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Summary:

When it comes to piecing together a career as an independent worker, online marketplaces like Elance and oDesk can seem like all upside. But is this the whole story? A small business consultant suggests these sites present an often overlooked problem for freelancers – lower prices.

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When it comes to piecing together a career as a remote, independent worker, online marketplaces that match talent with those in need of services can seem like all upside. Allowing freelancers to tap new markets, sites like Elance and oDesk lubricate the process of matching worker and employer allowing freelancers to spend less on marketing and client relations.

But is this the whole story? Writing on the American Express OPEN Forum blog recently, small business consultant Barry Moltz suggested these sorts of sites might have an often overlooked dark side for independent web workers: They drive down prices by broadening the supply of services. That’s good for companies shopping for remote workers, of course, but lousy for those hoping to keep their fees up. Moltz writes,

While these crowd-sourcing models have been around for a while, especially on the consumer side, they are not without complaints from people seeking this type of work.  This method tends you to drive down the price of services with less barriers to supply. Fabio [Rosati, CEO of Elance] compares it to shopping on Amazon.com, “You are no longer limited to the stores on main street. You can almost buy anything, anywhere.”

The idea that price competition is getting tougher out there for freelancers isn’t confined to Moltz’s post. Blog Freelance Folder also recently ran a post entitled “The Great Freelancing Pricing War.” “It’s a war out there–or at least it can feel like one when it comes to the prices freelancers charge for their services,” writes Laura Spencer before offering tips on how to fairly price your work and maximize your fee. She doesn’t expressly implicate the like of Elance in this increased price pressure, however.

What’s been your experience as an independent web worker – are sites like Elance and oDesk making it harder for you to charge a fair wage for your work?

Image courtesy of Flickr user rutlo.

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  1. Thanks for the mention…it’s a growing reality in our economy.

  2. Of course they are. I have tried sites like that, and you can’t compete with people from India or other countries who only charged like $6-10 a hour for their services. Most of the time they can’t get the job done anyways. The people I seem to get are people who tried to use these sites and then the programmers can’t finish the job and I have to fix their mistakes.

  3. As a provider, I found a project on sologig a few years ago when I needed to increase my project load. I was paid fairly and it turned into repeat business. A good experience. But as Blake mentioned, I won’t compete with providers who are OK with earning pennies on the dollar. And do-overs/clean-up jobs? No such thing. That’s a start-from-scratch job.

  4. First of all, thanks for linking to my post on Freelance Folder. I think the pricing pressure is much greater on freelancers than it was a few years ago.

    In many ways, I think that the sites you mention are a symptom as well as a cause. I have also seen very low prices posted for jobs on non-bidding sites and have even had to deal with the expectation of low prices when dealing directly with a client.

    I believe that the problem of low freelancing rates is complex. There are many factors that feed into including: the economy and the resulting influx of new freelancers, the globalization of the marketplace, and even client expectations and misinformation.

    Thanks for highlighting the problem in your post.

  5. Full disclosure: I’m the staff economist at oDesk and these opinions represent my own views.

    A couple of thoughts:

    * Like any competitive market, the forces of supply and demand are going to determine prices in these online markets. With the opening up of new countries that have large, reasonably well-educated, internet savvy populations, supply increases which will tend to drive down wages. On the other hand, these markets (and the ability to break work up into small, outsourceable bits) also make it possible to outsource more work, increasing demand, and hence prices.

    * At least within oDesk, we haven’t seen strong trends in wages, though presumably this article is talking about freelancers in general and we obviously don’t have visibility on their wages.

    * As a practical matter, I don’t think workers in developed countries like the US can’t compete in these markets—they actually have a lot of advantages: perfect english, same time-zone, familiarity with US business culture/expectations etc. Further, price matters, but it’s not the only thing. For what it’s worth, I work with many oDesk contractors and the break-down is 1 x US, 1 x Italy, 1 x Russia, 1 x Pakistan and 2 x Philippines.

    * The efficiency and distributional effects of information and communications technology are complex and the evidence is ambiguous, so I’d be skeptical of anyone offering a definite answer to these kinds of questions. There was an interesting Quora thread on this topic: http://www.quora.com/Will-oDesk-and-mfg-com-be-the-demise-of-the-American-middle-class

    * I think focusing on what these markets do for relatively well-paid workers in developed countries misses one of the most important moral facts about these markets, which is that they generate new, relatively well-paid, meaningful work opportunities for people in developing countries. It’s obviously not a random sample of our workers, but If you spend a few minutes on oDesk’s Facebook fanpage and look at the comments and stories, it’s clear that online work is improving lives in a pretty dramatic way.

    1. I think the last point you make is great and often overlooked — we complain (with some justification) about wage competition in the developed world without giving sufficient thought to the other outcome of the processes behind these pressures –lots of people living much fuller, freer lives.

  6. Raymon B. Horsley Thursday, October 13, 2011

    I find that most buyers on these sites are looking for the cheapest way to get their service needs done. They are not looking for originality just cost. The providers that do the best are the ones who are willing to work for nest to nothing and use some cheap template to substitute for their lack of talent.

  7. Freelancer.com rocks!

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