Houston, We Have a Problem: Cost of Risk to Traffickers, Buyers and Victims in the Commercial Sex Trade
Angie Henderson, Ph.D. & Megan Lundstrom, M.A.
While data on the prevalence of sex trafficking victims, buyers and traffickers remains scarce, the economic impact of this industry can be estimated with some validity. The International Labor Organization estimates that sex trafficking generates $99 billion per year globally (ILO, 2014). Yet, few scholars have attempted to calculate the overall cost of risk to traffickers, buyers and sellers/victims as a way to better understand how and why this industry flourishes. In 2009, economist Siddarth Kara built an economic estimation model to gauge the cost of risk of trafficking individuals for commercial sex in seven different countries, including the United States[1]. Using traditional economic theories of risk and reward, Kara suggested that it is vital to attack the industry’s “immense profitability…by inverting its risk-reward economics; that is, by making the risk of operating a sex slave operation far more costly” (p. 200). This approach is useful, though admittedly crass. Yet, Kara describes the commercial sex industry for what it is:
a mature, multinational corporation that has achieved a steady-state growth and produces immense cash flows … [and] has four components: a product (the victim), a wholesaler (the trafficker), a retailer (the slave owner/exploiter), and a consumer (pgs. 17, 202).
Since sex trafficking is an illegal enterprise, accounting for the cost of risk should any involved party be arrested, convicted, and fined is key. Further, it can help policymakers, law enforcement, prosecutors, and others approach this industry more efficiently — by raising the cost of risk for exploiters, while reducing harm to victims, in an effort to truly put traffickers out of business.
Using Kara’s models, Lundstrom (2019) calculated the cost of risk to a U.S.-based trafficker for doing business based on total arrest records, the chance of conviction and the maximum federal fine. At the federal level, the cost of risk to a trafficker for conducting business in the U.S. was $730 per year (Lundstrom, 2019). However, given the varied economic and criminological landscapes that exist across the U.S. when it comes to commercial sexual exploitation (CSE), it is vital to localize these estimates to account for differences between jurisdictions. Demand for commercial sex can vary widely across the U.S., as can law enforcement approaches and justice system responses to pursuing and successfully prosecuting such activity. A full picture of why the commercial sex trade is so profitable necessitates taking into account the localized cost of risk to criminals for offending and conducting business, not to mention the long-term impact — economic and otherwise — on their victims.
One of the major metropolitan areas in the U.S. that is fairly well-known for highly concentrated levels of commercial sexual exploitation is Houston, Texas (Dank, et al. 2014). Below, we adapt Kara’s (2009) model to predict cost of risk to all involved parties by examining local law enforcement and justice system responses to addressing sex trafficking.
An Economic Approach to Risk Estimation
Why Focus on Cost of Risk?
Kara (2009) explains systematically how traffickers maintain their exorbitant profit margin:
The most effective way for any business to increase profits is to minimize costs. For most businesses, the largest operating cost is labor. …The greater the profits, the greater the demand for slaves. … They keep prices as low as possible to secure as many customers as possible, new and repeat. The operating costs of the business are low. … The retailer demands slaves because they elevate profits and expand the customer base by virtue of lower retail prices. The only vulnerability the retailer suffers is the illicit nature of his business. There is a cost if he is caught, but most slave owners are not targeted with aggressive investigation (p. 202–203).
To discourage traffickers, profit margins must be decreased substantially. Even though in many countries there are harsh punishments for traffickers, law enforcement and the justice system in general have yet to fully attack all sides of the industry. In any industry, demand drives supply and profit. The commercial sex trade is no different. We begin with predicting the extent of sex trafficking victimization, including estimated prevalence, value, profit in Houston, Texas.
Estimated Value of a Sex Trafficking Victim
Every time a forced, frauded or coerced commercial sex act is executed, there are at minimum three parties involved: a product (the victim[2]), a wholesaler/retailer (the trafficker(s), and a consumer (the sex buyer). To estimate the cost of risk to each party, we need to establish assumptions about the industry. First, research shows that on average, commercial sexual exploitation (CSE) victims are forced to earn roughly $1000 (gross) per day for their traffickers. This estimate holds true for the Houston, Texas market (Dank et al. 2014). The cost of running the business to a trafficker is fairly inexpensive, especially compared to other businesses. On average, traffickers have the following overhead costs: hotel, food, advertising, condoms, grooming/clothing. Kara (2009) assumes about a 70% profit margin per victim.
Additionally, most research on domestic pimp-controlled sex trafficking suggests that victims do not get paid days off, and are forced to deliver that $1000/day quota to their traffickers 365 days a year. Yet, to be conservative in our estimates, we suggest calculating the annual workday total at 260 days to account for incarceration, illness, hospitalizations, assault or other forms of violence. Given these figures, we estimate that victims in Houston are valued at roughly $182,000 per year:
EV (Estimated Value) = ($1000[3] -$300[4]) × 260 = $182,000 profit per victim annually
Predictive Modeling: Sex Trafficking Victimization in Houston
In Houston in 2019[5], a total number of 214,181 advertisements were posted online for commercial sex. Additionally, a total of 18,639 individual profiles existed across commercial sex advertising platforms in the Houston area. These online advertisements do not all represent trafficking victims; some are selling sex of their own volition and do not have third-party traffickers. To account for this, we weighted these data according to best estimates provided in empirical research, which shows that approximately 89% of all commercial sex providers report they would prefer to not be selling sex and/or feel forced, frauded or coerced into doing so (Farley et al., 2004). However, it is worth noting here that some find this to an overestimate. To correct for that, we half Farley’s estimate to provide the most conservative possible scenario to adjust for the number of consensual sex workers with online profiles. This translates to 14,539 total victims in the greater Houston area in 2019.
Total Demanded Commercial Sex Acts
As previously mentioned, victims are held to an average of $1000/day quota, which can be earned in anywhere from 1–10 commercial sex acts, depending on the context surrounding the transaction. Yet, we use the more conservative estimate of 5 commercial sex acts per day in this model to account for market fluctuation (e.g., some victims may earn more than $100/sex act to achieve their daily quota). Thus, the total demanded commercial sex acts from sex trafficking victims in Houston is calculated as follows:
14,539 victims × 5 (acts per day) × 260 (days/year) = 18,900,700 demanded commercial sex acts per year in Houston, Texas
Having established this baseline, we can predict the cost of risk (COR) to sex traffickers, sex buyers and sex trafficking victims below.
Predictive Modeling: Sex Traffickers in Houston
Calculating the number of traffickers operating in a given area is fairly straightforward, as research suggests that the average trafficker has between 4–8 victims (Kara, 2009; Nichols, 2016). We use the median number for this calculation (6) to predict an average of 3,635 traffickers exploiting victims in the Houston area each year. It is important to note when considering this range that traffickers move victims through Houston and may not necessarily based in Houston year-round. Assuming there are on average 3,635 traffickers in Houston, we can estimate cost of risk for a trafficker to do business using the following equation based on the number of arrests, convictions, trials and fines in Houston in 2019:
TRAFFICKER COST OF RISK = CHANCE OF ARREST X CHANCE OF CONVICTION X FINE
(18/18,900,700) x (16.2/18) x ($10,000) = $.01 per commercial sex act
Using the above predictions and maximizing the fine allowed in the state of Texas, traffickers only need to put away $.01 per commercial sex act (multiplied by 6 victims at 5 sex acts per day, at 260 days per year). This comes to $66.85 per year; a minimal annual cost a trafficker needs to plan for should he get arrested, convicted, and fined the maximum amount allowed in the state of Texas. It is important to note here that while Texas allows for a maximum fine of $10,000, this is likely not the average fine. Therefore, the actual cost of risk is likely much lower.
Predictive Modeling: Commercial Sex Buyers in Houston
Currently, the maximum federal fine for human trafficking is $1.5 million. For solicitation or prostitution, fines differ based on jurisdiction but it can range from $50 in West Virginia to a maximum fine of $4,000 in Texas.
To predict the number of sex buyers in Houston, we use the total adult male population in the Houston metropolitan area as a starting point (N= 2,649,802). Research shows that on average, 6% of all men purchase sex in a 12-month period (Demand Abolition, 2018). This comes out to 158,988 sex buyers in Houston.
In Houston, 203 men were arrested with a prostitution charge in 2019. Of those 203, 175 were convicted. The maximum fine for a misdemeanor charge for buying sex is $4000 if they have previous prostitution convictions. Assuming there are on average, 158,988 buyers in Houston, we can estimate cost of risk for buyers using the following equation based on the number of buyer arrests, convictions, trials and fines in Houston in 2019:
BUYER COST OF RISK = CHANCE OF ARREST X CHANCE OF CONVICTION X FINE
(203/18,900,700) x (175/203) x ($4,000) = $0.04 per commercial sex act
Using the above predictions and maximizing the fine allowed in the state of Texas, buyers only need to put away $.04 per commercial sex act to account for the risk of arrest. Based on the assumption that the majority of buyers purchase roughly once per month, this cost comes to $.44 per year; a minimal annual cost a buyer needs to plan for should he get arrested, convicted, and fined the maximum amount allowed in the state of Texas. It is important to note here that while Texas allows for a maximum fine of $4,000, this is only the case for buyers who have prior prostitution-related convictions. Therefore, the actual cost of risk is likely much lower.
Total Victim Arrests
In Houston, 644 women[6] were arrested with a prostitution charge in 2019. Relative to the total predicted number of victims (14,539), this a relatively low arrest rate (4%) of sex trafficking victims in Texas. This makes sense given the recent LE shift away from arresting prostituted persons in Harris County (Updegrove, Muftic, Niebuhr, 2019). Project 180 (P-180), a diversion program instituted by the Harris County District Attorney’s Office in 2017. The primary objective of P-180 is to:
reduce harm to prostitution sellers in the way of criminal justice intervention and to reduce the lasting legal impact and stigma of a prostitution arrest by providing for case dismissal upon successful completion of the program (Pfeffer 2019, p. 7).
Though not all arrested individuals end up being eligible for the program, Pfeffer (2019) reports that 89% of individuals in P-180 complete the program and have their charges dismissed.
At the time of publication, Pfeffer (2019)’s report did not include the total number of individuals in P-180 in 2019. On average, however, 174 individuals are diverted to P-180 each year. Assuming 89% of that total get their charges dismissed, we calculate the conviction rate for prostitution charges at 489:
644 (total arrests in 2019) — (174 x .89) = 489 (total convictions in 2019)
From here, we can calculate the total cost of risk to a sex trafficking victim for engaging in commercial sex acts against their will.
TRAFFICKING VICTIM COST OF RISK = CHANCE OF ARREST X CHANCE OF CONVICTION X FINE
(644/1,885,000) x (489/644) x ($10,000) = $5.19 per commercial sex act
Table 1 below presents a side-by-side comparison of buyers, traffickers, and victims for engaging in the commercial sex trade. It should be noted here that actual choice to engage in the commercial sex trade lies only in the hands of buyers and traffickers, yet their cost of risk is negligible. In fact, victims’ cost of financial risk is 100 times that of a trafficker. The majority of research on sex trafficking victimization reveals that victims do not earn any of the money that is exchanged for sex. How are victims supposed to account for the cost of risk for engaging in a forced, frauded, or coerced sex act? It is, simply, impossible.
Table 1. Cost of Risk to Traffickers, Sex Buyers and Victims/Sellers in Houston, Texas (2019)
Though it could be argued that pimps may bail out their victims, this is not always the case. In addition, these immediate financial costs of engaging in the sex trade as a “seller” do not even take into account the long-term psychological, social and physical toll that has been clearly documented in research (Farley, et al., 2004).
Part of this discrepancy in cost of risk can be attributed to the fact that victims engage in anywhere from 5–10 transactions per day, which raises their risk of arrest up to tenfold when compared to sex buyers. Buyers typically will purchase once in a day, and certainly not every day; the average is 1–2 times per month (Demand Abolition, 2018).
Additionally, it is important to point out the cycle of disadvantage that the above figures perpetuates for sex trafficking victims and survivors. CSE victims often originally become vulnerable to exploitation because of financial instability/poverty. If victims are arrested, convicted and fined during their exploitation, successful exit becomes increasingly difficult, if not altogether impossible, without legal assistance. Carrying the cost of risk that’s one hundred times that of their exploiter only serves to accumulate deleterious disadvantage over time, perpetuating re-victimization and a lifetime of deprivation and trauma.
SOLUTION
It is clear that the current practices create an insurmountable barrier to individuals successfully exiting exploitation. With the potential profit for a trafficker of upwards of $200,000 per victim per year, and the cost of risk being well under $100, it is no wonder that domestic sex trafficking continues to flourish despite the Trafficking Victims Protection Act (TVPA), first passed in 2000. Below, we detail the components of The Equality Model, an approach that has been adopted in 9 countries as well as a handful of jurisdictions across the U.S. This model better protects victims from exploitation while simultaneously increasing the cost of risk for exploiters in the commercial sex trade.
The Equality (Nordic) Model
The central focus of The Equality Model (EM) is to stop arresting sex trafficking victims for their own victimization, and offer services for successful exit and recovery. Tyler (2021) describes the Equality Model, sometimes referred to as the Nordic Model (which originated in Sweden in 1999), as:
asymmetric decriminalization which decriminalizes people in systems of prostitution but retains some sanctions against people who purchase sexual access to others and those who profit from the prostitution of others but who are not prostituted themselves (i.e.pimps) (p. 69).
Originally, this model was introduced not only as a tool to combat sex trafficking and commercial sexual exploitation, but also as a way to promote gender equality (Bender et al., 2019). It also serves the purpose of shrinking the overall market for prostitution. In practice, law enforcement continue to criminalize individuals who purchase or profit from commercial sex. According to the economic calculations presented in this paper, exploiters have a miniscule cost of risk for exploiting victims, which results in unchecked power that continues driving the market.
The Equality Model also provides exit programs in the form of social, psychological, and economic assistance to victims and/or those willingly selling sex to that they can transition out of the sex industry (Bender, et al. 2019; Ekberg 2004; Tyler et al. 2017). This model has operated in Sweden for over twenty years, and several other countries since 2000 have followed suit: Canada, Iceland, Ireland, Israel, France and Norway (Harkov 2018; Tyler et al. 2017). Several jurisdictions across the United States, including King County (Seattle), WA; San Francisco, CA; Brooklyn, NY; San Antonio, Waco, Forth Worth and Austin, TX; Boston, MA; Baltimore, MD, and other smaller municipalities have adopted this approach. Emerging evidence shows that the EM is promising:
The Equality Model is the most effective way to prevent vulnerable, marginalized women and girls from being exploited and harmed in the sex trade, and support those who wish to exit it. No other policy framework is as effective, because no other model targets the demand that fuels the sex trade so effectively (Bender et al., 2019, p. 25).
The purpose of this paper was to establish a more thorough understanding of the commercial sex trade in Houston as just one major metropolitan area where sex trafficking flourishes. Results indicate that a substantial problem exists when it comes to criminalizing victims and providing near impunity for exploiters: sex traffickers and sex buyers. Much work remains to be done, and both researchers and practitioners should take these foundational predictions into account when designing policy, establishing sound LE approaches, and providing victim services and outreach to help individuals escape exploitation and hold exploiters accountable.
Prostitution is a gendered survival strategy that requires the person in it to assume unreasonable risks.
-Andrea Dworkin (1993)
References
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[1] Kara’s estimate was based on street-level, or outdoor, prostitution only and therefore was limited in scope. In 2021, much of the commercial sex trade is facilitated online, so our estimates account for these shifts. As one example, in his model, he valued one commercial sex act in the U.S. at $30, which is a gross underestimate (Dank et al., 2014; Henderson & Rhodes, 2021).
[2] Note that we are using the label “victim” because we are discussing individuals who experience force. fraud or coercion when exchanging a sex act for something of value (TVPA, 2000)
[3] An average nightly quota per trafficking victim is $1000.
[4] Traffickers carry a daily overhead cost of $300
[5] We use 2019 data because the commercial sex trade experienced significant shifts — including moving victims online for webcamming and other forms of cyber-sex — in 2020.
[6] Research indicates that the majority of sex trafficking victims are women & girls (Nichols, 2016).
