oConomy
July 25, 2012 by Shoshana Deutschkron

Editor’s Note: As we looked at the data we’ve gleaned from our users on oDesk, we have noticed an exciting trend of wage growth across contractors working on our platform.

Online work provides a huge opportunity for people to grow their careers. After 36 months on oDesk, contractors earn an average of 190% more than they earned during their first month on the platform. The growth curve is dramatic: oDesk contractors increase their earnings by an average of 60% during the first year alone.

In addition to tenure on oDesk, we looked at two significant factors that accelerate earnings growth for contractors on the platform: education and prior (non-oDesk) work experience. In fact, each additional year of education translates to approximately 12% higher wages, while each additional year of work experience is worth approximately 2.6% more. Read on for the full story!

Many thanks to oDesk Staff Economist John Horton for all the analyses in this post.

We hear so many great success stories from our contractors. For example, Marcel Morgan from Jamaica left his corporate job in February and is on track to earn 20% more this year working full time on oDesk. And Josh Warren from Texas went from earning $15/hour when he first joined oDesk to $95/hour and running his own agency today. At oDesk, we are not just watching our own business grow—we are also witnessing contractors grow their earning potential and their careers.

We thought it would be interesting to analyze exactly how much earnings growth happens as contractors gain experience on oDesk and build their reputation. To do this, we calculated wage growth among a pool of 90,000 oDesk contractors (in order to calculate hourly wages, these contractors had all been paid for at least some hourly work on the platform). The graph below shows that after 36 months on oDesk, contractors earn approximately 190% more on average than during their first month on the platform. In fact, wages grow dramatically—almost 60%—in the first year alone.


How we calculated growth:
We took each contractor’s hourly wage in the first period and then divided their average wage in each subsequent period by their first period. So, for example, if a contractor averaged $3/hour in January, $6/hour in February and $8/hour in March, the three numbers would be 1, 2 and 2.66. For each month, we took the average for whatever number of the 90K original contractors were working in that period. As such, the average is exactly 1 for the 1st period. In subsequent periods, we could logically only have measures for workers who remained. It’s possible some who did not see their wages increase left. Also, it’s likely some contractors start their hourly wage lower when they are just getting started in order to get their first job, and then raise their rate once they have built their online reputation.

Factors Driving Earnings Potential

As contractors gain work experience and build their reputation on oDesk, they are building their careers.

Beyond oDesk experience itself, we examined what other factors drive our contractors’ earning potential, and found two: education and past work experience (prior to oDesk). Let’s examine both closer.

How does a contractor’s education relate to income potential on oDesk?
Each additional year of education correlates to approximately 12% higher wages. The graph below shows the relationship between education levels and earnings on oDesk using the number of years of education traditionally associated with each degree (i.e. high school = 12, bachelors = 16, masters = 18, doctorate =21).

When the diagram is horizontally “thick” it means that there are a lot of workers at that wage, and when it is “thin” it means that there are relatively few workers. With this, we can see that for high school education only, the diagram is quite thick at low wages.

We found this correlation particularly interesting because we know that on oDesk, many contractors are highly educated but live in countries where there is a lack of available work supply. With oDesk, these highly skilled contractors can make use of their education by accessing global clients who need their expertise. These skilled, educated contractors suddenly have the opportunity to do the work they want and start earning the higher wages their education entitles them to.

How does past work experience drive income potential on oDesk?
Another factor related to wage growth of oDesk contractors is prior, non-oDesk work experience. When our contractors take the time to fill out their profiles and list all the work experience they have had in the past, they see a positive impact on their hourly rates. In fact, each additional year of work experience listed is worth about 2.6% in higher rates. The chart below demonstrates that with each year of experience (non-oDesk), contractors see higher wages.

In Conclusion

Working online provides contractors with almost boundless opportunity to gain new work experience, build their reputation, and earn considerably more in turn. To fully realize their earnings potential, all contractors should showcase their experience as they build it, and make sure their profiles reflect their education, training and prior work experience.

Shoshana Deutschkron

Senior Director of Communications

As Senior Director of Communications, Shoshana brings to Elance-oDesk extensive experience in strategic communications for the technology industry. Her unique data-driven background helps uncover insights from Elance-oDesk’s online workplace data. Prior to Elance-oDesk, Shoshana was a Vice President at market research firm Penn Schoen Berland, where she provided research-based communications counsel for companies including Ernst & Young, HP, EA and eBay. Throughout her career, she… read more

  • http://gravatar.com/gunbarrelflygirl Debbie

    Which countries are experiencing this 190% growth in income? Surely not those of us working in the US! If so, why am I not able to give myself a raise every year? EVERY time I raise my rate to about 15.00/hr, I get ZERO offers and ZERO jobs. Congrats to Josh Warren as he is definitely the exception and not the rule (and probably in IT).
    Sure, ODesk had provided me with opportunities and I am grateful but, with that being said, I think these stats actually shoot yourself in the foot and prey on people’s lack of experience in reading these types of charts.
    For example, the chart illustrating years of education and wage. If one looks a little closer at that, you can see that, a person with 16 years+ education is STILL making the same amount of money as someone with a high school diploma! The chart is “bulged out” at exactly the same location across ALL education levels, which looks to be an average of LESS THAN 10.00/hr! If you would have filled in the numbers BELOW 50.00, that fact would have been much more obvious but, you left that part of the graph out.
    I think this is a classic example of how stats can be manipulated to try to prove something that just isn’t there.
    Your scatter plot, same thing (the one with the dots). The highest distribution of dots is, bingo, in the lower wage area. The few dots that managed to make it to 150 USD/hr HAD to be in the IT professions.
    Thanks for proving to (some of us) what we already knew. I do NOT see a correlation between years of experience and income. I see an average of around 10-20.00/hr no matter the years’ of experience or the amount of education.

  • Anthony

    Yes, the comment of Might J is most valid. I say this from my own ( and some friends’) personal experience. A pay cut is taken in the initial salvo into the ODesk work platform to be marketable. Hence, the initial dramatic rise in wage in the first few months may in fact be a recovery to previous earning levels. This would lessen the real wage growth.

  • MightyJ

    The way the headline of this article is written, one would think that working through oDesk for some time will make your salaries increase (almost) exponentially. Could this be because new freelancers take a cut in wages for the first months?. I mean: When you start at oDesk (or at any other freelancer site) you need to give your future clients an incentive to hire YOU and not some other guy, especially because your previous work portfolio is either empty or very small. So usually freelancers take a cut in hourly wages to get the business going, and then gradually bring it up to “normal” once you have made a few clients and gotten their all-important feedback.

  • http://rrwebservices.com/ Rishi Asthana

    I started 10 months back. I had good knowledge only about SEO but no prior business development skills or client management skills.
    I learn’t all these from my clients only. Every individual has a different approach, different mind set to get the job done. This has helped my prioritize tasks and do do everything that can bring some value to client business.
    I also have a significant growth on oDesk.

    Thanks
    Rishi

    • http://odesk.com sakil

      While education and non-oDesk work experiences are factors in one’s earning potential at oDesk, I would also add that the knowledge and skills I got from my clients and their testimonials allowed me to gain higher paying rate.

    • http://santamonicatheater.org/ yosep

      @jonan &rishi
      I began to know the oDesk few days ago, and I am not so familiar with the workings of the oDesk. but I am very pleased to be menemuka ODesk business in this, of course I could be the future of knowledge here. I previously only one publisher in Link sales. but still not satisfied with the sales link business, financial services was not enough in the sales link. hopefully in oDesk I could earn much more.
      please guide me on oDesk for seniors, how to start a business on oDesk, sy are logged in, my account is complete. but how to get the job or the job market here like what?

      Please guide.

  • Ruel

    Yes this is true although i am not in odesk now but it was odesk hone my skills and introduce me to a world of freelancing. now im full time homebase worker earning 600% increase than my office job

  • Ashfaqur Rahman

    Excellent Article

  • http://targetedmedia.co.uk Simon Cooper

    Thank you for you post,

    This makes interesting reading. I always wondered how others got on working on-line. From your figures I am no where near my potential yet which is always good to know.

    Regards,
    Simon

  • http://onlinewritingniche.com/ Jonan Castillon

    I could only nod in agreement with all the facts and figures presented in this post. Though I’m not hitting bigtime like some of those who really focused and excelled, I also resigned from my job because I was earning more through oDesk than my office job.

    While education and non-oDesk work experiences are factors in one’s earning potential at oDesk, I would also add that the knowledge and skills I got from my clients and their testimonials allowed me to gain higher paying rate.

    For example, when I started in oDesk four years ago, I don’t know anything about SEO writing. After working with clients and learning from their tips, I learn some skills and enhanced it with my reading.

    Thus, oDesk is both a learning and earning experience.

  • Jim Petty

    Nice data but how about putting it in English next time? This isn’t a Scientific Journal publication