Economic Aspects of Sex Trafficking

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1 Economic Aspects of Sex Trafficking

2 Most profitable business? At least $32B annually in 2005 Expected to surpass drug and arms trafficking Wide variation between regions

3 Domestic CSE Not Included (Donna Hughes, The Demand for Victims of Sex Trafficking 2005) The sex industries of Indonesia, Malaysia, Thailand, and the Philippines account for two to 14 percent of these countries Gross Domestic Product. In Thailand, the yearly estimated income from prostitution in 1993 to 1995 was $22.5 billion to $27 billion. In Indonesia, the sex industry is estimated to bring in $1.2 billion to $3.3 billion per year, which is between 0.8 and 2.4 percent of the country s Gross Domestic Product. In Jakarta, the sex industry makes $91 million per year In Japan, where prostitution is not legal, but widely tolerated, the sex industry is estimated to make Y10,000bn (US$83 billion). There are an estimated 150,000 foreign women in the sex industry; many of them are known to be trafficked from the Philippines, Korea, Russia, and Latin America each year

4 Extreme variations in CSE Profitability Across regions Across kind of CSE: Low end domestic sex work High-end domestic sex work Low end domestic and international trafficking High end domestic and international trafficking

5 Push/ Supply factors: Countries or regions of origin are often characterized by poverty and little prospect of sustained economic opportunity; Consequently, there is a constant supply of victims available: Push & Pull Factors Francesca Bosco, et al Pull/Demand factors: Destination countries or regions are characterized by demand for sexual services or an increasing demand for cheap migrant labor or other forms of exploitative service. Organized criminal networks: Organized crime has taken advantage of this economic supply and demand situation in order to generate vast profits through trafficking and exploitation.

6 Estimated Annual profits per victim of forced commercial sexual exploitation Average turnover per victim= average prices X average # of clients Average profit per victim calculated as 70% of total turnover Source: P. Belsor, Forced labour and human trafficking: estimating the profits, ILO 2005

7 Estimated Annual Profits from all forced sexual exploitation Total profits from forced CSE = average profit per victim X estimated # of victims Total of $33.9 B makes this one of the world s most profitable businesses Source: P. Belsor, Forced labour and human trafficking: Estimating the profits, ILO 2005

8 Estimated annual profits from forced CSE with trafficked victims Note that profits from trafficking account for 82% of all profits from forced CSE MENA= Middle East & North Africa Source: P. Belsor, Forced labour and human trafficking: Estimating the profits, ILO 2005

9 Annual profits from all forced labor Global annual profits from all 9.8 million forced laborers = US$ 44.3 billion This amounts to US$ 4,500 per victim Note that CSE profits are 76.5% of total profits from forced labor Source: P. Belsor, Forced labour and human trafficking: estimating the profits, ILO 2005

10 Annual profits from all trafficked forced laborers Global annual profits from 2.5 million trafficked forced laborers= U.S$ 31.6 B This annual average of US$ 13,000 much higher than for non-trafficked profits Even much greater for trafficked CSE victims And greatest of all in the advanced industrial countries Source: P. Belsor, Forced labour and human trafficking: estimating the profits, ILO 2005

11 Kara: Sex Trafficking 1.2 m trafficked sex slaves end of ,000 new victims in 2008 Net gain of 43,000 new slaves Current growth rate of 3.5% less than previously: reflects mature phase of growth Source: Siddharth Kara, Sex Trafficking: Inside the Business of Modern Slavery, 2009

12 Kara s estimates of global revenues & profits Notes $9.5b est. of US State Dept. and $32.7B of ILO Slave trade profits(to brothel owners and pimps) Revenues of $1.0 billion in 2007 or average per slave of $1,895 Generating profits of $600 million Estimated profits of sex slavery: $35.7 billion from $51.3 billion in revenues in 2007 Global average of $29,210 per slave Total revenue from all victims of trafficking: $58.6 billion revenue with profits of $39.7B Total revenue and profit from all contemporary slavery: $152.3 billion with profits of 91.2 billion in 2007 Source: Siddharth Kara, Sex Trafficking: Inside the Business of Modern Slavery, 2009

13 Economics of sex slavery: supply side Poverty Gender bias: gendercide in Asia; brutal patriarchal laws Ethnic bias: Dalits in India; Roma in Balkans; Tamang in Nepal Lawlessness Military conflict social instability Economic breakdown All related to economic globalization Source: Siddharth Kara, Sex Trafficking: Inside the Business of Modern Slavery, 2009

14 Economics of sex slavery: demand side Male sexual demand: 6-9% of males over 18 worldwide purchase sex at some time each year Only 0.5% of males required per day to maximize capacity of 1.2 m trafficked sex slaves Profit (as related to labor costs): Labor costs near to zero Cheaper sex also induced greater demand Elasticity of demand: Demand for sex services highly elastic. Has increased because of increased use of slave labor ource: Siddharth Kara, Sex Trafficking: Inside the Business of Modern Slavery, 2009

15 Reasons for profitability in spite of illegality of slavery Very low risks due to: Confusion over definition of trafficking Corruption in police, border control and judiciary Lack of international coordination Lack of specific police attention to slavery Weak enforcement of law against of sex traffickers Weak protection of victims giving testimony Ineffective laws with little economic clout Fine for owning a brothel in India is $44; Earnings from 1 sex slave is $12,900 per year, 291 times the penalty Source: Siddharth Kara, Sex Trafficking: Inside the Business of Modern Slavery, 2009

16 Comparison with domestic sex work Steven Levitt & Sudhir Venkatesh, An Empirical Analysis of Street Level Prostitution (2007) Study site: Chicago low-income black area Women with pimps earned more even after 25% payment. (Pimps pay efficiency wage ) 4,400 women active citywide per week Fluidity of entering and leaving work Hourly average wage of $26.73 ($25 without) 10 acts per week; average $350 per week Police corruption. High level of extortion Estimated 1.6 Million acts per year Conservative estimate of 175,000 different johns

17 Levitt & Dubner high end study Superfreakonomics Over $300 per hour at high end in New York Why the extreme difference in payments? Location ethnicity Nature of johns: most upper middle class married men

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19 Economic model of trafficking E. Wheaton & T. Galli, Economics of Human Trafficking, Intr. Migr, 2010, 48(4) Participants: Vulnerable individuals Traffickers Employers Users of slave produced products Trafficking seen as opportunistic response to: Economic desire to migrate Restriction on migration In context of corrupt governments Benefits greatly outweigh costs

20 Factors contributing to trafficking (Francesca Bosco, et al ) Political and economic transition. Corruption Conflict and post-conflict situations Poverty. Discrimination in the labor market. Gender discrimination. Violence against women. Domestic abuse of children and neglect. Orphans. Misconceptions regarding sexual behavior. Sex with virgins to cure AIDS Harmful traditions or customs.