I was at Beer & Pixels last month. It's a monthly event where game developers meet up and talk about current projects and game jams and such. It was here that I met Richard, a lawyer who is interested in getting into the industry. We got to talking about hourly rates, and when I told him I was charging one client $30 an hour and another $45 an hour, he buried his head in his hands. Richard, probably within 4 years of my age, was charging $300 an hour to all his clients. "Well" I thought, going into a slightly defensive stance "those are just lawyer prices, right? We couldn't get that!". I was half right, those were lawyer prices and I couldn't get that, but he was totally justified in burying his head in his hands, because as the business administrator and programmer I could be charging at the very least $100 an hour and anywhere up to around $160. And here I'd been proud of my $45!

As I am very new to this business - or any business at all for that matter - it hadn't quite dawned on me yet just how much I was undercharging as a freelancer. I just knew that my casual UNSW job paid $30 an hour and that was seen by my friends as pretty good, so I based it off that. What had not occurred to me is that as a contractor, my client would not be paying for sick days, holidays, benefits, insurance, etc, not to mention taxes! To demonstrate his point about how much I'd been undercharging, Richard got the attention of someone else at our table and posited this hypothetical to him:

"Let's say Coca-Cola is going to hire you on a contract basis to make a game where you play as the Coca-Cola logo rolling down a hill or something and it's going to take you 4 weeks of full-time work to complete development. What is your hourly rate?".
After much umming and aahing, he replied "Say..$20 an hour?". It is worth mentioning at this point that in Australia the minimum wage is currently $16.87.

Flabbergasted, Richard turned to another person and posed the same query, with the more definite response of $40 per hour, at which point Mr.$20 said "Woah man don't get greedy!". After going around the table and getting no bids higher than $40, Richard went on in no brief terms how we were all severely undervaluing ourselves and informed them of their entitled three-figure sums. You could see sparkles in the eyes of everyone at that table as someone who knew what they were talking about actually told us - US - that our work and time is valuable. This was a rare and beautiful moment for us, being validated by someone outside our own industry and family! What hit me then was a huge question, something I have been unable to get out of my mind since:

Why do we game developers undervalue ourselves so much?

I mean, we don't even bat an eye at the lawyer making $300 an hour, that's just lawyer prices right? So why do we ourselves set developer prices at rock bottom? There are a few possibilities I've been juggling:

Software developers sometimes tend to be the more socially awkward type, the type who'd rather accept a lower wage if it meant they didn't have to go through the awful process of arguing or negotiating with a boss. That or self esteem issues have a drastic effect on self worth not only spiritually but financially.
The games industry in Australia is a harsh place and the general feeling around employment in it is "Jobs are scarce and there's plenty of developers I could get cheaper in India, I hold all the power and you hold none, and you should feel lucky to even have the opportunity to apply for a job in this industry, let alone negotiate a decent wage"
The table I was sitting at was of particularly naive people (myself included) and it was just by chance, and this is a total non-issue

I don't know which is the right answer, and I'm not going back or changing any of my current contracts, but I know this:
The next job I do, I'm tripling my rate.

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The Great Rate Deficit of Freelance Developers