Why Can’t I Raise My Rates? Variables Affecting Supply

In my previous post, I discussed scarcity and introduced the role that supply and demand play in determining rates in the language-service market. We looked at an example or two and noted that language professionals (i.e. translators) make up the supply, while businesses, hospitals, law firms, governments, individuals, etc. comprise the demand.

In this post, we’re going to forget about demand for a moment and limit our discussion to the supply side of the market in order to further our understanding of the factors that influence supplier behavior. First and foremost, it is essential to keep in mind that we are the supply. And by “we”, I mean language service providers.

It can be easy to overlook this point, because most of the time we think of ourselves as consumers, as part of the demand for food, housing, clothing, transportation, and so many other things. But in this case, we’re on the other side of the equation.

So what influences our decisions?

In economics, we begin by assuming that a market price for our service already exists, and that we, as suppliers of translation services, will respond to it. How will we respond? For starters, that depends on whether the market price is high or low.

Economists state our initial response in terms of quantity, i.e. the supply. If the market price of translations is low, few translators will be willing to enter the market and accept that rate, and thus few translations will be supplied. As the market price rises, more and more translators will be willing to do the job, and thus, the quantity of translations supplied will increase even more[1].

Thus, the basic “law of supply” is that the market price of a service – such as English>German translation – has a direct relationship with the quantity supplied:

Market Price of Eng-Ger translations ↑ Quantity of Eng-Ger Translations ↑

Of course, market price is just one of the variables that affects our behavior as suppliers.

We’ve already mentioned another factor: the total number of “suppliers” on the market. Again, we are talking about language-service providers, or more specifically in this discussion, translators. In general, the more translators there are in a given language pair, the more translation services will be offered, and as a result of this surplus, there will be downward pressure exerted in the market on the average price per word, which will tend to fall.

In addition to the sheer number of translators, several other variables affect supply. These include available technology, the costs of inputs, government policies and regulations, among others. Let’s review some of them in more detail to understand how they affect the supply.

Technology is not just limited to machine translation, but also includes the technology that individual translators employ to offer their services. For the longest period of time, the available “technology” used in translation was pen, paper, and dictionaries.

Writer with pen

Traditional translation technology

The advent of the typewriter was an example of changing technology that led to shifts in the market and the way in which translators worked, resulting in changes to pricing. More recently, translators have employed computers, software, the Internet, Computer-Assisted Translation (CAT) tools, cloud-based translation environments, and other technologies to help them ply their craft. All these technologies have had, and continue to have, an impact on the supply.

It is not just the existence of these technologies, but also their costs that affect the translation market in the form of “inputs”. In traditional microeconomic theory, we tend to think of inputs as land, labor and capital. Two of these categories don’t help much with translation, though. Instead, inputs in our industry include things like computer software, Internet access, translation memories, and hours of labor. The more expensive these inputs are, the less a translator is able to earn for the service performed, and as a result, the supply of translations will tend to decrease.

The last variable that we’ll review in this post is the impact of government regulations and policies. These obviously vary from state to state and country to country. The translation industry is regulated in some nations, but not in others. For certain translators, this means having to be part of a trade union or association. For others, it might involve earning a specific degree or passing a certification exam. Then there are the taxes that translators have to pay, depending on the type of work that they are doing, and where that work is being done. All in all, the role of the government and regulations can either make the industry more or less competitive and thus affect the supply as a result.

Putting all these variables together, we can begin to develop a model to help us understand the forces that affect the supply side of the equation. In notation form, it might look something like this:

If Pm ↑, then ↑ Qtr

and if T ↑, then ↑ Qtr

but if Nt, Ci, or Grp ↑, then ↓ Qtr


Qtr = Quantity of translations supplied
Pm = Market price of a translation
T = Technology
Nt = Number of translators
Ci = Cost of translation inputs
Grp = Government regulations/policies

At this point, your eyes are probably starting to glaze over, but bear with me. What these symbols mean is that we have relationships between the amount of translation being produced in the market and certain other variables that may affect prices.

Those relationships are either direct or indirect. The direct relationships are fairly obvious. If translators can make more for their work, they will be willing to do more work. And if technology helps make the work easier and faster, then translators will produce even more of it.

The indirect relationships, however, are more nuanced. Without delving into the details, the basic idea is that changes to variables such as taxes, the cost of computer software, or the number of translators will have the opposite effect on the amount of translation produced. This change in the supply of translation will then affect the market price for services in that market.

In any event, these variables are constantly in flux, and thus the supply of translation is constantly changing. But while they are helpful in understanding the quantity of translation on the market, they are still only half of the market, and they don’t yet enable us to examine market rates.

This post has been from the translator’s viewpoint; that is, as the provider of translation services. But as previously discussed, prices on the market are determined by both the supply and the demand. So in the next post, we’ll look at the variables that can affect the demand for translations.


[1] The underlying assumption here is that if rates are too low, translators will do other work (perhaps editing) in which they can earn a better income. But as rates improve, translators will forgo other lower-paying work to offer more translation services.