Thanks for all the great comments yesterday! I'm so happy you're finding these insights from Kimberly Blythe, head editor at Omnific Publishing, as helpful and interesting as I do. If you're just joining Ask the Editor week, you can find the earlier answers here:Editing What You Love...And What You Don't
Most Common Mistakes and How to Avoid Them
A Kim: Many independent or small to mid-sized publishers are indeed working on a royalties-based paradigm these days. (These companies will usually pay the authors like this, giving them a percent of what is actually sold as it sells, rather than an advance to earn back through future sales.) How much an editor will earn depends on how much contact they have with a book, with developmental editors earning a higher percent of sales than copy editors do, but with copy editors having more titles to work on.
Freelance editors have a lot of different ways they set up their fee structure, usually based on per-page rates, and depending on what you want done. You'll pay a lot more for a "developmental edit" (grammar, plot, dialogue, advice on restructuring) than you will for a "copy edit" or "proofread" (which will only correct your grammar or vocabulary, but not offer advice on your story itself). Keep in mind, as you shop your novel around, that there is a difference between a vanity press, which will charge you for your editing, and a royalties-based company which will split the income from your book between you and all of the staff who worked on it.
Basically, you have to really love editing in order to stay with it long term. If you're looking to publish a book of your own, or to get into editing, you really need to do some research to see if your perception matches the current reality. Fiction editors are a lot less likely to have a desk in a high rise in a big city than they are to work from home on a freelance basis, though there are still jobs like that (and the market for them is incredibly competitive). Unlike novels or movies which picture a just-graduated-from-college-and-now-working-at-a-big-publisher editor who lives in an amazing NYC loft and wears brand name everything...real world editing is a lot less glam. (I read on GalleyCat that NYC editors for the big publishers average about $53,000/year, which wouldn't quite cover that penthouse and Louboutin lifestyle I've seen in novels. Alas.)
Editing isn't a great cash cow for me, though it does help pay my bills. But since I'm working for a publisher which doesn't have a physical office, I get to work in my pajamas or jeans, read great stories, and "meet" lots of characters and their authors. It's sort of what I mistakenly thought being a librarian was like when I was young—getting paid to read! (It also gives me an outlet for correcting people's grammar and vocabulary, which makes me much friendlier on Facebook and in real life. I don't even bat an eye when a friend uses "irregardless" or types a post that says "my friends brought they're favorite wine over for dinner awesome dude!!1!")