like Preston already pointed out. This indicates coordination failure hence prices will be most likely to low in the market solution.

 

On a final note.Just ask yourself why it's not possible anymore to see the bid range if you don't have the membership plus plan.  This is a classic example of price regulation/coordination . In theory this should lead freelancers to give their "true" hourly rate and not the one which lands them the job. Also the introduction of connects reduces overall number of applications which reduces supply and hence raises rates.  Here I don't agree with you Preston because why would I introduce such measures if:

 

"Many prices on Upwork are NOT low" .

 

 

 

 

Community Guru
Douglas Michael M Member Since: May 22, 2015
4 of 21

@Ehsan K wrote:

Also the introduction of connects reduces overall number of applications which reduces supply and hence raises rates.  Here I don't agree with you Preston because why would I introduce such measures if:

 

"Many prices on Upwork are NOT low" .


Ehsan,

 

Because, as I think you argue, it's a complex and uncoordinated system. Perhaps more to the point, the providers' view of "many" is quite different from Upwork's.

 

My prices are not low; they're based on standard rates in my field. I've been pleasantly surprised to find many (more) providers with the same practice here than I expected. We could still collectively be a drop in Upwork's bucket. They still might want to reduce the number of applications per job, whether in an explicit attempt to restrict supply and support higher prices or simply (and hypothetically) to reduce buyer attrition traceable to a flood of largely irrelevant applications.

 

None of that affects my business model. Working on Elance, once I arrived at a reasonable ROI by being selective, I never used up my connects. I rarely cared what my competitors were bidding, so rarely paid for the privilege of knowing.

 

I'm no economist. Could it be said that there are multiple markets in operation here?

 

Thanks and best,

Michael

 

p.s. Can't resist. Thread title = Best. Typo. Ever.

Community Guru
Ela K Member Since: Feb 9, 2015
5 of 21

@Douglas Michael M wrote:

 

p.s. Can't resist. Thread title = Best. Typo. Ever.


 Agreed.

Ace Contributor
Leah M Member Since: May 3, 2015
6 of 21

Agreed. May I add to that the obvious, which is that prices may often seem low to folks in western countries because they're competing with bidders in asia, india, etc., where average wages and cost of living are considerably lower. 

It's different from the "real world" where companies abide by minimum wage laws to set reasonable prices for their employees. 

Maybe oDesk can enforce some sort of "minimum wage" for clients according to the country in which they or their companies are based. OK, I'm sure they've considered that option, and decided against it for fear of losing clients. But on the other hand, it would make oDesk seem like a more respectable, legit job matching platform, and if oDesk wants to cater to professional, high skilled, high quality freelancers, as they claim, they should ebrace some sort of minimum-wage regulations. 

Community Guru
Douglas Michael M Member Since: May 22, 2015
7 of 21

@Leah M wrote:

May I add to that the obvious, which is that prices may often seem low to folks in western countries because they're competing with bidders in asia, india, etc., where average wages and cost of living are considerably lower.


Thank you, Leah. Sometimes the obvious needs to be stated.

 

If I may, let me add a couple of observations: things that either are obvious or should be. One is that the competition you mention is by no means limited to online matching/prospecting/bidding sites. Exporting work offshore to slash labor costs has been standard US business practice for decades.

 

Also, though one often hears about the lower "average" wages and cost of living in countries other than the US (which I believe provides the bulk of Upwork buyers), there's no reason to expect professionals in those countries to scrape by on their national averages. Just as in rich countries, professional work and life bring expectations that increase one's expenses as well as one's level of comfort and security. I shudder to think of the ethnocentric stereotypes that seem to envelop many buyers' mental image of technical and professional workers in economies that can be more demanding in their way than that of the US.

 

Best,

Michael

Ace Contributor
Ehsan K Member Since: May 22, 2015
8 of 21

Hi Douglas,

 

first of all you have a nice eye for detail. And your final comment just saved the day.

 

Yes I guess there are multiple markets here in operation. The one where  the mass of freelancers are engaged in should be clear. It's the lower end. The connects system intervenes only there just like you wrote :

 

"simply (and hypothetically) to reduce buyer attrition traceable to a flood of largely irrelevant applications"

 

However I think you can break it down to just two markets. The low-end (low wage) and high-end (high wage) market.

 

You wrote:

 

"None of that affects my business model."

 

and

 

"I rarely cared what my competitors were bidding, so rarely paid for the privilege of knowing"

 

And that's exactly the point. The high-end market doesn't set prices which are let's say skewed. What you're writing above basically says that you're not bidding strategically. You're bidding solely on the grounds of the VALUE of your work-product/skills/experience. That only works well as long as nobody starts bidding strategically in your niche. Look at the low-end market and you get a completely different picture.

 

There you have this bidding with ridiculous low rates and on jobs where the freelancers aren't even qualified.(Comment by me: I know there are freelancers with low rates who don't show this bidding pattern. However I guess we all agree that you never or at least rarely see someone with a high rate bidding on jobs he can't do. I would categorize freelancers who don't show this bidding pattern but bid low in the category of workers mentioned by Leah. These people come from countries where the average wage is low and they can earn a decent living in the "low-end" market here on Upwork. There's nothing wrong with that and economically their bidding rates can be attributed to focal points).

 

However I'm not talking about low prices stemming from bidding by freelancers who are based in low average income, low cost-of-living countries.  Douglas got it right when he mentioned:

 

"I think you argue, it's a complex and uncoordinated system"

 

From a modelling point of view it's hard to build an economy like the Upwork ecosystem. Having this in mind I'm talking about the negative impact that the underlying structure of the market place and bidding system has on the economy and pricing of jobs. From my point of view there are huge problems within that system at the moment. I give you just one example.

 

I wrote a similar comment with regard to the rating system in the past days. In order to understand the prices for jobs and the hourly rates you need to look at it from a game-theoretical perspective or to be more detailed you need to look at the Nash Equilibrium(NE). The NE would be the optimal price I bid no matter what every other applicant bids (without me knowing the exact amount of these bids). In the simplest case you would  bid $0.01 here on Upwork and you should get every job. This would be the last iteration in the process. The bidding process doesn't always reach that iteration for whatever reason but the whole structure of the process favours ever decreasing rates in order to get a job.

 

Scientifically my explanation isn't 100% correct but I just wanted to make it easy to understand and to give you an impression of a structural weakness in the system. For example this can be massively exploited. Most people are unaware of their bidding behaviour.  But let's say you are aware of it. In my niche there are maybe 4-5 jobs a week on Upwork, sometimes a little bit more. From the workload I guess I could do 80% of them. If I now bid the NE in my field how long do you think it takes to eliminate my complete competition?I guess not so long. To make it more interesting, actually there is someone in my niche who does that. He has a really good feeling for the price the client is willing to pay or even offers him to take any given price(Honestly I don't know). However his prices vary by around 400% and he takes most of the jobs in this niche. Even if the job is labeled as experienced(and believe me he's experienced) he doesn't bid high and takes the job. 

 

To sum it up most likely there are a lot of reasons why rates are perceived too low. However it's not good if the underlying structure of the economy tends to drive prices into a particular direction. Of course this includes the opposite direction. If hourly rates would be on average too high this would result in a lack of clients 

 

Community Guru
Douglas Michael M Member Since: May 22, 2015
9 of 21

Thanks for your further thoughts, Ehsan.

 

I realized as I was writing that I risked implying either I or the high-end market were somehow insulated from the mass low-end market. We're not, of course. Still I'd suggest how one presents oneself and bids, tactically if not strategically, reduces much of the noise (interference) generated by the system, and that goes some way toward facilitating connection with clients willing to operate both professionally and in the high-end market. Much fretting and hand-wringing can thus be saved, which of course also improves my ROI.

 

;^)

 

p.s. Abdul said the same thing more simply: "Set your mind in a rate and then stick on it. You will get a job within that rate soon. Do not under estimate yourself for the reason falling the rate."

 

There's probably a dissertation lurking behind the seemingly magical effect of such a tactic, the anecdotal evidence for which continues to mount.

Ace Contributor
Leah M Member Since: May 3, 2015
10 of 21

True, that, Douglas. Professionals in any country should expect more than the local minimum wage. Of course, this situation goes from sad to ridiculous when you're a professional in a country like the US and have to compromise for the minumum wages in much poorer parts of the world, which couldn't pay the rent here. Lets face it, in some professinal fields here one might expect to earn less than the average wage of a bus boy or a floor cleaner. That one prefers or has no choice but to do their job remotely shouldn't mean they're less worthy or less deserving of basic rights. 

The difference between this situation and traditional offshoring is that in the latter, the work is outsourced to those overseas at overseas rates, while here often times employers prefer to hire professionals from English speaking countries but for outsourced rates...

 

Ehsan, you're right, I mentioned just one of several causes for this phemomenon and the situation has a lot of potential for abuse. It's funny, your previous comment was like an argument against "free market" fanaticism in general. How would you suggest we tackle it?

 I think some minimum levels should be established for specific tasks (depending on the task and maybe the location as well). 

On the other hand, Upwork should have more clever filters to ensure clients find suitable contractors (and vice versa) more easily.

 

TOP SOLUTION AUTHORS
TOP KUDOED MEMBERS