Cost of living set to cancel out freelancer rate rises
TOPIC OF THE WEEK
How will freelancers and micro-businesses make ends meet in 2022 in the face of rising food, energy and fuel prices? Should the government step in before it’s too late?
The hiring boom is set to continue for 2022, with many professionals joining the great resignation with a view to start consulting, freelancing or contracting. Hiring companies, as a result, are having to work harder to woo candidates, which means salaries in some areas are reaching new highs. But the cost of living crisis could cancel things out.
First, the good news.
While global unemployment reached historic highs triggered by the pandemic, freelancers have weathered the disruption relatively well. More than 30% of respondents in a Payoneer survey reported higher demand for their services since the pandemic began, with 45% reporting that demand stayed constant without slowing.
Programmers, marketing specialists and finance professionals experienced the strongest growth in terms of income and new business over the period.
What is the average global rate for a professional freelancer?
Findings show the global average hourly freelance rate is now $28, significantly higher than the $21 average hourly rate reported in the 2020 Global Freelancer Income Report. With 40% of freelancers reporting that they are now charging more for their services than they did at the start of the pandemic, and demand continuing to rise, the opportunity for freelancers to succeed has never been greater.
- 32% of respondents reported higher demand for their services since the COVID-19 pandemic began, with a further 45% saying demand stayed constant without slowing.
- The fields of programming, marketing, and finance showed the strongest growth in demand.
- Younger freelancers were the main beneficiaries in the surge in demand, while more seasoned freelancers saw a slight slowdown.
- 40% reported higher hourly rates since the start of the pandemic. Only 12% saw a decrease in rates.
Now onto the bad news.
Cost of living: it’s going to get worse
Female freelancers are still earning less than their male counterparts. On average, 84% of what male freelancers earn. Plus, no one was expecting the prolonged costs of the pandemic to be followed by such a spike in inflation, which has brought on a new problem: the cost of living crisis. It’s hitting not just freelancers and microbusiness owners, but those that employ or buy from them.
How is everyone going to make ends meet? And should the government step in before it’s too late?
- In the first half of February, 76% of people in the UK said their cost of living had risen in the previous month – up from 69% in the second half of January.
- The most common price rise they mentioned was the increasing price of the supermarket shop (90%).
- This was followed by rising energy bills (77%) and the soaring price of fuel (69%).
Source: Hargreaves Lansdown
The price of food is actually increasing slightly slower than other runaway price rises, but it hits harder, says Sarah Coles, senior personal finance analyst, Hargreaves Lansdown.
“Right now, prices are up 4.3% in a year, but they’re rising particularly quickly on staples like pasta, eggs and milk – all of which are up 8% or more. While there are other things we can cut back on or avoid spending on completely, we still need these staples.
So once we’ve traded down brands or gone to a cheaper supermarket, there’s very little we can do to cut the cost.”Sarah Coles, senior personal finance analyst, Hargreaves Lansdown
Gas prices could soar to new highs if the Russian government cuts off more Western European gas supplies as a result of its stance over Ukraine. Some freelancers and small business owners have said that they are already witnessing the heart-wrenching choice of eating versus staying warm.
“We are currently doing well. Lockdown brought a whole host of new customers to us and we are eternally grateful for this but I think that is because we have quite a niche market,” said Jem Young, founder of No Forks Given Fabrications.
“However, we have family members and friends who are already choosing between eating and heating, and many are going with hardly any food at all so that their children can eat. It is a truly scary time and it is really difficult to stay positive and upbeat. There’s this real guilt hanging over us that our business is doing really well but not well enough that we can help our family and friends out of the dire position many find themselves in,” said Young.
There’s this real guilt hanging over us that our business is doing really well but not well enough that we can help our family and friends out of the dire position many find themselves in.Jem Young, founder of No Forks Given Fabrications.
Young is part of a tribe of entrepreneurs in the UK, voicing their concerns over the cost of living in the UK.
Nine in 10 (93%) small and micro-businesses say the Chancellor, Rishi Sunak, is not doing enough to support them, according to a survey by Facebook group, Not On Amazon, which has nearly 190,000 independent makers as members, including Young.
The survey results also revealed 9 in 10 (88%) micro-businesses are finding it harder to make ends meet compared to a year ago. Just 1% of the 2000 survey respondents said they are finding it easier to make ends meet compared to a year ago, while 11% said they are in the same financial position relative to February last year.
Danielle McKenny, owner of organic skincare company, Gaea’s Garden has been witnessing the price of food in the grocery shops increasing by 15-20% in the past two years.
“It’s only set to get worse. I don’t see any politicians losing sleep over any of this insanity. The past two years have been absolutely devastating for small businesses. While our sales have plummeted, the cost of living and eating has skyrocketed,” said McKenny.
Jamie Rackham, Founder of Not On Amazon, had those to say: “The fact that nine in 10 makers and micro businesses are finding it harder to get by than this time last year shows that the post-pandemic financial crisis is really starting to take hold. What’s also crystal clear is that the vast majority of small indies do not feel the Government is doing enough to support them, while at the same time letting giant corporations avoid paying the taxes they should.”
Many of our members basically feel abandoned. Slow sales are bad enough in themselves, but once you factor in rising energy prices and raw material costs, the financial pain is amplified. In the meantime, big businesses, which can afford to slash their prices, get bigger. As ever, the rich get richer, and the poor poorer, and that’s simply not right.Jamie Rackham, Founder of Not On Amazon
Marianne Clarke, owner of pet portrait and grooming company, Selston Groom and Train: “We have stopped putting our heating on when we are cold. I now only use the heating to dry clothes. I wear my dressing gown all the time unless I am working. As a dog groomer working from home, I use a lot of hot water and a lot of electricity for blowdrying. I am extremely worried about the cost of energy prices rising. My electricity bill has already risen by £50 a month, but I fear that more rises will come.”
Those freelancers working from home are also concerned, like Amin Khan, owner of sustainable clothing retailer, PrimaBerry: “As a small business owner who works from home, rising energy prices and the cost of living are a huge concern for us. We try to make our items as affordable as we can but we are afraid that, soon, we will have to raise our prices and our customers will stop purchasing.”
Sarah Seymour, owner of London-based Love Absolute Skincare said, “As the owner of a micro skincare brand, I’m feeling absolutely exhausted. The two-year battle since Covid began has been long and brutal and our sales have been affected throughout. Sometimes no money at all has come in.
Just when I thought we were out of the woods, I’ve literally been blindsided by a £1,700 energy bill. The battle to survive for micro-businesses like mine is real and soaring energy prices are crippling us just as we thought things might improve.Sarah Seymour, owner of London-based Love Absolute Skincare
Have you read?…
Why now is a good time for freelancers to raise rates
How inflation can create opportunities for freelancers
Brits purchasing power halved: Top tips to make your money stretch with rising inflation
Inflation has arrived: 70% of UK businesses said they will increase prices