The fact of the matter is that lost jobs to other counties and low wages are the result of consumers wanting to pay the lowest price point possible for consumables. I have dubbed this as the Walmart Effect. Consumers want to pay the lowest prices they can but want higher wages and keeping jobs in the country. Both things cannot coexist.
Today, I’d like to illustrate this through something that happened to me last week.
As many of you know, one of my revenue streams is creating digital art for social media advertising. I was approached by a customer asking me how much I would charge them to create a Virgen de Guadalupe in vector format for them. By the way, the client is a Fortune 500 service provider. The potential client obviously knew what they are asking for when they asked for a vector graphic. In its simplest terms, a vector graphic allows the end user to manipulate the graphic’s size from small to poster size without losing resolution. As a digital graphic designer it is better for me to sell a raster graphic to an end user instead of the vector graphic because if the consumer wants to change the size of the graphic for a future project they would need to pay me a fee to resize it for them.
It is obviously better for me to sell a raster graphic as it gives me the ability to generate more money from one image.
The potential client asked for a full-color version in addition to the vector requirement. My billing rate is $125 per hour of labor. This allows me to cover my overhead and allows me to make a living from my work. However, for this example, I am going to take this to the bare minimum. Keep in mind, that if you sell your work at the bare minimum you will soon go out of business because there are intangibles that need to be covered in order to remain in business. However, let’s continue with the bare minimum.
In order to create the vector, I need a computer, software and my time. A computer has a lifespan of about three years. The software I use is the Adobe Creative Suite. Let’s apply some math to my example. First, let’s assume I am only willing to work forty hours a week. Let us also assume that a decent computer costs me $1,000. Assuming I take two weeks of vacation a year, it leaves us with 50 work weeks. If we take the $1,000 computer and divide that by the anticipated three-year life span, and then we further divide that by the 50 work weeks we plan on working we get a $6.66 weekly cost for the computer. If we take that figure and divide it by 40 hours per week, we know that the computer costs us seventeen cents per hour. So we have a built-in cost of seventeen cents per hour of work.
The Adobe software subscription costs me $49.99 per month. Taking that figure and dividing it by 160 work hours for the month we get thirty-one cents per hour. When we add that amount to the cost of the computer we get a fixed cost of $0.48 per hour of work.
It took me about five hours to create the Virgen de Guadalupe vector. That gives me a built in cost of $2.40 in materials for the end product.
Now things get tricky, we need to figure out how much I need to charge to make a living off of making vector graphics. Let’s do this calculation three ways.
The first is the minimum wage of $7.25. At that rate, I should charge $38.65 to cover the fixed cost and the labor to make the graphic.
The second way we can calculate the price to make the graphic based on the so-called living wage initiative. MIT has created a living wage calculator that takes into account the cost of living in a specific community. MIT researchers argue that a living wage is the wage rate that meets “the minimum standards of living.” These vary from community to community. For Florida, according to MIT, the living wage should be $10.99 for one adult. Taking that amount and calculating the labor and fixed costs, we get $57.35 as the amount I should charge for the graphic.
Finally, let us apply the amount I charge for this type of work. At $125 per hour, it comes out to $625.
The client turned down my proposal and instead picked a different vendor. The client argued that my price was too high. So let’s look at what the client ended up paying.
There are three major ways to buy graphic vectors today. You can purchase a pre-made one, download a “free” one or commission someone to make you one. Google “virgin de guadalupe vector” and you get a long list of “free” downloadable ones. Without bogging you down with a detailed list of why “free” ones should not be used for advertising purposes let us just accept that a “free” one is not acceptable to the client because of the liabilities of intellectual property laws. That leaves buying a pre-made one or commissioning someone to make you one.
For buying pre-made ones, the prices vary from $24.71 to $575 (Getty Images).
Freelance vector artists advertise online contract work from $15 to $85 per hour in the US.
An illustrator in China quoted my client $40 to do the Virgen de Guadalupe illustration for him.
Needless to say, I did not get the project. My client liked the $40 fee better.
Even if I had charged the “living wage” rate, I still would not have been awarded the project. In addition to this, any commissioned graphics work invariably leads to corrections or changes before the final product is accepted by the client. As such, it would have taken more than five hours to produce the end product the client was requesting.
An artist willing to work for the minimum wage would still have a difficult time landing the project because at $40 for the project, the Chinese artist would still have been difficult to beat.
This leads us to the notion of bringing jobs back to the country or creating artificial wage minimums.
Even if the client looking for the Virgen de Guadalupe image is forced to abide by “US authorized labor” laws, he would still have contracted the Chinese worker. This is because the Internet has no borders. For the more tangible products, there is the release valve of automation that would kick in should artificial wages be imposed via legislation. It is easy to blame the client for being “greedy” but is he really being “greedy”?
Or, is the client just meeting the needs of his consumer?
Think about it this way, if a consumer is willing to pay more than Walmart prices for consumables wouldn’t it stand to reason that the company owners would be willing to pay higher wages?
Ultimately, I have a choice to make. Either I lower my prices to meet the going rate set by workers willing to work for less, or do I create a reputation and a niche market that allows me to set my rate at $125 an hour?
At least once a week, I deal with a client that believes my prices are too high. However, since I am still in business it stands to reason that enough people value my work enough to meet my prices, all without relying on artificial wage rates or buy USA only schemes.
But more importantly, if the US population truly wanted livable wages or higher wage minimums they could easily set those through their wallets by simply purchasing consumer goods at places that pay better wages. But as you can clearly see, US consumers like Walmart prices just fine.