CHAPTER 1 - HOW IS A STREET PROSTITUTE LIKE A DEPARTMENT-STORE SANTA?

 

• Males have always had an advantage over females throughout history.
• However, the lives of women have improved dramatically, especially in developed nations in the 21st century. According to the earliest available statistics, 21 per cent of college students in the United States were female in 1872. The percentage has grown to 58 per cent today, and it's on the rise.
• Despite this, being a woman still comes with a high economic cost. In the United States, a woman who holds a bachelor's degree and works full-time earns about $47,000 a year, on average. In contrast, similar men make more than $66,000, a 40% premium.
• Prostitution, however, is a labour market women have always dominated. 
• Prostitutes in the United States were counted in 310 cities in 26 states in the early 1910s by the Department of Justice. According to the DOJ, one out of every 110 women was a prostitute. It is estimated that 85 per cent of prostitutes were in their twenties. One out of every 50 American women in that age range is prostituted. 
• How did Chicago prostitutes earn so much money one hundred years ago?
• The answer - supply and demand laws often determine wages more than legislation, which is why they play a major role in determining wages.
•  About a century ago, prostitutes in Chicago faced almost exclusively punishment. Prostitution also carried a deep social stigma in addition to the constant threat of arrest. A prostitute never had a chance to find a suitable husband, which was perhaps the most severe penalty. As a result, prostitutes' wages had to be high to entice enough women to meet the high demand.
• Venkatesh, a sociologist at Columbia University in New York, spent his grad-school years in Chicago and still returns there regularly for research. As he grew more knowledgeable of the neighbourhood's underground economy, he moved on to prostitutes but a real understanding of the prostitution market requires some real data.
• To collect data on a sensitive subject like prostitution, Venkatesh used real-time, on-the-spot methods. Prostitutes were tracked on street corners or in brothels where trackers observed some aspects of their transactions and gathered more intimate details as the customers left. A majority of the trackers were former prostitutes—a credential that made them more likely to provide honest information.
• Looking at the data wages were considered first. In Chicago, street prostitutes work an average of 13 hours per week and earn an hourly wage of approximately $27. Venkatesh also tracked other work these women did other than prostitution. There were four times more earnings from prostitution than from those jobs. When you consider the job's downsides, that wage premium may seem pretty meagre. During the study, at least three of the 160 prostitutes who participated died as a result of violent incidents.
• Moreover, women's wage premiums are nothing compared to those enjoyed by prostitutes a century ago. 
•  Is there a reason why the prostitute's wage has dropped so much? Recent decades have seen a substantial change in sexual mores. "Casual sex" and "friends with benefits" didn't exist a century ago. Also, the penalties for having sex outside of marriage were much higher in the past. 
• Prostitutes do not charge the same price to all clients, according to the data. According to research, black customers are charged on average 9 dollars less than white ones and Hispanics are in the middle. Economists call this phenomenon price discrimination.
• As Venkatesh learned, they use different pricing strategies for white and black customers. When dealing with black men, prostitutes usually name the price outright to discourage any negotiation. When doing business with white customers, meanwhile, the prostitute will make the man state his price - knowing that he might give an outrageous sum in exchange for her services which turns out to be a profitable stratagem of sorts as evidenced by the higher priced transactions made among whites than blacks according to their prices listed here in the data collected.
• One easy way for someone to get a significant discount is to hire a prostitute directly rather than dealing with an intermediary. If they do, they will receive the service at about 16 dollars less. This estimate is based on data from prostitutes in Roseland and West Pullman. The two neighbourhoods are located next to each other and are very similar when it comes down to it; while the ones in West Pullman used pimps, all of those found in Roseland hired independent contractors.
• The pimps are very strategic in the way they recruit. They target a particular group, namely rich whites coming from downtown strip clubs and riverboat casinos. But as the data show, this type of business has an expansive effect beyond just increased wages for its workers. A woman working with a pimp is less likely to be beaten up or forced into giving freebies to gang members by these other men out there because it would mean bad business for them
• Six pimps during Venkatesh’s study managed prostitution in West Pullman. They ranged in age from thirty-something to forty-something and were doing pretty well, bringing home an average of $50K per year. These men also had legitimate jobs – some were car mechanics or store managers; many owned their homes; none were drug addicts. One of these pimps’ most important roles was handling the police.
• The real issue is that the police know precisely where the prostitutes are, not that they don't know. This example demonstrates the principal-agent dilemma. Economists define this as a relationship in which two parties seem to have the same motives but in fact, do not. When two parties in a given undertaking appear to be equally interested, they may not be equally interested. The police chief, the principal, in this case, would like to curb street prostitution, while the police on the street are the agents. In theory, the police would like to make arrests, but he doesn't have a very strong incentive like the chief. The police officers get advantages besides simply arresting people, and this is revealed in Venkatesh's research. Of all the prostitutes he studied, 3% provided free services to the police.
• In Venkatesh's research, the third community, Washington Park, was the most economically depressed and the most isolated from outsiders, especially whites. The prostitutes worked without pimps there and earned the least money, in contrast with the other prostitutes in the study. 
• But every July 4th, Washington Park is packed with families and other large groups who come together for cookouts and parties.
•  It turns out that demand for prostitutes in Washington Park spikes every year during this period. And so, the prostitutes- who are great at making smart business decisions - increase their prices by 30% and take on extra shifts until they are exhausted
•  The answer to this chapter's title question—How is a street prostitute like a department-store Santa?—should be obvious: They both take advantage of short-term job opportunities brought about by holiday spikes in demand.