2006 - A Human Capital Methodology For Estimating The Lifelong Personal Cost of Young Women Leaving The Sex Trade

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A HUMAN CAPITAL
METHODOLOGY FOR ESTIMATING
THE LIFELONG PERSONAL COSTS
OF YOUNG WOMEN LEAVING THE
SEX TRADE
a
Linda DeRiviere
a
Manitoba Research Data Centre, Statistics Canada ,
370 Brodie Centre, 727 McDermot Avenue, Winnipeg,
MAN R3E 3P3, Canada E-mail:
Published online: 11 Nov 2008.
To cite this article: Linda DeRiviere (2006) A HUMAN CAPITAL METHODOLOGY FOR
ESTIMATING THE LIFELONG PERSONAL COSTS OF YOUNG WOMEN LEAVING THE SEX
TRADE, Feminist Economics, 12:3, 367-402, DOI: 10.1080/13545700600670434
To link to this article: http://dx.doi.org/10.1080/13545700600670434
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Feminist Economics 12(3), July 2006, 367 – 402
A HUMAN CAPITAL METHODOLOGY

FOR ESTIMATING THE LIFELONG PERSONAL
COSTS OF YOUNG WOMEN LEAVING
THE SEX TRADE
Linda DeRiviere
ABSTRACT
This article combines case study interviews with the tools of economic cost-
benefit analysis to estimate the lifelong effects for individuals in Manitoba,
Canada, who began engaging in prostitution as youths. The empirical findings
reveal that sex workers retain only a small portion of their earnings from
prostitution after feeding drug addictions and third-parties extortions of net
residual earnings. The sex-trade worker typically suffers from debilitating
addictions and health conditions that are symptomatic of the stress and danger
of engaging in this lifestyle. After leaving prostitution, the former sex worker
faces major challenges in rejoining the mainstream labor market. The issues
engender multiple reasons for policy-makers to direct their attention to
counteracting the conditions of vulnerability that bring youth into this lifestyle
and, thereby, effectively disrupting the supply of sex workers.
K EY W O R D S
Youth sex trade, Aboriginal women, cost-benefit methodology, women’s health
and addictions, earnings differentials, human capital
JEL Codes: I12; J15; J24
INTRODUCTION
Current literature in North America is riddled with debate about whether
prostitution is a profit-making and empowering venture of rational, utility-
maximizing actors (Helen Reynolds 1986; Katri Sieberg 2001; Lena Edlund
and Evelyn Korn 2002) or conversely, a blatant exploitation typically
originating from a disadvantaged childhood and leading to lifelong poverty
(Melissa Farley and Howard Barkan 1998; Cherry Kingsley and Melanie
Mark 2000; Karen Busby et al. 2002; Kelly Gorkoff and Jane Runner 2003).
Typically, prostitution is portrayed in the literature as pertaining to
Feminist Economics ISSN 1354-5701 print/ISSN 1466-4372 online Ó 2006 IAFFE

http://www.tandf.co.uk/journals
DOI: 10.1080/13545700600670434
ARTICLES
adult women. Little economic theory addresses adult prostitution as

the extension of a life process that begins in the adolescent years. Nor does
the literature contemplate that the economic outcomes stemming from this
lifestyle extend well beyond the exit into mainstream society.1 Gorkoff and
Runner (2003: 15) argue:
[I]t may be counter-productive to separate adult and youth pro-

stitution because the process of prostitution and the life circum-
stances of those involved do not differ solely or perhaps even largely
according to age. Research has clearly indicated that the circum-
stances that bring youth and adults to sex-trade work and keep them
there are more similar than different. In addition, the experiences of
sex work are similar.
Thus, this study uses a life cycle methodology to explore the experiences of
sex-trade workers in Winnipeg, Canada. This city’s disproportionate
number of marginalized Aboriginal women living in poverty makes it an
appropriate location to study sex-trade workers.2 Since many of these
women are drawn into the sex trade as a matter of economic survival, the
model may have some applicability to women in similar economic
circumstances in poor developing countries.
Canadian society has more recently conceptualized adolescent prosti-
tution as child exploitation, though not so long ago these youth were
viewed primarily as delinquents (Robin F. Badgley 1984; Steven Bittle
2002; Gorkoff and Runner 2003). The approach of this study combines
eight case studies of predominantly female, former sex-trade workers,
another fifty-four interviews collecting data on the mainstream labor
market experiences of prostitutes, and the tools of economic cost-benefit
analysis to develop a methodology for capturing the personal, lifelong
effects for each of these individuals. The study considers two stages in
the life cycle: the periods in which they engage in sex trade activities
and after they transition into mainstream society. It will illustrate
that this work was a temporary life experience for the majority of
individuals who began their engagement in the sex trade as youths, but
it ultimately had a permanent impact on lifetime earnings and
productivity outcomes.
From a cost-benefit perspective, no studies have conducted economic
analysis on the lifelong personal costs resulting from the provision of such
labor during one’s youth, particularly the quantification of personal
opportunity costs following the transition into mainstream society. A few
recent Canadian studies have estimated the economic costs of child abuse
(Sandra Burgess et al. 2003), including the personal costs of abuse
(Audra Bowlus et al. 2002) and the costs of violence against women
(Tannis Day 1995; Lorraine Greaves, Olena Hankivsky, and JoAnn
368
PERSONAL COSTS OF WOMEN LEAVING THE SEX TRADE
Kingston-Riechers 1995). To date, however, no research has investigated

whether or how these individuals’ economic options are reduced after
leaving this lifestyle. Taking a life cycle approach to a study of sex-trade
workers, the main empirical questions are: Is there a measurable
temporary financial benefit derived from engaging in the sex trade in
Winnipeg? If so, does it outweigh the personal costs incurred over the
period of sex work and its effects on lifelong earnings after transitioning
into mainstream society?
L IT ER A T U R E R EV I E W
Extensive literature by sociologists and social reformers, in contrast to
economists, addresses prostitution. In Canada, the topic received much
attention in the mid-1980s with the Badgley Committee (Badgley 1984)
and Fraser Committee (Paul Fraser 1985) reports. The former revealed
that 96 percent of sex workers enter the trade before age 18. Likewise,
the majority of Canadian studies report similar findings, with the initial
entry ranging from age 12 to 17 years (William McCarthy 1995; Fran
Shaver 1996; Cecelia Benoit and Alison Millar 2001). The recent Benoit
and Millar (2001) study revealed that 62.5 percent of their respondents
remained in the sex trade for five or more years. Susan McIntyre (2002)
reported an average stay of six years. In Busby et al. (2002), just over
one-third of participants worked in the sex trade for more than eleven
years. These accounts supply evidence that the engagement in
prostitution often begins in the adolescent years, while the transition
into mainstream society is likely to occur some years later during
adulthood.
A range of literature (Kingsley and Mark 2000; Benoit and Millar 2001;
City of Winnipeg 2001; Bittle 2002; Social Planning Council of Winnipeg
2002; Gorkoff and Runner 2003; Kendra Nixon and Leslie M. Tutty 2003)
identifies a close correlation among several pre-existing conditions of
vulnerability, which influence the decision to enter the sex trade before the
age of consent. These include a premature departure from the family home
or other care arrangements; substance abuse; a history of various forms of
child abuse; a low level of formal education; poor job prospects and a
difficult financial situation; a lack of community and family support
networks; and an Aboriginal heritage. However, the literature diverges in its
degree of emphasis on these variables and on the extent to which they may
overlap (Bittle 2002; Gorkoff and Runner 2003). Nevertheless, there is
evidence for particular consistencies in lifestyle among sex-trade workers,
such as considerable drug use, high risk of violence, poor self-care, and
contraction of a range of diseases (Pamela J. Downe 2003). The magnitude
of these risks determines the economic outcomes available to the
individual.
369
ARTICLES
In most regions within Canada, Aboriginal women are overrepresented

in the sex trade (Gorkoff and Runner 2003). Aboriginals are known to be
the poorest demographic group in the Canadian economy and, in relative
terms, their standard of living mirrors that of citizens in many less
developed countries (Andrea Currie 2001). Ethnicity, socioeconomic
status, and a history of cultural colonization shape Aboriginal women’s
participation in the sex trade (Kingsley and Mark 2000). The misconceived
lures of fast, good money tend to glamorize this lifestyle. Socially and
economically marginalized women are the most vulnerable to making such
personal choices (Nixon and Tutty 2003; Gorkoff and Runner 2003). Thus,
the problem of youth in the sex trade in Canada is linked to a particular

ethnic community in addition to being a function of poverty and limited
opportunities.
Furthermore, wide disparities exist in the literature on the estimated
earnings of prostitutes (Shaver 1996; Kimberly-Anne Ford 1998; Benoit and
Millar 2001; Edlund and Korn 2002). The research on sex work heavily
emphasizes street-level prostitution (Shaver 1996; Doreen Duchesne 1997)
since activities in other venues are sufficiently hidden from scrutiny and
analysis. Thus, as with other aspects of the underground economy, the issue
is one that is difficult to study (Ronald Weitzer 2000). Nevertheless, the
majority of analysts propose that prostitution is a financially lucrative
vocation (Reynolds 1986; Shaver 1996; Edlund and Korn 2002). Sieberg
(2001) equates the sex trade with entrepreneurial individuals commanding
substantial earnings for their services though requiring few skills. She
further proposes that some prostitutes get monopoly returns in the sex
trade; limited supply and low competition may permit a significant earnings
premium (Sieberg 2001: 54 – 69). Sex work is often compared to other
criminal activities such as selling illicit substances, whereby the individual
who would otherwise work at a minimum-wage job can earn many
hundreds of dollars in a week. Presumably, the decision is rational because
the individual weighs the personal costs and benefits or expected utility
from engaging in this lifestyle (Sieberg 2001).
In summary, prior qualitative research suggests that an individual’s
engagement in prostitution during adolescence may be closely correlated
with a disadvantaged history involving abuse, family dysfunction, dropping
out of school, and a particular ethnic and socio-economic background.
Some public policy research initiatives have influenced innovative
preventive programs, which serve to dissuade adolescents from engaging
in prostitution (RESOLVE and CS/RESORS Consulting, Ltd. 2004). Other
intervention strategies reduce the stressors for those who are contemplat-
ing leaving prostitution (Kingsley and Mark 2000; Social Planning Council
of Winnipeg 2002). However, little is known about the earnings of sex-
trade workers, which greatly influence the allure of the sex-trade, and no
prior research has tracked the lifelong personal costs associated with
370
participation in the sex trade. This study fills the gap in the literature by
using cost-benefit techniques to develop a methodology for capturing the
economic outcomes for individuals in Winnipeg, Canada, who engaged in
prostitution during their youth.
RESEARCH METHODOLOGY: COST CATEGORIES

Drawing from the economic cost-benefit literature (Tevfik F. Nas 1996;
Henry M. Levin and Patrick J. McEwan 2001), the personal effects are
separated into two stages of the life cycle: the period over which an
individual is engaged in sex-trade work, typically starting in the adolescent

years, and the period following the final transition into mainstream life.
The costs vary substantially between these two periods, thus requiring
separate analyses. Within this conceptual framework, I traced the life
history and outcomes during the two life-cycle periods.
It is common practice to categorize economic costs – known as
opportunity costs related to the use of society’s available resources – into
direct, indirect, and intangible costs (Eric Single et al. 1996; Bernard C. K.
Choi and Anita W. P. Pak 1996, 2002). Direct expenditures involve actual
funds expended on goods and services (e.g., prescription drugs). This study
takes a human capital approach, a measurement strategy that involves
calculating the indirect costs of involvement in the sex trade in terms of lost
productivity or the value of lost time in the labor market.3 If for any reason
days of work are lost – such as in the case of incarceration – I multiply the
amount of time by the potential daily earnings at that particular stage of the
life cycle. At a personal level, this includes lost earnings in the prostitution
labor market.4 The estimation method for indirect costs follows the cost-of-
illness approach of Choi and Pak (2002). Although the intangible benefits
and costs are identified, such as pain and suffering or loss of leisure time,
no efforts are made to calculate these costs since they are difficult to
measure.
R E S E A R C H M E T H O D O L O G Y : D E S C R IP T I O N OF T H E D A T A
COLLECTION AND ESTIMATION ISSUES
Data collection involved personal interviews with individuals who had been
involved in the sex trade and had transitioned into mainstream society for
at least one year. The average length of time since the participants left the
sex trade was approximately four years. Several individuals were contacted
through the Transition, Education, and Resources for Females (TERF)
program at the New Directions for Children, Youth, Adults, and Families
agency in Winnipeg, Canada. This life-skills program assists individuals who
want to leave the sex trade. Other participants heard about the study at a
variety of service provider agencies in the community. The study was
371
ARTICLES
advertised at TERF, and the informants self-selected into the sample. All
participants were at least age 18. Consistent with the literature, the majority
of respondents began working in the sex trade as adolescents, however,
their engagement in this lifestyle continued well into their adult years
(see Table 1 which follows later in this paper for history of involvement in
the sex trade).
One objective of the interview process was to estimate the personal
effects, such as earnings in the sex trade, the incremental personal costs
incurred from engaging in this type of work, and the subsequent
employment and earnings effects in the mainstream labor market. Two
main instruments were utilized for data collection. A twenty-question survey

gathered demographic data, detailed information about the respondents’
employment activities, and the respondents’ income from legitimate
sources, as well as education and training. The survey also explored
the role of chronic health issues in their reintegration into the legitimate
labor market. In order to conduct regression and decomposition analysis,
as well as predict the effects of past sex-trade activities on future earnings,
the labor analysis required a larger sample. A total of 62 respondents
agreed to participate in this survey. Since, at any given time, an estimated
400 – 600 street-based prostitutes work in the City of Winnipeg
(Manitoba Child and Youth Secretariat 1996; Social Planning Council
of Winnipeg 2002), the sample size for the labor-market analysis
represents 10 – 15 percent of the population of visible sex-trade workers
in the region.
A sub-sample of eight former TERF clients agreed to participate in a
semi-structured case study interview. The questionnaire collected data on
sex-trade earnings; funds expended on alcohol, illicit drugs, and
personal medical supplies; time spent in addictions treatment facilities
and incarcerations from conflicts with the law; and monetary losses from
robbery and violent incidents while engaging in sex-trade activities.
Since the literature review established that the local sex trade has
disproportional representation by individuals of Aboriginal descent, the
expectation was a high response rate from this demographic group. As
predicted, 90.3 percent of the respondents were of Aboriginal heritage.
The majority of the participants had experienced dysfunction in their
families of origin, and they faced many of the conditions of vulnerability
described earlier.
The costs and benefits are reported for the sub-sample of eight case
study informants only since the interview process collected more detailed
data on these individuals. Other sections specifically relating to labor
market activities and general demographic data (e.g., Tables 1 – 3 to follow
later in this paper) expand the analysis to show the results that were
calculated for the full sample of sixty-two respondents. Using the total
sample for demographic and labor market analysis may provide a better
372
approximation of the population of sex-trade workers. For clarification

purposes, the sample size relating to the costs and benefits is specified
throughout the text. All costs and benefits are valued in Canadian
dollars.
For the costs that extend beyond the year 2003 and to account for price
and wage changes over time, the Treasury Board of Canada’s guidelines
are followed with respect to discount rates (Treasury Board of Canada
Secretariat 1998). The discount rate is the rate of interest used to convert
the value of future costs to a current or present value in order to compare
them to the current or present costs. It is based on the notion that a
dollar’s worth of expenditures today is worth more than the value of a

dollar at some future date. In addition, an inflation rate of 2 percent is
applied to past revenues and costs, as well as future costs, which is an
average of the Conference Board of Canada’s projected Consumer Price
Index from 2004 to 2020 (Gavin Hales, Yves St-Maurice, and Pedro
Antunes 2002).
Concerning the discount rate, the average of three market rates are
calculated based on the rates provided by eight financial institutions and
also based on the fact that the respondents are generally poorer
individuals: a personal unsecured loan, an unsecured line of credit, and
a thirty-six-month rate on a car loan. The average interest rate
approximates 7.5 percent in 2003.5 Though the Treasury Board recom-
mends that this rate should approximate the social discount rate of
10 percent, it is noted that a discount rate of 9.5 percent with an applied
inflation factor of 2 percent is equivalent to the private market rate of
7.5 percent. Therefore, 9.5 percent as the discount rate and a 2 percent
inflation factor is used in order to satisfy the Treasury Board’s
recommendations. The discount rate of 9.5 percent is applied to two types
of future costs: future earnings losses in the labor market, and the net
present value of future personal costs for prescription drugs, dentists, and
addictive substances. Future costs following 2003 are estimated to age 65
only. The rationale is that labor market earnings losses are incurred
throughout the employment-related working years only. There is no stream
of future benefits to be discounted from the base year since all participants
left the sex trade before 2003. The only source of benefits is a small
earnings premium from prostitution activities.
When grappling with the issue of whether or not to include males in the
study, it was decided to keep the analysis within certain narrow parameters.
While young males represent 10 – 25 percent of the visible sex trade (Fraser
1985; Sylvia Davis 1995; Shaver 1996), and this study ought to speak to their
experiences, the inclusion of males would most certainly skew the earnings
analysis since the labor market is structured in a gendered way. After
transitioning into mainstream society, statistically speaking, males who
reenter the labor market will gain a 30 percent earnings advantage over
373
ARTICLES
women, likely through occupational segregation (Paul Phillips and Erin

Phillips 2000). However, I do include transgendered male-to-female
individuals in the labor market analysis (n ¼ sixty-two) because they identify
as female. Since transgender women experience the labor market as
women, this earnings advantage does not apply to them. Their inclusion is
not expected to pose a significant sample selection bias concerning the
economic costs for two reasons. First, none of the eight case study
respondents is transgender. Second, the transgender respondents’ employ-
ability and health characteristics are similar to the rest of the sample.
M E T H O D O L O G I C A L L I M I T A T IO N S
Ronald Weitzer argues that most of the research in the area of prostitution
relies on ‘‘convenience samples’’ (1999, 2000: 267). These are non-random
and non-representative samples of the population of sex-trade workers
since they are usually composed of individuals who have contact with
community services agencies. The most victimized or the poorest
individuals may self-select into the study, causing a sample bias. Likewise,
those most interested in leaving and able to advocate for themselves may
get help from an agency. However, it is well documented in the literature
that the world of prostitution is not very accessible to outside researchers,
thus making random sampling virtually impossible. Indeed, large samples –
those exceeding 200 respondents – are also rare. Recall may also be a
significant issue, though the participants’ TERF files provided supporting
documentation for the demographics and other variables. Such barriers
were encountered in gathering data for the current study, including ethical
considerations that limited the extent to which this population could be
drawn upon. The non-random case study sample interviews transitioned
sex-trade workers from the TERF program since human ethics concerns
deemed appropriate the recruitment of former TERF clients only.6
Although a sample size of eight case studies is small, this is not an anomaly
in prostitution-related research (Bittle 2002).
Nevertheless, a bias is that potential participants who currently have no
connection to the New Directions agency or its associated service pro-
vider agencies may not have heard about the study. Hence, it is
indeterminate whether sex-trade earnings and costs are representative.
Individuals who are full participants in the labor market and who currently
do not have contact with these social services agencies were not included
in the sample. While individuals who fully participate in the labor
market may have been excluded (the economic costs are potentially
overstated), there is an equal chance that others who have a lifetime
dependence on welfare aid were also excluded (the economic costs may be
understated).
374
A minority of sex-trade workers never permanently makes the transition

into mainstream society. Typically, prostitution is not viewed as a lucrative
lifetime career opportunity as individuals experience burnout from a
variety of factors – drugs, illness, and violence (Busby et al. 2002; McIntyre
2002). The narrow scope of the study precludes the inclusion of the effects
related to the lifelong prostitutes. Their exclusion is not expected to pose a
significant sample selection bias concerning the economic costs since the
current study produced evidence that physical and mental health issues
have the largest impact on the level of costs, in contrast to age or length of
time involved in the sex trade.
The findings and conclusions of this study are qualified in terms of

representing an array of experiences within the population of sex-
trade workers in Winnipeg, Canada. The conclusions drawn may not be
generalizable to reflect the economic reality of all sex-trade workers in the
local region either, and the direction of potential sample selection biases
is indeterminate. However, see Linda DeRiviere (2005) for a comparison
of the participants’ characteristics with Benoit and Millar’s (2001) sample
of sex workers in British Columbia.7 Though the current study’s
sample consists of mainly Aboriginal women, these individual’s employ-
ability and health characteristics are similar to those women surveyed in the
Benoit and Millar study, whose sample consists of only 14.9 percent
Aboriginal respondents. The analysis suggests that their sex-trade back-
ground, in contrast to an Aboriginal heritage, brings on social and
economic marginalization after leaving prostitution. The experiences and
consequences of sex work may be quite similar among women across
Canada.
Several in-depth interview participants worked in the sex trade while they
were residents of other provinces of Canada. However, extension of this
analysis to a Canadian context presents many challenges because earnings
and activities in the sex trade varied considerably from one city to the next.
In terms of venues, the respondents worked in the street-based sex trade,
massage parlors, escort agencies, and strip clubs. These factors made
longitudinal comparisons of numbers of clients and average earnings
almost impossible. Therefore, to create consistency within the analysis the
respondent’s earnings for the period that she engaged in sex trade activities
are estimated based on her earnings during the year immediately
preceding the most recent transition (in theory, the final transition) into
mainstream society.
Since, in this study, all personal costs are estimated in terms of Manitoba
values in 2003 Canadian dollars, it is also appropriate to estimate earnings
based on the Manitoba sex trade. Therefore, earnings during the year
immediately preceding the transition would be closest to the 2003 values.
Earnings are not converted into 2003 dollars since there is no evidence that
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rising inflation affected the earnings of sex trade workers in the past decade
or so. There was no evidence that fee structures changed due to general
inflation. These decisions may understate earnings because the participants
typically decreased their sex-trade activities throughout the year preceding
the transition. On the other hand, this procedure will also underestimate
the significant costs that offset their earnings (e.g., illicit drugs and funds
transferred to a pimp), which are also based on the final year in the
trade. The net effect is that the study’s main results will not change in any
material way.
AN OVERVIEW OF THE DEMOGRAPHICS
Table 1 Participants’ characteristics, history of involvement in the sex trade, and

family status (n ¼ 62 respondents)
Total Sample Percentage

number mean of sample
Personal characteristics
Current age in years (range: 18 – 46) 30.1
Aboriginal 56 90.3
Transgender 12 19.4
Years of elementary and/or high school 8.7
Graduated from high school or 25.8
General Education Diploma
Received vocational or specific training 25.8
Received some university 6.5
education or a degree
Working years received income 65.7
assistance (over age 17)
Years received income assistance 65.3
in the past six years
History of involvement in the sex trade
Age of entry into the sex trade 16.2
Number of years involved 10.1
Number of years since transitioning 3.8
into mainstream society
Family status
Single, separated, divorced, and no children 62.9
Married or common-law 17.7
Single-parent 19.4
Number of children born to respondents 103*
Number of dependent children currently 21
living with the respondents
Number of children born to respondents 79
and currently in other care arrangements
Note : *Three children are over age 18.
376
Table 2 Labor force characteristics upon reentry (n ¼ 62 respondents)
Sample Percentage
mean of sample
Respondents with a chronic health issue 22.5

Respondents with work limitations 34.0
(excluding individuals with a
long-term health issue)
Respondents reporting excellent, 67.7
very good, and good health
when working at their last job*
Respondents who are currently employed 27.4
Respondents who were unemployed 16.1

for any period of time during 2003
Employed in the public or nonprofit sectors* 37.5
Pension plan provided by the employer* 23.2
Medical insurance provided by the employer* 33.9
Unionized/covered by a collective agreement* 12.5
Average number of days per month 2.4
missed at the place of employment*
Job tenure at place of employment (in months)* 10.6
Average hourly wages for employed 8.77
individuals (2003 Canadian dollars)
Note : *Based on the participant’s current or last job held (not necessarily in the last year of the panel).
Source : The figures reported in Tables 1 and 2 are based on the last year of a six-year panel, with
the exception of the income assistance variable or when otherwise noted. Hourly wages are an average
over the panel (converted into 2003 dollars).
A N O VE R V I EW O F T HE K EY F I ND I NG S
The key findings for the eight case study interview respondents,
summarized in Figures 1 – 3, are listed as follows (detailed explanations
follow in the subsequent sections):
. The respondents had an earnings premium during the years of

engagement in the sex trade. The average gross earnings were
$27,071 per annum. Half of the respondents received welfare aid
while working in the sex trade.
. Gross earnings were reduced substantially through transfers to pimps,
dependent partners,8 and escort agency owners ($10,068 annually –
37.2 percent), the use of illicit drugs and alcohol ($12,617 annually –
46.6 percent), lost earnings following violent incidents, from arrests
and incarcerations, and from participating in treatment programs
($2,305 annually – 8.5 percent). Net annual surplus funds after
subtracting the substantial costs associated with sex-trade activities
are less than 8 percent of gross earnings.
. From a cost-benefit perspective, other measurable indirect costs are
deducted, such as the forgone opportunity costs in the mainstream
377
ARTICLES
labor market. While involved in the sex trade, the eight re-
spondents combined lost slightly less than sixty-eight years of labor
market experience and on-the-job training, which is known to
enhance their future earnings potential. The overall earnings
premium equals the average gross sex-trade earnings of $27,071
minus opportunity costs at the minimum-wage annual earnings of
$12,636 net of tax remittances. From the point of view of the
individual, income taxes are a personal cost.
. Cost-benefit principles necessitate a further deduction for lifelong
costs following the transition into mainstream society. The major
Figure 1 Personal benefits and costs from work in the sex trade (in 2003 Canadian
dollars) (n ¼ 8 case study participants)
Notes: Annual average per respondent in parentheses. On the benefits side, I report
‘‘gross’’ earnings from sex-trade activities from which any lost earnings are deducted
on the cost side.
378
incremental costs are found in the reduced lifelong earnings,

particularly due to physical and mental health issues. The eight case
study respondents have lost a collective total of sixty-five years of their
working lives from a lack of participation in the mainstream labor
market for health reasons. A portion of the workday is lost from
chronic health conditions for an additional thirty-nine years.
. Finally, after tallying the total personal benefits and costs, the findings
reveal that the costs far exceed the benefits over the individual’s
lifetime. At a personal level, the eight case study informants have
collectively lost a net present value of $1.39 million, mostly in labor
market productivity losses, during the period of engagement in the

sex trade plus the rest of their working lives.
In Figures 1 – 3, the annual averages in parentheses are calculated by

summing the individual participants’ means for each cost and benefit
category and then dividing by eight. This method does away with variations
in the amount of time the respondents worked in the sex trade and the fact
that their lifetime earnings losses span different periods of time. For these
reasons, the averages in parentheses are not derived by dividing the total
cost category into the sum of years in the sex-trade for all participants or the
total years of lost earnings in the labor market.
P E R S O N A L B E N E F I T S : E A R N I N G S I N T HE SE X T R A D E
The findings from the eight case studies reveal that throughout the period
of involvement in the sex trade, a small earnings premium is the only direct
benefit of prostitution at a personal level. However, such benefits are short
term relative to the individual’s available working years, and the offsetting
costs of prostitution are huge. Fast money may reduce the pressure for
meeting one’s immediate survival needs: food, clothing, shelter, and, in
particular, addictive substances. It was not unknown for some lone
(or single) mothers or pregnant women to engage in sex-trade work for
income to supplement inadequate social assistance funds.
Following Neil McKeganey and Marina Barnard (1996), the case study
interview instrument gathered data about the average number of clients
per week and the percentage of time spent on specific sexual services
(i.e., oral or vaginal sex, etc.). In an earlier literature review, Christopher
Bagley (1999) interviewed former sex-trade workers in Calgary and
found that 20 percent have 100þ clients per week; 66.7 percent: fifty to
ninety-nine clients; 11.1 percent: twenty-five to forty-nine clients; and
2.2 percent: eight to twenty-four clients per week. The average was fifty-six
clients per week (Bagley 1999: 448). In order to conduct a reasonableness
test of earnings and drug costs, I sought the expert opinions of
experiential staff at the New Directions agency who suggested that
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Bagley’s estimates are high compared to the Winnipeg sex trade. The
respondents also provided data on the typical fee structure for the
different types of requests.
As discussed in the methodology section, it was determined that the
number of clients per week varied substantially over time. Sex-trade
activities usually revolved around the extent of the individual’s addictions.
The typical sex worker, on average, started with fewer than ten clients
per week, often working only a few days per week. Younger women, in
particular, worked for survival money. Two main factors influenced a
significant jump in the number of weekly clients. First, if addictions
progressed to the use of cocaine and other stronger drugs, then it was
necessary to increase the number of daily clients. Indeed, these work-
related variables were also contingent on binge patterns. Second, the
extent to which a dependent partner or pimp relied on her earnings for
either drugs or spending money heavily influenced the number of clients
per week. Those respondents with less expensive addictions often averaged
fewer than ten dates per week (e.g., during the periods of marijuana or
alcohol use). Typically, the period immediately preceding the transition
into mainstream life sometimes coincided with addictions treatment and
generally involved a slowdown in sex-trade activities.
Trends in earnings showed similar results. The typical fee structure
reported by respondents who worked in the City of Winnipeg was con-
sistent. For street-based workers, fees depended on whether they worked in
high-track or low-track area. Some sex-trade workers reported that they
could charge much higher rates for a short time period when they were
very young and/or relatively new in a particular area or city. However,
slower nights, excessive competition in the immediate work area, and the
need to finance drugs forced the women to negotiate fees with customers
on an ongoing basis. Some of the women also worked in many cities across
Canada and cited earnings or fee structures that varied considerably from
one region to the next.
Moreover, if the period of involvement in prostitution was the 1980s,
earnings were significantly enhanced. At that time, women could earn
more money in the sex trade, whereas a recent crackdown on street-based
prostitution by authorities has increased clients’ fears of apprehension and
thus prompted a movement to indoor venues, substantially reducing the
earnings from street-based sex work. Finally, most of the women used drugs
quite heavily while involved and, understandably, could not recollect many
of the specific details about earnings. Several respondents reported that
they immediately disbursed all of their sex-trade earnings on drugs for
themselves, dependent partners, or friends. Therefore, as an added
measure and since fees tended to vary depending on demand conditions,
estimations of drug costs and daily usage were heavily relied upon to
conduct a reasonableness test of the total earnings from sex-trade activities.
380
Employment in escort agencies yielded more earnings consistency. The

women reported that the escort agency owner usually set a structured fee
schedule that did not deviate through negotiation.9 The respondent
received a portion of the fee charged to each client. The class of agency –
referring to the type of women that it hired – determined the sex-trade
worker’s take home amount; hence, the price her services commanded
in the marketplace depended on the quality of the establishment.
The average take-home pay per client was around $80. Consequently,
multiple factors render it impossible to make an accurate estimation of
earnings and the number of clients over the entire period of work in the sex
trade. Since, in the current study, all costs are estimated (e.g., personal costs
such as drugs) based on recent market values in the City of Winnipeg, total
earnings are calculated based on the last year of engagement in sex-trade
activities. All respondents, with the exception of one woman, worked in the
Winnipeg sex trade for at least one year preceding a final transition into
mainstream life. For the one respondent who worked in another city in her
last year of sex-trade activities, earnings are calculated based on Winnipeg
rates and the number of clients per week reported in the interview.
The eight case study interview participants worked a combined total of 77.8
years in the sex trade (average 9.75 years per person). Their average annual
earnings were $27,071 based on the final year of involvement at Winnipeg
rates. The average number of clients was fifteen to eighteen per week.
The average transaction netted the sex-trade worker $30 – $35. An example of
the calculation of average fees is as follows: a participant may have reported
having 16 dates per week in the final year preceding transition, of which
40 percent requested vaginal sex for a usual fee of $50 and another 60 percent
requested oral sex for a usual fee of $21. The participants generally reported
that there was consistency in the percentage of requests for specific sexual
services, whereas fees were more likely to vary due to negotiating with dates. In
this example, the female prostitute’s average weekly earnings are calculated
to be (16 6 0.40 6 $50) þ (16 6 0.60 6 $21) ¼ $521, which is approximately
$27,000 per annum. The average transaction nets the sex trade worker $521
divided by 16 customers per week ¼ $32.50.
These estimates are higher than the Benoit and Millar (2001: 43) study,
which reported that the median earnings of female sex workers were
$15,000 – $18,000 per annum and $17,500 per annum for all street-based sex
workers. The current study’s findings are considerably lower than one
Montreal study in which sex workers earned $1,800 – $2,000 per week (Shaver
1996). The level of earnings in the sex trade may reflect the market price of
substances such as cocaine. For example, in the Vancouver area, the street
price of drugs is reportedly much lower than Winnipeg – that is, $10 for an
injection of cocaine (¼ gram of cocaine) as opposed to $20 in Winnipeg for
the same amount of the drug (Jenny Gates 2002: 15; Evan Wood et al. 2003).
Though the individual in the current study earns on average $27,071 per
381
ARTICLES
year, the hourly rate is not based on a forty-hour week. Experiential advisors
from the New Directions agency’s TERF program have stated that sex
workers habitually work long days that often exceed twelve hours. Many
hours are consumed waiting around for customers to make an offer. To the
total earnings I add the value of income assistance for the years that some of
the eight case study respondents combined earnings from the sex trade with
welfare aid, totaling $289,674 (Figure 1). It is assumed that individuals would
not have been able to combine the two sources of income had they been
working in the mainstream labor market.
Figure 2 Personal costs while involved in the sex trade (in 2003 Canadian dollars)
P E R S O N A L C O S T S F R O M W O R K IN T H E S E X T R A D E
Direct personal costs
The in-depth interview instrument was designed to capture the personal
costs – direct, indirect, and intangible – during the period of sex-trade
involvement and the period following the final transition into mainstream
382
life. As illustrated in Figures 2 and 3, for the eight case study informants,
the categories of expenditures differ substantially between these two
periods of the life cycle. Directly correlated with the respondents’
engagement in the sex trade were significant personal expenditures for
alcohol and illicit drugs. These expenditures totaled $950,232 or an average
of $12,617 per case study participant for each year worked in the sex trade
(Figure 2).
To summarize the entire sample of sixty-two respondents, just over two-
thirds (67.7 percent) either did not used drugs or alcohol before the initial
entry (14.5 percent) or had been casual users and identified themselves as
not being addicted in any significant way (53.2 percent). According to

Statistics Canada (1998), around half of Canadian youth have engaged in
alcohol and/or drug use, though the respondents of the current study
clearly showed a more widespread pattern of drug and alcohol use.
Approximately one-third of respondents reported that they developed an
addiction to alcohol or drugs prior to their involvement in the sex trade.
However, once engaged in prostitution, the majority of these individuals
switched from alcohol and marijuana to more harmful (and costly)
substances, such as crack or rock cocaine, crystal methamphetamine, LSD,
mushrooms, powdered cocaine, and injected heroin or cocaine and
solvents.
Although several participants in the larger sample acknowledged a
correlation between entry and the financing of alcohol and drugs, among
many other factors, only eight individuals (12.9 percent) reported that this
was the sole reason for entry. Only three out of sixty-two participants
reported that the use of drugs and alcohol did not progress to a serious
addiction during their involvement. Several respondents commented that if
an individual was not addicted before entry, the nature of the work and
the lifestyle almost guaranteed the increased use of substances and alcohol,
as well as much higher expenditures on the latter. The data collected from
the interviews produced evidence that is consistent with the Kingsley
and Mark report (2000: 18), which documented that drugs are a coping
mechanism, especially once a youth is engaged in sex-trade work. The
significant expenditures on such substances were sex-trade related, thus
constituting an opportunity cost to the individual.
The earlier literature review revealed that 50 percent of underage sex-
trade workers spend a daily amount of $100 – $300 on alcohol or drugs such
as heroin, crack, and cocaine (Kingsley and Mark 2000). It was not unusual
for the eight case study informants to have such large drug expenditures on
any given day. However, these costs were not incurred on a daily basis, and
they usually coincided with binge patterns of drug use – for example, three
days of constant drug use followed by a two-day crash. Since earnings are
calculated based on the final year of sex-trade activities, patterns of drug use
and the costs are also reported based on this period. For example,
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ARTICLES
a participant may have had an $80 per day cocaine habit. She may
report that she was high for four days out of the week and crashed for the
other three days. Though the weekly drug costs were $320, she may have
been incarcerated for an average of 8.5 weeks per year while in the sex trade
and may have attended an addictions treatment program for another four
weeks. Thus, the illicit drug costs total $320 6 39.5 weeks per year, which is
approximately $12,600 per year. This figure excludes an annual average of
12.5 weeks of incarceration and time spent in treatment. Presumably, a
sex-trade worker would not be using illicit drugs during these periods.
The next largest direct personal cost reported by the eight case study
respondents involved sharing of income with a pimp, dependent partner,

drug dealer, owners of escort agencies, and drivers, resulting in a combined
cost of $848,934 (Figure 2). An earlier literature review revealed that while
working in the sex trade personal costs included income handed over to a
pimp or dependent partner often for the duration of work in the sex trade.
This amount varies according to the venue in which the woman engages
in prostitution. For example, 10 – 40 percent of earnings on average may
be paid out to operate out of a ‘‘house’’ (City of Winnipeg 2001: 7).
The Benoit and Millar (2001) study found that street-based sex-trade
workers retained on average 93 percent of their earnings, though
sometimes a boyfriend had access to these earnings. The latter’s re-
spondents also reported that escort agencies generally take a higher cut
than many other venues, sometimes up to 50 percent (Benoit and Millar,
2001: 43 – 4). The eight case study participants generally shared around half
of their residual earnings with a pimp, partner, or drug dealer but
not necessarily for the entire period of sex-trade work or with the same
partner. Typically, a slowdown period in sex-trade activities preceded the
final exit, and this was frequently around the time that the often-violent
relationship with the partner deteriorated, and there was a breakup.
Considering these factors, the net shared earnings with such individuals
represented 37.2 percent of gross earnings, which is a direct loss of personal
income.
In principle, the method used to calculate the funds disbursed to other
parties is as follows: suppose the participant was involved in the sex trade
for ten years, and her pimp/boyfriend(s) was in her life for 7.4 of these
ten years. During the interview, the respondent reported the approx-
imate percentage of earnings that she generally handed over to a pimp
or boyfriend. If we assume that she earned $200,000 (to simplify the
example, expenses such as clothing, robbery and lost earnings from incar-
cerations, etc., are overlooked) in the ten-year period ($20,000 6 10 years)
and handed over 50 percent of her net residual earnings to the pimp or
partner for 7.4 years, then he received a total of $74,000 ($200,000 6 7.4/
10 6 50 percent). However, the net shared earnings of $74,000/$200,000
384
represents 37 percent of total earnings during the participant’s sex-trade

involvement.
Other direct personal costs incurred by the eight case study informants,
totaling $88,365, includes the clothing needed to conduct business in the
sex trade ($85,815 in Figure 2), fines following a conviction for an offense
and miscellaneous processing charges paid to legal aid ($2,550 in Figure 2).
Since most of these individuals had no children or were not raising
children born to them over the period of sex-trade work, they incurred no
personal expenses for childcare during incarcerations or while attending
court sessions or meetings with lawyers. Few purchased special clothing for
court appearances, and most participants did not have a sense of the
precise value of their annual clothing budget, although it was much higher
for those who escorted. Therefore, included in the direct costs, for those
who were unsure of the value of their clothing expenditures, is a reasonably
low annual allowance of $500 for the purchase of clothing, boots and shoes,
cosmetics, and hair products needed to conduct business in the sex trade.
The decision about the value of $500 was made in consultation with
experiential advisors at the New Directions agency’s TERF program. The
eight case study respondents combined incurred an annual average of $743
for clothing expenditures (Figure 2).
Half of the eight respondents in the case study reported an occasional
robbery, totaling $5,420 in direct personal income lost throughout their
years spent in the sex trade (Figure 2). This is consistent with one
Vancouver study that estimated that almost 54 percent of the res-
pondents were robbed while engaged in street-based sex work (Leonard
Cler-Cunningham and Christine Christensen 2001). The dollar value is
minimal given that the eight women collectively worked 77.8 years in the
sex trade. While some of the young women worked in venues that offered
more protection from robbery such as escort agencies or massage parlors,
street-based workers reported that they often handed over their earnings to
a pimp after each date or promptly spent the funds on drugs. Nevertheless,
the respondents experienced occasional incidents of robbery. Though the
women had access to free supplies from a community health clinic,
the findings also revealed that the participants incurred minimal direct
personal expenditures, resulting in a combined total of $2,660 for medical
supplies following violent incidents, such as a bad date (Figure 2).
Indirect personal costs

From the total earnings of the eight case study respondents, I deducted
opportunity costs of $951,210, which are the gross potential earnings
from their combined loss of 67.75 years in the formal labor-market activities
at an average minimum wage of $6.75 per hour (2003 rates) minus
385
ARTICLES
10 percent taxes and other remittances ($95,121), such as Canada Pension

Plan and Employment Insurance premiums. Reported in Figure 2 is the net
lost earnings deducted, which totals $856,089. Six of the eight women had
been working prior to entry into sex work and/or during periods of
attempted exits. From an individual perspective, their opportunity costs are
the losses from employment-related productive activities in the mainstream
labor market. The other two respondents did not work in the mainstream
labor market before entry into the sex trade and did not access welfare aid.
The participants’ enrollment in training courses suggests that they would
have been employed in the mainstream labor market, as opposed to
accessing government income assistance, had they not been involved in the
sex trade.
The fourth largest group of personal expenditures is the indirect costs of
lost earnings totaling $160,571 or an average of $2,163 per participant
(n ¼ 8) for each year spent in the sex trade. These indirect costs are
classified into three categories. First, lost earnings from incarceration in
remand, a youth detention center, or women’s correctional facility totaled
$125,657. Generally, lost earnings were from sex-trade activities. For
example, the average length of incarceration in the remand system while
awaiting an appearance before a judge was one to seven days, which
multiplied by the daily sex trade earnings, equaled the personal cost of an
arrest. The women reported no earnings losses due to a court appearance
or for meetings with a lawyer. Finally, several of the women spent a great
deal of time in and out of the remand system or jail (for other crimes as
well), hence the recurrence of these indirect costs.
Second, lost earnings following violent incidents totaled $19,164
(Figure 2). The interview process confirmed the grim reality that the risk
of physical and sexual violence from sex work is substantial. The
respondents conveyed accounts of assault and battery from bad dates and
pimps, rape, being attacked by gangs or other street-involved individuals,
kidnapping, a gun held to the head, and pulled hair. They also endured
personal attacks that involved kicking, slapping, and being punched in the
face. Many physical injuries were sustained, including fractured ribs; a
dislocated jaw; major head trauma; broken bones in wrists, ankle, and toes;
a dislocated finger; lacerations to eyebrows and lips; black eyes; and
countless bruises. Seven of the eight respondents reported daily abuse from
partners, both physical and mental, often over a period spanning several
years. Consequently, the women reported lost work time from short-term
disabilities due to physical and mental health injuries and while
participating in the process of prosecuting the perpetrators. As reported
earlier, the direct personal costs for medical aids were minimal as most of
the women accessed free supplies to treat wounds from a drop-in center or
community health clinic. Certain physical injuries required immediate
medical attention at a hospital, but, for the most part, the sex-trade workers
386
reported that they simply returned to work immediately after an incident.

Typically, counseling was not sought after a violent incident as illicit drugs
generally soothed the emotional pain and suffering. Some respondents lost
earnings temporarily from the fear of returning to the streets after a violent
incident.
Third, lost earnings from participation in drug and alcohol treatment
programs totaled $15,750 for the eight case study informants (Figure 2).
Not only does the individual lose earnings on harmful addictive substances,
but there is also a loss of personal earnings when participating in
detoxification and rehabilitation or day programs. To estimate the personal
costs of addictions, the questionnaire collected data about the average

number and length of times the respondent participated in programs
related to addictions. This figure was multiplied by the average daily
earnings from the main work activity, which was the sex trade. The direct
costs of the treatment programs and emergency room visits are not
personal costs since they are paid for by the publicly funded Canadian
medical insurance system.
Figure 3 Lifelong costs after transitioning into mainstream society (in 2003 Canadian
dollars)
387
ARTICLES
Intangible costs
Finally, the intangible or immeasurable costs from engagement in the sex
trade are substantial. The women suffered physical pain and irreparable
emotional damage, lost time with children and other family members
from incarceration, hospitalization, or participation in drug and alcohol
treatment programs. It is impossible to ascribe a monetary figure to the
psychological distress to these individuals, as pain and suffering are intan-
gible costs and less quantifiable using a human capital approach. Some
studies have attempted to use a willingness-to-pay approach for measuring
the intangible costs of pain, suffering and grief, as well as the life-years lost due
to substance abuse (Single et al. 1996).
THE LIFELONG PERSONAL COSTS AFTER REJOINING

M AI N S T RE A M S O C I E T Y
Lifelong personal direct costs
Following the Homewood Survey’s framework, I designed the case study
interview instrument to capture the lifelong personal costs after the par-
ticipant’s transition into mainstream life.10 The current study’s informants
incurred no direct personal expenditures for individual or group
counseling and legal aid services, as they received these services free of
charge through a variety of social service agencies. Currently, three
respondents incur direct out-of-pocket expenditures for prescription drugs
and dental costs totaling $1,972 in 2003 (not shown on Figure 3, since the
diagram includes the present value calculation only). The women reported
that their current dental expenditures are highly correlated with sex trade
activities for two reasons: they had poor dental health habits while engaged
in this work, and the heavy use of cocaine was hard on gum tissue and
caused tooth decay. All other prescriptions and dental work totaling $1,218
per year are provided free of charge through the welfare aid program.
Under the Canadian public healthcare system, personal costs are income-
tested, and, since the sex worker will probably have low lifetime earnings,
the direct personal costs are minimal.
However, the eight informants reported substantial costs of unhealthy or
addictive habits, totaling $16,532 per annum (this is the 2003 current value
not shown on Figure 3; they average $2,066 per year for each respondent).
In the questionnaire, respondents were asked to estimate the current
annual out-of-pocket costs for their habits, such as cigarettes, illicit drugs
and alcohol, excessive gambling, or any other habit that they would prefer
not to be doing. Arguably, these may not be incremental personal costs;
however, such habits are a method of coping with stress. They are highly
388
linked to the participants’ issues with addictions, which are exacerbated

with sex-trade involvement. Since many are still using (though to a lesser
extent than while involved in the sex trade), addictions continue to have a
substantial impact on the monthly disposable income, which is already
quite low for most respondents. In addition, the women reported spending
a combined total of $1,188 per year ($148.50 per person – not shown on
Figure 3 since the diagram includes the present-value calculation only) on
vitamins and self-help materials. The costs of prescription drugs, dental
treatments, and addictive substances impose a substantial tax on the
earnings of those individuals who work at paid jobs as they add up to
17 percent of gross earnings for a minimum-wage worker. These and other

direct expenditures are extended over the respondent’s remaining years to
age 65 (applying a 2 percent inflation factor and a discount rate of
9.5 percent). The net present value of the future expenditures is estimated
to be $38,413 for prescription drugs, dental costs, self-help therapies/
materials, and nutritional supplements. These eight individuals will incur
costs totaling $198,006 feeding and coping with their addictive habits
(Figure 3).
Lifelong personal costs of addictions and prolonged

negative health outcomes
The long-term health threat from sex-trade related activities and sexual
violence is the high probability of contracting sexually transmitted
infections (STIs), in particular, the hepatitis viruses. In the Benoit and
Millar (2001: 75) study, 54.2 percent of respondents contracted an STI
while engaging in the sex trade and 57.8 percent of these individuals
had multiple incidents of infection. Some of these costs involve direct
expenditures by the government. For instance, treating a person with
HIV/AIDS totals $653,000 for both direct and indirect costs over the
course of the illness (Terry Albert and Gregory Williams 1997).
Moreover, personal struggles with drug and alcohol addictions after
transitioning are highly correlated with post-traumatic coping reactions.
Several respondents reported that drugs are a coping mechanism for
dealing with the stressors in their daily lives even after leaving the sex
trade.
Both questionnaires gathered data from the full sample (n ¼ sixty-two)
on the relationship between health and productivity in the labor market
following the respondent’s transition into mainstream society. For the
purposes of this article, ‘‘illness’’ is defined to include both physical and
mental health conditions. Diminished mental health may occur from
conditions such as depression and ongoing struggles with addictions. The
extent of disability from illness may range from very severe to causing
minor restrictions in daily activities.
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ARTICLES
The participants conveyed accounts of a wide range of health issues. For

example, 29 percent of participants had contracted the Hepatitis viruses
(in particular, Hepatitis C); 4.8 percent were afflicted with HIV/AIDS;
35.5 percent experienced depression; 75.8 percent had ongoing addictions
issues relating to illicit drug use; 4.8 percent experienced learning
disabilities that were also attributed to prior heavy drug use; and 6.5 percent
experienced chronic fatigue.11 This breakdown of health issues takes into
consideration that some participants had a health issue but did not identify
it (around 10 percent) and others may have reported more than one
condition (53.2 percent). The individual’s opportunity cost is a reduction
of income-earning activities and employment-related productivity from

chronic illness for the duration of her work life.12
The objective of this section is to estimate the value of future pro-
ductivity losses resulting from illness, which may occur in one of three ways.
First, the individual has a serious illness and there is a high probability
that she will not participate in the labor market in the future.
Second, following the transition, the respondent had a sex-trade-related
health issue that prevented participation in the mainstream labor market
for a period, but the condition did not continue for the duration of
her work life. She re-entered (or expected to re-enter) the labor market in
a part-time or full-time capacity depending on the extent of the
health issues. For example, this may be the case if the respondent does
not hold a job in the labor force for a few years after transitioning due to
concerns about relapses relating to addictions. She may want to
concentrate on personal development by participating in a transitioning
and life skills program or attend regular AA meetings and group counseling
before making plans to look for a job. Third, the respondent entered the
labor market on a full-time basis immediately following the transition
and eventually switched to part-time work. A portion of each workday is
lost, for example, if an individual anticipates working on a less than full-
time basis in the future due to chronic physical and/or mental health
issues. This condition is expected to continue for the duration of her
work life.
For the first two cases, the entire workday is lost for at least a part of the
individual’s work life. Based on the respondent’s work history and training
in the mainstream job market, a random effects regression model applied
to panel data predicted the individuals’ potential earnings.13 The res-
pondent may have accumulated some work experience before entry into
the sex trade. Many participants had sporadic bouts of employment in
the mainstream labor market while they were involved in the sex trade.
Intermittency and discontinuity characterize the work patterns of the
typical sex-trade worker in the sample. The predicted labor market wage
approximates minimum wage for around half the participants. Based on
the predicted earnings, I calculated the present value of future earnings for
390
Table 3 Summary of labor-market earnings loss due to health effects (2003 Canadian
dollars)
Full-time Dollar Dollar value of
equivalent value of labor-market
Percentage years lost labor-market loss: case
(n ¼ 62) (n ¼ 62) loss (n ¼ 62) studies (n ¼ 8)
Respondents not 22.5 455 2,680,784 303,884

participating in the
labor market due to
chronic illness or a
permanent disability*
Respondents who lost 56.5 120.5 1,689,206 207,320
earnings in the labor

market during the
transition into
mainstream society**
Respondents who
participate in the
labor market on a
less than full-time
basis due to work
limitations:
Respondents who 4.8 54 525,657 236,808
exited the sex
trade with a
physical or mental
health limitation
that prevents
full-time work
hours
Respondents who 4.8 45.1 432,396 –
entered the labor
market on a
full-time basis after
exiting the sex trade
and then switched
to part-time work
due to health issues
Respondents with no 6.6 169.5 0 –
particular plans to
ever participate in the
labor market after
exit (not related to
health issues)
Respondents who 11.3 0 0 –
participated in the
labor market on a
full-time basis
immediately after exit
(no health-related
productivity losses)
Totals – 844.1 5,328,023 748,012***
Notes : *Non-participation is directly attributed to sex-trade related health problems. The majority of
non-participating ex-sex-trade workers are afflicted with the Hepatitis C and HIV/AIDS viruses; **Lost
labor-market time may be due to dealing with addictions and healing, etc. These figures exclude years
for academic upgrading. The percentage column does not add up to 100 due to the overlap
of categories. Some respondents who incurred earnings losses during the transition also fall into other
categories of productivity losses; ***Shown in Figure 3.
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ARTICLES
the number of years that a respondent would not participate in the labor
market. In the third case, for those who lost a portion of the workday due to
health issues, productivity losses were based on the value of the partial daily
hours lost. Similar present value techniques were then applied. The
findings revealed that the informants incur large personal costs in terms of
lost earnings from lower productivity due to prolonged negative physical
and mental health impacts. As shown in Figure 3, for participants in the
eight case study interviews, the net present value of lost earnings in the
formal labor market, net of income taxes, which is directly attributed to
short-term and long-term health conditions that prevented full or partial
participation in paid jobs, totals $748,012.

Table 3 summarizes the labor market productivity losses for the full
sample of survey participants (n ¼ sixty-two). The figures are listed
separately for the eight case study participants. The net present value of
earnings losses, net of income taxes, totals $5,328,023 for the entire sample
of sixty-two participants. All calculations are based on predicted future
wages in 2003 dollars, which were calculated from the regression analysis.
The future earnings losses depend to some degree on the participant’s
expectations about the future and plans for educational or vocational
upgrading. If the respondent had recently left the sex trade, she estimated
how long she expected to be out of the mainstream labor market.
The informants typically gave a conservative estimate for the transition
period (e.g., one more year). Only seven individuals provided a
future estimate that exceeded two more years as of the interview date,
and there were usually extenuating circumstances – such as ongoing
addictions – that could account for the longer prediction. Consequently,
the figure for the transition period is a low estimate. Since several other
participants have contracted serious illnesses or have major issues with
addictions that will not be resolved for many years, longer projections
for non-participation may be viewed as accurate for those individuals.
Likewise, participants who have been out of the sex trade for several years
have established labor market patterns. Thus, the earnings losses are
predictable.
WA GE DE C O MP OS ITION : TH E V A L U E O F L O S T E A R N I N G S
C O M P A R E D T O OT HE R W O M E N I N T H E L A B O R M A R K E T
The objective of this section is to illustrate that the sex-trade worker may
experience further lifetime earnings losses compared to similar women
who participate in the labor market. As illustrated in Figure 3, there are
nominal financial benefits to working in the sex trade during the earlier
period of the life cycle. Since the majority of respondents left school
prematurely, the sex trade permitted higher earnings potential than a
minimum-wage job in the mainstream labor market. Indeed, the substantial
392
costs of addictions and the sharing of funds with other parties offset the
earnings premium. However, the sex worker missed opportunities to
acquire certain attributes known to enhance earnings in the labor market,
such as formal education or vocational training.
The labor market survey, composed of sixty-two primarily Aboriginal
participants, permitted the conduct of regression analysis and comparisons
of labor market attributes with other Canadian Aboriginal women in the
Statistics Canada Survey of Labour and Income Dynamics (SLID) via
decomposition analysis.14 It is assumed that the representative sample of
Canadian Aboriginal women in SLID have not been involved in
prostitution. Though there are limitations in making such comparisons,

in theory the women’s characteristics and labor market attributes should be
similar enough to make some qualified causal inferences about the effects
of sex-trade involvement on productivity attributes and earnings. Five
respondents were not of Aboriginal heritage, and one of them was of
African descent. However, these participants’ labor market characteristics
and attributes were similar to the Aboriginal sample. Therefore, for
the purposes of the decomposition analysis, they are pooled with the
Aboriginal sample. This may understate the productivity losses since five
respondents should probably be compared to other Caucasian women in
SLID. However, this group is too small a sample for regression and
decomposition analysis.
A unique aspect of this study is the regression analysis is based on a six-
year panel that captured demographics and employment histories for both
the sex-trade workers in the current study and the Aboriginal women in
SLID. For most former sex-trade workers, the earnings history in the panel
covered the period following the transition into the mainstream. However,
in some cases, if a respondent was currently participating in the TERF
program or if she was in the transition period, her recent work history
generally provided a good basis for future earnings estimation. The only
exception was if the individual was engaging in specific training or a
university program; in which case, past employment would underestimate
future earnings. Such participants were rare. Since TERF is a life-skills
program, rather than a job-training program, it will not enhance earnings
relative to the individual’s past jobs in the mainstream labor market.
Likewise, a grade 12 or high-school equivalency certificate does not
ameliorate earnings by itself, though it may improve employability in a low-
paying job. This provides the justification for using the participants’ past
work experiences as a basis for the regression analysis.
I use decomposition analysis, an estimation technique common in labor
economics, for this study. This involves the use of regression techniques to
separate and analyze the wage equations for each group: the sex-
trade workers and the Aboriginal women in SLID. The technique
decomposes an observed wage gap from the two estimated wage equations.
393
ARTICLES
For this particular application, the random effects model’s coefficients are
used for both groups to preserve heterogeneity across the observational
units when analyzing the wage disparities. The regression coefficients are
employed to estimate the portion of the wage gap that is accounted for by
the observed attributes and to measure the unexplained part of the pay
structure.15
The net present value of future lost wages reported in Figure 3 totals
$85,924 ($473 per year for each respondent). Based on the split-sample
regression estimates, the eight case study respondents had lower than
average productivity attributes. Collectively, they incurred a wage loss,
averaging $1.94 per hour, which is attributed to the explanatory variables

included in the wage equation. However, the wage differential that was due
to the difference in pay structure favored the sex-trade workers over the
Aboriginal women in the SLID survey ($0.54 per hour).16 To some extent,
the latter findings may positively reflect community interventions that some
former sex-trade workers access. Through community networks, some
former sex-trade workers obtained high-paying public-sector jobs, positively
affecting the pay structure, though there is a disproportionate number of
minimum-wage workers in the sample of former sex-trade workers. This
result may also suggest that Aboriginal women in SLID are typically
secondary labor market workers. These findings establish that sex-trade
workers generally had a lower and flatter earnings profile. During the eight
case study interviews, several participants reported that their history of sex-
trade involvement affected their educational achievements and chances for
employment, or if employed, their ability to keep a job. Moreover,
56.5 percent of the sixty-two respondents reported having a limitation in
their daily work or school activities.
SENSITIVITY AND RISK ANALYSIS

Generally, economists utilize risk analysis techniques in order to deal with
uncertainties such as the probability that expenditures will be incurred in
the future and the monetary value of the costs. One source of uncertainty
in this study relates to the small sample size; nothing guarantees that the
distribution of the sample in the current study is in close proximity to the
distribution of the population of sex-trade workers in Canada. A deviating
value of significant variables for some of the respondents can have a major
effect on the average personal costs.
For the current group of participants, however, there was very little
uncertainty in the data on future values. A few individuals have a high
probability of accessing welfare aid for the remainder of their working lives
due to health conditions contracted during their sex-trade activities. Since
the variables are correlated, these women will certainly incur lifetime
earnings losses in the labor market. Therefore, the probability outcomes for
394
the variables are quite high. Likewise, the parameter values for the labor
market variables are relatively certain, and preferences are expected to be
stable. In addition, it is likely that a few respondents will choose to work
part-time only in the future due to serious health issues. Most parameter
values for the future direct costs are also somewhat predictable and are
conservative estimates. Risk analysis is a tool that will not necessarily benefit
the study to any extent.
Because the selected discount rate will heavily influence the net value of
the productivity losses, the human capital approach would be difficult.
Therefore, this study uses sensitivity analysis to determine if a change in the
discount rate has a significant effect on the net present value of direct and
indirect future costs. Although the productivity losses are somewhat
sensitive to such a change, as illustrated in Table 4, this does not alter
the main results by a material dollar value relative to the total personal costs
estimated in the study.
Table 4 Sensitivity analysis
Deterministic Maximum Minimum

model, NPV, Effect on NPV, Effect
discount discount total discount on total
rate 9.5% rate 8% costs* rate 12% costs*
Personal costs:
Future value of 833,936 939,254 þ105,318 705,602 7128,334
lost earnings
from productivity
losses**
Other direct 236,419 277,259 þ40,840 187,401 749,018
personal costs***
Notes : * þadds to costs, 7lowers costs; **Lost earnings in the future are derived from three sources:
the transitioned sex-trade worker does not participate in the labor force due to health issues; the
transitioned sex-trade worker only participates in the job market on a part-time basis, also due to
a health condition; and an earnings loss is derived from the wage differential when compared
to other Aboriginal women in Canadian society; ***Other direct personal costs are incurred for
prescription drugs, dental treatments, self-help therapies and materials, nutritional supplements,
and personal addictions.
C O N C L U D IN G R EM A R K S
In this study, I have developed a human capital methodology for calculating
economic costs and benefits to estimate the average personal outcomes for
individuals who, in past years, had been involved in the sex trade. The
model is applied empirically to sex-trade workers in Winnipeg, Canada,
although it may have some applicability to the diverse circumstances of
women in other economic and sociopolitical systems. This is particularly
the case for marginalized and oppressed women in poor developing
395
ARTICLES
countries who are often drawn into the sex trade as a matter of survival.
Personal interviews permitted the collection of data on several variables
reflecting the impact of the trade on the individual.
A series of case study interviews traced the life histories of eight former
sex workers before leaving prostitution and reentering the market. This
study gathered data on sex-trade earnings, funds expended on alcohol and
illicit drugs, disbursements to pimps and partners, and for personal medical
supplies. Indirect costs included lost earnings from time spent in addictions
treatment facilities and incarcerations from conflicts with the law while
involved in the sex trade. I traced the income, education, training, and
detailed employment activities in the formal job market and the role of
disabilities and health issues related to reintegration into the mainstream
labor market for eight informants and an additional fifty-four former sex
workers. The collection of this data and the Statistics Canada Survey of
Labour and Income Dynamics permitted some estimation of former sex-
trade workers’ status compared to similar women in the labor market.
Consistent with the qualitative literature, the findings revealed
increased addictions, lower lifetime productivity, and threats to physical
and mental health following transition from the lifestyle. Years of poor self-
care and contracting a range of health conditions have the potential for
impeding labor market participation. After a period of engaging in
prostitution, the individuals have lost significant opportunities to acquire
income-earning productivity attributes and, over their work life, sex-trade
workers may incur large indirect personal costs in terms of lost earnings
compared to similar women in society. Due to the events of their youths,
they face several employment-related challenges and have a low pro-
bability of working in high-paying occupations. Thus, prostitutes are the
most vulnerable to lifelong poverty and other forms of marginalization due
to the lack of marketable skills that improve their chances of gaining
employment.
These results shed some light on the sex-trade experiences of socio-
economically disadvantaged ethnic and minority women, such as Aboriginal
Canadians. However, the small sample of non-Aboriginal sex workers face
similar social and economic marginalization brought on by their involve-
ment in prostitution. Future work on this topic could involve larger sample
sizes with transitioned sex workers from a greater range of ethnic back-
grounds. Nevertheless, Aboriginal women’s characteristics resemble those
of other women in poor developing countries. Thus, the analysis provides
not only a glimpse into the potential personal costs incurred by individuals
but also the earnings-related productivity losses to the economy. The
empirical applications also illustrate many of the challenges concerning
pragmatic applications of theories of cost-benefit analysis.
Two conclusions stem from this analysis. First, the findings debunk the
perception of lucrative monetary rewards in the sex trade, particularly for
396
some ethnic and socioeconomically disadvantaged groups of women. The

analysis shows that earnings from prostitution hardly constitute invested
funds for the future, particularly when one considers the associated costs of
such expenditures on illicit drugs, allocations to third parties, and the
significant lifetime productivity losses of formal labor market earnings.
Second, the current work contemplates the notion that the effects of
prostitution entail a life-cycle process, which often begins during
adolescence and likely extends into adulthood. The economic conse-
quences may entail a lifelong monetary impact on not only the individual
but also on public programs supporting the former sex-trade worker.
Prostitution may be more than a private, individual dilemma but a much

larger social and economic one. When women in any economy incur large
productivity losses at a personal level, the government will likely experience
substantial fiscal impacts (e.g., various forms of welfare aid). Thus, the issue
engenders multiple reasons for policy-makers to direct their attention to
counteracting the conditions of vulnerability that bring young women and
men to this lifestyle and perpetuate the social and economic margin-
alization of people in the sex trade. Reducing the incentives through
prevention and intervention programs directed at high-risk youth must be
part of the solution for successfully managing this dilemma and significant
social problem in many parts of the world.
Linda DeRiviere, Manitoba Research Data Centre, Statistics Canada,

370 Brodie Centre, 727 McDermot Avenue, Winnipeg, MAN R3E 3P3, Canada
e-mail: Linda_DeRiviere@umanitoba.ca
ACKNOWLEDGMENTS
There are many people to thank for their generous support throughout the
conduct of this study. The ongoing support from Dr. John Loxley and Dr.
Wayne Simpson from the University of Manitoba, Economics Department is
much appreciated. Special thanks are due to the faculty from RESOLVE
Manitoba, specifically Dr. Jane Ursel and Dr. Jocelyn Proulx for their
thoughtful feedback and assistance at every step along the way. Dr. Marylee
Stephenson from CS/RESORS Consulting Limited offered excellent
editing support. Leslie Buckle, Senior Evaluation Analyst from the National
Crime Prevention Strategy is gratefully acknowledged, as is the funding
from this institution. Many thanks to Jane Runner, Program Manager at the
New Directions for Children, Youth, Adults and Families agency’s TERF
program. The Statistics Canada, Manitoba Research Data Centre is
acknowledged for the use of its internal data files for the labor market
analysis. The opinions expressed do not represent the views of Statistics
Canada. Finally, this study would not have been possible without the
397
ARTICLES
collaboration of the very spirited and generous individuals who agreed to

participate and share their life stories. I wish to express special thanks to the
study’s participants.
NOTES
1
This paper evolved from a cost-benefit study prepared for RESOLVE (a family
violence research center) at the University of Manitoba and the National Crime
Prevention Centre at Canada’s Federal Ministry of Justice. The study was one part of
the evaluation of Ndaawin, a community service organization that focuses on
responding to Aboriginal youth at risk of exploitation through prostitution. This

diversion program focuses on supporting and educating youth and building self-
esteem, often in spite of a disadvantaged childhood, so they can make informed
decisions about the perils of the sex trade, gang activity, and illicit drug use. The
complete study examined the effects of sexual exploitation from three standpoints:
personal, fiscal, and a general societal point of view.
2
Aboriginal refers to First Nations, Aboriginal Canadians. There are generally three
groups of Aboriginal peoples: Indians, Metis, and the Inuit. The participants of this
study are from all three ancestral backgrounds.
3
For a discussion of the main criticisms of the human capital approach, see Fred
Kuchler and Elise Golan (1999).
4
An alternative is a willingness-to-pay approach. For example, how much is the sex-
trade worker willing to pay to avoid the adverse outcome of lower lifelong earnings
from chronic illness and early death? Alternatively, what is her valuation of a desirable
outcome? According to Bernard C. K. Choi and Anita W. P. Pak, this cost-utility
approach is ‘‘subjective and may be difficult to use . . . due to the complexity of the
questions asked’’ (2002: 48).
5
These figures were retrieved from the LoanBanx website (www.opiemarketing.com).
The rates are quoted as of September/October 2003.
6
Since there was a possibility that the respondents would recall traumatic experiences
during often-violent periods in their lives, the University of Manitoba’s human ethics
committee deemed appropriate the recruitment of former TERF clients only who had
access to ongoing counseling services.
7
Cecilia Benoit and Alison Millar’s (2001) study of sex-trade workers in British
Columbia has expanded Canadian researchers’ knowledge base by capturing more
reliable prevalence statistics on a larger sample of individuals who engage in the sex
trade.
8
The participants identified a complex array of personal relationships with boyfriends
who were drug dealers and pimps. In this article, these various partners of the
opposite sex are referred to as ‘‘boyfriends’’ or ‘‘dependent partners.’’
9
This method of conducting business has undergone changes. More recently, some
escort agencies charge the customer a finder’s fee and require the sex-trade worker to
negotiate fees with the customer directly. This is expected to reduce the sex worker’s
earnings from escorting activities.
10
The Homewood Survey was conducted as part of the ‘‘Economic Costs and
Consequences of Child Abuse in Canada’’ report to the Law Commission of Canada
(Audra Bowlus et al. 2002). This is one of the few studies that estimate the personal
costs of child abuse.
11
The transgender respondents had only a slightly lower prevalence of health problems
when compared to the other former sex-trade workers in the full sample (n ¼ 62). For
instance, 25 percent reported depression, 16.7 percent contracted hepatitis C, and
398
66.7 percent struggled with addictions, although 25 percent have a long-term chronic
health problem.
12
Statistics Canada (2000) reported that 6 percent of females had an incident of
depression in 1996 – 1997 (cited in Benoit and Millar 2001: 68). A Canadian addiction
survey has found that the proportion of women alcohol users identified as high-risk
drinkers was 8.9 percent in 2003. An estimated 1.8 percent of Canadian females
used illicit drugs (excluding cannabis) in 2003, though they were not necessarily
addicted to drugs (Health Canada 2005). The comparative figure for HIV/AIDS is
0.3 percent of the Canadian adult population (Public Health Agency of Canada 2005)
and Hepatitis C is 0.53 percent of the Canadian female population (R. Remis,
R. Hogg, and M. D. Krahn 1998).
13
The regression analysis and technical aspects of the econometric work on the panel
data using the Statistics Canada Survey of Labour and Income Dynamics is available
from the author upon request.
14
The SLID public-use files do not identify the Aboriginal observations. Therefore,
special permission was sought at Statistics Canada in order to use the internal files,
which are housed at the Winnipeg Research Data Centre.
15
Readers who are unfamiliar with the standard decomposition procedure may refer to
Ronald L. Oaxaca (1973) or Dwayne Benjamin, Morley Gunderson, and W. Craig
Riddell (2002) for further details on this technique.
16
For each of the eight case study informants, this study uses the annual value of the
hourly wage loss attributed to the explanatory variables in the regression equation
(averaging $1.94) plus the wage differential due to differences in pay structure
(averaging $0.54) in the calculation of the net present value of future lost wages,
totaling $85,924 as shown in Figure 3.
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A HUMAN CAPITAL METHODOLOGY

JEL Codes: I12; J15; J24

Feminist Economics ISSN 1354-5701 print/ISSN 1466-4372 online Ó 2006 IAFFE

adult women. Little economic theory addresses adult prostitution as

[I]t may be counter-productive to separate adult and youth pro-

Kingston-Riechers 1995). To date, however, no research has investigated

In most regions within Canada, Aboriginal women are overrepresented

the problem of youth in the sex trade in Canada is linked to a particular

RESEARCH METHODOLOGY: COST CATEGORIES

individual is engaged in sex-trade work, typically starting in the adolescent

main instruments were utilized for data collection. A twenty-question survey

approximation of the population of sex-trade workers. For clarification

dollar’s worth of expenditures today is worth more than the value of a

women, likely through occupational segregation (Paul Phillips and Erin

A minority of sex-trade workers never permanently makes the transition

The findings and conclusions of this study are qualified in terms of

AN OVERVIEW OF THE DEMOGRAPHICS

Table 1 Participants’ characteristics, history of involvement in the sex trade, and

Total Sample Percentage

Table 2 Labor force characteristics upon reentry (n ¼ 62 respondents)

Respondents with a chronic health issue 22.5

Respondents who were unemployed 16.1

. The respondents had an earnings premium during the years of

incremental costs are found in the reduced lifelong earnings,

market productivity losses, during the period of engagement in the

In Figures 1 – 3, the annual averages in parentheses are calculated by

Employment in escort agencies yielded more earnings consistency. The

not being addicted in any significant way (53.2 percent). According to

respondents involved sharing of income with a pimp, dependent partner,

represents 37 percent of total earnings during the participant’s sex-trade

Indirect personal costs

10 percent taxes and other remittances ($95,121), such as Canada Pension

reported that they simply returned to work immediately after an incident.

costs of addictions, the questionnaire collected data about the average

THE LIFELONG PERSONAL COSTS AFTER REJOINING

linked to the participants’ issues with addictions, which are exacerbated

17 percent of gross earnings for a minimum-wage worker. These and other

Lifelong personal costs of addictions and prolonged

The participants conveyed accounts of a wide range of health issues. For

of income-earning activities and employment-related productivity from

Respondents not 22.5 455 2,680,784 303,884

earnings in the labor

participation in paid jobs, totals $748,012.

prostitution. Though there are limitations in making such comparisons,

averaging $1.94 per hour, which is attributed to the explanatory variables

SENSITIVITY AND RISK ANALYSIS

Table 4 Sensitivity analysis

Deterministic Maximum Minimum

some ethnic and socioeconomically disadvantaged groups of women. The

Prostitution may be more than a private, individual dilemma but a much

Linda DeRiviere, Manitoba Research Data Centre, Statistics Canada,

collaboration of the very spirited and generous individuals who agreed to

responding to Aboriginal youth at risk of exploitation through prostitution. This

Burgess, Sandra, Ailsa M. Watkinson, Anne Elliott, Wendy MacDermott, and

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