Laws Destroying Lives
Political Economy2

Laws Destroying Lives

The Economics of Trafficking

Human trafficking, as activists will tell us, is the biggest form of slavery in history, at least in numerical terms. It’s a heartbreaking problem which should enrage anyone with the slightest sense of justice.

Unfortunately, since the anti-trafficking movement has been more or less subsumed by the social justice movement, the issue is met with indifference from most people without a bleeding heart. Most of the activism around the issue has therefore focused on traditional “clamp down” solutions.

It’s understandable that a narrative of eternal vigilance against trafficking would jive nicely with a social justice mentality accustomed to class warfare rhetoric. And individual traffickers should certainly be brought to justice, given the opportunity. But fighting trafficking head on with law enforcement is like plucking leaves off a vine of ivy: it will be an uphill battle as long as our economy is fertile ground for the trafficking vine. Fortunately, durable institutional solutions do exist, if we seek them out. In fact, it is less a problem to be fixed, than a poison to be quit.

The first question we have to ask is, why do people traffic other people? Obviously, it’s profitable. There’s a demand; traffickers supply it. The next question is typically, is it more effective to target the supply of trafficked victims, or the demand? It doesn’t do much good to punish the prostitute, so do we punish the pimp or the john?

This is the wrong question to be asking. In most cases the exploitation has been perpetrated by the supplier. Demand side enforcement, in many cases, is not only unjust, but encourages further exploitation, as we’ll see below. If that’s the question, one should always err on supply side enforcement, where the crime has been committed. But either way we answer it, we are still left plucking leaves off the vine. A better followup question is, what is the demand for trafficking? People do not traffic in other people for its own sake. Rather, traffickers supply labor. And when we look at the types of labor demand supplied by trafficking, we can see a pattern emerge: Trafficking fills gaps in the labor market. And these gaps don’t form on their own: they’re created by the same people we turn to to fix the trafficking problem when we outlaw certain types of labor.

It’s a story familiar to any student of the Prohibition era, and one told often by opponents of the war on drugs. Why did alcohol become so closely tied to organized crime in the 1920s? It wasn’t because of some evil inherent in alcohol. Why isn’t it any more? No thanks to the ABC monopolies. Outlawing something – alcohol, drugs, or prostitution – doesn’t dry up the demand for it. It just forces it underground. And without the protection of legitimate courts and law enforcement, businessmen dealing with underground commodities have to take matters into their own hands.

It’s different when you outlaw labor. When you outlaw a commodity – drugs or alcohol – it goes underground, and people follow it. For the most part, if lives are ruined, it’s people who chose to be in the business, buying or selling (which is of course no justification for ruining those lives). When you outlaw labor, however, people themselves are driven underground. They become commodities themselves, and without legal protection, they’re ripe for exploitation.

Just as the prohibition of a commodity ties it to organized crime, so occupational prohibition enables traffickers and other criminal businessmen to gain a foothold in the market. There are three such laws particularly relevant to trafficking. First:

1) Anti-prostitution laws. There is a persistent demand in any society for prostitution. Anti-prostitution laws, by squelching the supply, channel that demand straight into the trafficking industry; demand which would otherwise be met by voluntary prostitutes.

But would things really look any different with legal prostitution? We can ask the people who benefit directly from it’s prohibition: pimps and escorts.

The interest of the pimp is easy enough to see. There’s a political idea called “Bootleggers and Baptists” – in our case, perhaps, Pimps and Preachers. the pimp has as much of an interest in keeping prostitution illegal as any moralizer. Already operating below the law, he can exercise major exploitative and coercive power over his prostitutes, and he can also command a risk premium from clients for the threat of law enforcement. In short, the harder such laws are enforced, the more profitable his job becomes.

Escorts, on the other hand – high-class, self-employed prostitutes who generally cater to the wealthy – are perhaps more sympathetic than pimps, but their interests are essentially the same with respect to the law. As with the pimp, anti-prostitution laws keep the field of competition relatively clear for the escort, allowing them to reap huge profits. But the escort market also gives us a glimpse into how humane the market might be if it weren’t subject to prohibition. Escorts are in their job voluntarily. As recounted in Super Freakonomics, many truly enjoy sex. They can be choosy as to their clients, and abuse is almost unheard of.

Anti-prostitution laws bifurcate the profession into high-class escorts and abused street prostitutes. The very reason the latter are abused is because they have little legal protection. The former avoid it by dealing with the wealthy, who have much to lose. Without such laws, and with legal recourse for abuse, the power (and likely the role, in many places) of the pimp will be virtually nullified, and the humaneness of the escort industry will extend itself even to the less classy prostitutes. Abusive pimps must remain underground. But without such laws, there is no advantage to remaining underground. Underground and abusive operations will simply be competed out of business by legally legitimate services. The gap in the labor market is filled, and all of a sudden there’s no place for sex traffickers.

2) Minimum Wage Laws make it illegal to employ anyone below a certain wage. Predictably, employers don’t raise wages; they simply lay off anyone less productive than the minimum wage. It’s no longer profitable to keep them employed. Yet despite mounds of evidence that minimum wage laws hurt the poor, it’s a policy which enjoys wide support.

Unfortunately, the damage doesn’t end at hurting the poor. The things which were produced at minimum wage are now more expensive to produce, and given competition and demand, employers can’t necessarily afford to pass that on to consumers. Those at the margin can’t afford not to, either. Like anti-prostitution laws, minimum wage laws fail to evaporate the demand for cheap labor; they simply drive it underground.

In fact, the similarities run deep between the two. Both make it illegal to hire certain kinds of labor: the former prostitutes; the latter relatively unproductive people. Both primarily hurt the already disadvantaged, and both create gaps filled primarily by trafficking. Low-wage employer-employee relationships which would otherwise be voluntary, dignified, and legal are forced underground, where these workers can be trafficked and forced to work involuntarily.

3) Anti-immigration laws are likely the most pervasive enabler of the three listed here. In fact, much of the labor demand created by the former sorts of laws is easily filled by immigrants because of these laws. Trafficked immigrants generally come from extremely impoverished situations; often the reason they’re trying to leave in the first place. Being desperate, impoverished immigrants are easy to take advantage of. And once in the US illegally, it’s easy to convince them that law enforcement is their enemy. Involuntary labor in the US is a hard lot, but deportation is rarely the better option.

And often, sadly, the traffickers are right. Xenophobic anger in the US, especially towards Hispanics, has been climbing since the recession as people afraid for their jobs look for someone to blame. And law enforcement is not above the prevailing sentiment of a town. The laws are stacked against immigrant trafficking victims, and though some departments are indeed sympathetic, many more (and many juries) aren’t inclined to be merciful.

There are employers which do hire illegal immigrants fairly and humanely, usually to get around minimum wage requirements. But good behavior with regard to immigrant labor is strongly disincentivized by these laws. Because in such cases they bear the full cost of a raid, it’s often easier to deal with a trafficker; someone who, like the pimp, both acts as an agent between employer and employee, and takes care of the legal risk of the deal himself. The more we crack down on immigration, the higher premium a trafficker can command in his intermediary role; the easier it is to exploit immigrants rather than hire them fairly.

This is why anti-trafficking organizations are fighting a self-defeating battle by working with ICE. Yes, the ICE that enforces US immigration laws. No matter how many victims they liberate and traffickers they book, no matter how many T-visas they give out, ICE is still actively creating the market for those victims. It’s nothing short of a racket. Every immigrant they deport, every sting on a business employing illegal immigrants, makes the job of a trafficker more lucrative, and enables him to traffic more people.

Law enforcement is a necessary component to fight trafficking, but so long as we have institutions that don’t afford legal protection to certain types of labor – as long as we make it illegal to hire certain people – law enforcement will never make a dent. Though there are a host of laws and regulations which hamper the labor market and enable traffickers, these three are the closest to the trafficking markets as they exist now. If we’re serious about fighting trafficking, these are the first steps, but certainly not the last. With each opportunity we take away, traffickers will move to one less lucrative, shrinking the industry, but also ferreting out further laws and regulations which harm disadvantaged workers. To summarize:

  1. Legalize prostitution
  2. Abolish the minimum wage
  3. Abolish immigration quotas and grant amnesty to current immigrants

In other words, prohibit no voluntary employer-employee relationships, and there will be little room for involuntary ones. The first will require Americans to fully appreciate the difference between morality and legality. The second will require Americans to recognize the adverse consequences of well-intentioned laws. And the third will require Americans to grow up, take responsibility for themselves, and respect the humanity of others, much as they have towards blacks in the decades following the success of the civil rights movement. None of these is without historical precedent. These are difficult barriers to overcome, but hopefully not insurmountable.




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  • 1

    James Vonder Haar

    Apr 17, 2011 at 7:07 | Reply

    Excellent post, and an interesting read. I’m not sure what audience you have in mind for it, but I think that this piece needs to be read most by those most likely to be alienated by the largely superfluous digs at progressive thought in the introduction. There’s a whole lot of common ground to be made with people in the social justice movements if we fiddle with a few nobs on the rhetoric meter.

    You might find this post from the blog, Bleeding Heart Libertarians, of interest.

    • 2

      Cameron Harwick

      Apr 18, 2011 at 8:00

      Fair enough; I’ll edit it to be more charitable. Also I think the “unfortunately” at the beginning wasn’t very clear with its referent…

      And good article, too. Part of this was my frustration that anyone not identifying with a leftist aesthetic seems to be largely ignoring the problem, so the BHL article heartens me in that regard.

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Hi, I'm C. Harwick, an economics PhD candidate in Virginia with an interest in monetary theory, institutional evolution, and folk music.

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