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How does inflation affect freelance work?

From heightened demand to the money illusion

As if the last couple of years haven’t contained enough hardships to contend with, once we start to feel a sense of normalcy, we’re being hit with rising costs on everything from your latest food delivery to sky-high dealership markups on cars. Heaven forbid you’re one of the poor saps trying to house shop these days…and if you’re one of the millions who works on contract, you might be wondering: How does inflation affect freelance work?

Let’s check out the good, the bad, and the ugly.

Abbey Charles
Abbey Charles
· 5 min read

The good

We don’t need to rehash anything that’s already been said about the rate at which people are leaving their jobs these days. We know. Everyone knows. There are so many reasons it’s happening, and we won’t talk about any of them.

The fact of the matter is that when you pair the exodus with rising inflation, it’s harder to get workers into jobs. Companies can’t keep up with matching salaries to inflation rates, and as a result, seats are left empty. And you know who’s waiting in the wings to fill those vacancies? Freelancers. 

ambreen-hasan-E9ANYNkN4Sc-unsplashRejoice, oh fellow freelancers!

When asking the question, “How does inflation affect freelance work?”, in terms of the work itself, there is a clear answer: You’ve got more of it to choose from! Unable to find full-time hires, companies are turning to freelancers to bridge the gap and keep their product moving along. Take advantage of the opportunity, and build good relationships with clients who may keep coming back once they see how easy it is to work with you.

The bad

Maybe it’s less “bad” and more “uncomfortable”, but the federal government can’t be the only party raising rates. You will need to increase yours to meet the market where it’s at and ensure you’re being paid what you’re worth. And if you’re not? Well, then you’re effectively giving yourself a pay cut every year. When was the last time you raised your rates? It’s likely that it’s been a while, and there are two factors coming into play: the money illusion and status quo bias. 

The money illusion is the idea that people tend to view money in nominal terms rather than real terms, failing to take into account all the costs that have risen while your rates stay the same. That $100/hour rate you’ve been rocking since 2019? It’s only worth $87.50 today. But to you, $100 an hour still feels like it’s worth your time. That’s the effect the money illusion has. 

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The other part of this is the status quo bias. Things are going great with your long-term client, and they’ve never had a problem with your $100/hour rate. No need to rock the boat when you’re getting that consistent cash, right? Let’s maintain the status quo so you don’t risk upsetting a good client. Now, given the money illusion, do you see why this is a problem? By maintaining the status quo, you’re effectively down-selling yourself. Raise your rates, and maintain the status quo on your living standards instead.

The ugly

How does inflation affect freelance work? Well, let’s look at what it’s doing to the rest of the world around you to get a truly vivid picture. 

Current inflation rates are at 8.5%, which is the highest they have been since January 1982. That’s 40 YEARS AGO. In the month of March 2022 alone, gas prices increased by 18.3%; groceries went up 1.5%. Over the last year, all goods and services (minus food and energy) have gone up by 6.5%, with food sitting around 8.8% and energy coming in at a whopping 32% higher than this same time last year.1

united-states-inflation-cpi@2x

These numbers are real, and they reflect the world around you. Now, think about them in the context of what you’re charging and what you do with your time as a freelancer. Traveling to client sites, having a dinner meeting, paying for the lights to stay on in your home office–all of those things cost more this year. It’s not a pretty situation, but it is one you can plan for, now that you have numbers in front of you. 

If you’re starting to feel the pinch, it’s time to sit down and calculate how to take advantage of the abundance of freelance work available and how you can leverage it to raise your rates to keep them consistent with inflation. This handy inflation calculator will tell you exactly what your rates are worth these days. Type in what your rate is, and choose which year you started charging that rate. You might be surprised to see how much more your time is worth these days. 

1 From the Bureau of Labor Statistics Consumer Price Index – March 2022 

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Interested in working with Gun.io? We specialize in helping engineers hire (and get hired by) the best minds in software development.

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