Quite a few translators in Russia service clients overseas and get paid in foreign currency, mainly U.S. dollars (euros too, but I’ll refer to dollars for the sake of simplicity). There is nothing wrong about this currency, but if you have to convert dollars to Russian rubles so that you can spend them in Russia, you might be noticing that each month what you earn in dollars is worth much less in rubles than it used to be. Just as many other Russian exporters of goods or services, you are suffering from the unfavorable behavior of the dollar exchange rate which has remained essentially unchanged over the last 12 years while the ruble inflation has been fierce all along.
If this thought is new to you, a simple example below can be eye-opening. Admittedly, the calculation is approximate, but it doesn’t need 100% accuracy to drive the point home:
- Back in 2000, the exchange rate was roughly 1 dollar for 30 rubles. At the same time, a loaf of bread cost 2 rubles. If you made $1,000 back then, you could buy about 15,000 loafs. The calculation is (1,000*30)/2=15,000.
- Fast forward to 2012, the USD/ RUB exchange rate is essentially the same, 1 to 30, but a loaf of bread now costs about 6 rubles. If you are still making the same $1,000, you can buy just 5,000 loafs, i.e. three times less than you could in 2000. The formula is (1,000*30)/6=5,000.
In other words, while a loaf of bread increased in price by more than 200% over 12 years, the price of the U.S. dollar remained unchanged. What are the implications of this unchanging rate for those translators who live in Russia and have to convert their dollar income into rubles to pay living or business expenses?
- Each year, the dollars you earn are losing their purchasing power in Russia at a dizzying pace, much faster than they do in the U.S. This means that although you make the same or even larger amount of money in USD, you are finding that you can buy less after converting it to ruble. In fact, you are likely to be better off spending at least some of your dollars in the U.S. now. Quite a few things are already cheaper over there such as electronics and gasoline, just to name two.
- To maintain your current quality of life requires either working more or increasing your U.S. dollar-based translation rates by the percentage of Russia’s inflation rate. Working more for less due to local currency inflation is a rat race by my standards, so let’s consider just the second option. While it may appear economically reasonable to you, increasing your rates can be a challenge in reality. You may have hard time explaining Russia’s inflation to your U.S. clients. They might wonder how inflation can be as severe as 10 or 15% per year. And then they might ask why another currency inflation would cause you to raise the U.S. dollar-based rates in the first place. Clients can also suggest that you spend your money outside of Russia and, personally, I wouldn’t take it as an offense because technically it makes sense, however impractical that might be in your current situation.
- But if you don’t raise your rates, you might be setting yourself up to fail financially unless the USD/RUB exchange rate changes favorably which isn’t something I’d bet on after more than a decade of essentially stagnant rate.
- But then, if you keep raising rates, you are becoming less competitive than those translators who live in other countries and don’t need this kind of drastic increase. They don’t convert their earnings into ruble and enjoy steady purchasing power that declines much less quickly. Raising rates can therefore result in a financial failure due to losing some of your business to competitors. Talk about catch-22!
What Practical Recommendations Come to Mind?
- Pay in the U.S. dollars where feasible to avoid losing purchasing power.
- If you want to maintain your current quality of life, you should closely monitor the ruble inflation rate and adjust your U.S. dollar rate accordingly. However weird this might seem to you or your clients, this is current reality for the Russian translation professionals.
- You need to come up with very smart explanations because your U.S. clients might have hard time understanding Russia’s high inflation rate.
- You should be looking for new clients much more aggressively than your competition since you are more likely to lose clients due to higher rates.
- Note that raising rates might be particularly difficult with translation agencies because larger agencies are under increasing pricing pressure from clients and competition.
Note that these recommendations are applicable in the current situation only. Should the USD rate increase significantly, your purchasing power will also increase. It might as well go through the roof someday! Also, I used USD as my primary example, but all considerations apply to euro, too.
If you live in Russia, what do you think and do about this issue?