Why Are Escorts So Well Paid?

If the average escort selling sex in the US worked 2,000 hours a year, her income would place her in the top 0.5% of the earnings distribution.

It continues to be a mystery as to why women are earning an average of $280 per hour to do, essentially, what the rest of us do for free. You may want to argue that their jobs are risky in terms of violence, disease and arrest, but if risk explained the high earnings then the women doing the riskiest sex work, those walking the streets, would earn more. Of course, they earn much less, only about $27 per hour. 

There is very little research that can claim to explain the high wage premium to sex work, particularly to escorts, and even less data to support the theories that do make that claim. 

One theory, that we have talked about before, argues that entering sex work seriously limits a woman’s future marriage prospects and that the wage premium to sex work is compensation for having made that choice. The earning data suggests then that the women working the streets, who presumably have limited marriage prospects, need little compensation to encourage them to forgo marriage and enter the sex trade. Escorts, on the other hand, are drawn from a socio-economic group with better marriage prospects and are therefore paid a healthy premium to enter the trade.

Recently, data has been collected from sex worker rating sites on over 40,000 sex workers in Canada and the US in an attempt to find some empirical support for this theory.* The evidence from this dataset suggests that as escorts age in their twenties their earnings increase, peaking somewhere between the age of 26-30, and decrease as they age after 30. The authors feel that this provides evidence to support the marriage theory – as women age they face a bigger risk that they will never marry and therefore need to be compensated by more to discourage them from exiting the sex market in favour of the marriage market. Once a woman reaches her thirties, though, her future marriage prospects are limited such that she requires less compensation to stay on the market. (Just for the record, these are not the workers’ actual ages but rather the ages their clients estimating them to be)

The difference in per-transaction earning between a worker who is between the ages of 18-20 and a worker who is almost 30 is 7%, or about $18. For a worker seeing 3 clients a night and working 15 nights a month this works out to an annual difference of about $10,000.

Does this evidence really support the theory though? One alternative explanation is that escorts earnings decline as they age and increase as they gain experience. When sex workers are in their twenties, the second effect dominates – experience increases their earnings by more than aging decreases it. When they reach their thirties, however, the first effect dominates – aging decreases their earnings by more than experience increases it. This simple story gives us the same earning/age profile seen in the data.

What I find interesting about this story is that the authors assume that the price in the market is wholly determined by the sellers – the sex workers themselves. But if two sex workers are otherwise identical, why would a buyer pay more for sex with the worker in her late 20s just because she requires that wage to stay in the market? In fact, if a woman in her late twenties requires a higher earning to stay on the market then we would not expect that she would have a higher wage. We would expect that she would either exit the market once the wage fell below her reservation wage or she would supply more hours in order to drive up her earnings. 

Otherwise, we have to believe that the sex trade is not a competitive market. This data suggests that the buyers use a variety of sellers, though, which suggests that it must be at least somewhat competitive. And if it isn’t, we certainly need to be told why.

I still think that stigma is contributing to the high wage paid to sex work but it hasn’t been proven, yet. 

* Edlund, Lena; Joseph Engelberg and Christopher A. Parsons (2009). “The Wages of Sin.” Columbia University Economics Discussion Paper No. 0809-16.