The Economics of Human Trafficking

Economics of the Human Trafficking
Industry

Outline
• What is Human Trafficking?
• Definition
• Elements of
• Human Trafficking Market
• Defining the Market
• Consumers and Product
• Supply and Demand
• Pricing
• Locations
• Industry Drivers
• Globalization’s Affects
• Economic and Industry Impact s
• Economics and Migration
• Conclusion and Recommendations
Economics of the Human Trafficking Industry 2

―the recruitment, transportation, transfer, harbouring or receipt of persons, by means of the
threat or use of force or other forms of coercion, of abduction, of fraud, of deception, of the
abuse of power or of a position of vulnerability or of the giving or receiving of payments or
benefits to achieve the consent of a person having control over another person, for the
purpose of exploitation.
Exploitation shall include, at a minimum, the exploitation of the prostitution of others or other
forms of sexual exploitation, forced labour or services, slavery or practices similar to slavery,
servitude or the removal of organs‖ (UNODC, 2012).
The United Nations Office of Drug and Crime
define human trafficking as:

The Act (What is done)
Recruitment, transportation, transfer, harboring or receipt of persons
The Means (How it is done)
Threat or use of force, coercion, abduction, fraud, deception, abuse of power or vulnerability, or giving
payments or benefits to a person in control of the victim
The Purpose (Why it is done)
For the purpose of exploitation, which includes exploiting the prostitution of others, sexual exploitation, forced
labor, slavery or similar practices and the removal of organs.
(UNODC, 2012)
Key Elements

Market: Defining the Market
• As people become vulnerable to exploitation and businesses continually seek the lowest labor
sources, trafficking human beings generates profit and a market for human trafficking is created.
• The market for trafficked people involves labor supply decisions by vulnerable populations (possibly
migrants), labor demand decisions by employers, and the intermediary decisions by human traffickers.
• Profit is the driving motive for trafficking
• ―An opportunistic response to the tensions between the economic necessity to migrate, on the one
hand, and the politically motivated restrictions on migration, on the other‖ (Chuang, 2006).
• Human traffickers connect the supply of labor in source areas with the demand for labor in destination areas
(Wheaton et al., pg. 117)
Within the next 10 years crime experts expect human trafficking to
surpass drug and arms trafficking in its incidence, cost to human
well being and profitability to criminals (Wheaton et. al, pg. 114)

Market: The Numbers
Estimates involving human trafficking are imprecise due to disparities in governmental and non-governmental
definitions and the underground nature of trafficking.
• The United States estimates that 600,000-800,000 persons are trafficked across international borders annually
• It is thought that 2.5 million people are being trafficked around the world at any given time
• 80 percent are woman and girls while 50 percent are minors
(Wheaton et al, pg. 119).
• The ILO estimates that annual global profits generated from trafficking amount to be around $32 billion (Brewer, pg. 46)
• 161 countries are reported to be affected by trafficking (UN.GIFT, 2012)
• Third largest illegal industry in the world following drugs and arms sales
(Besler, pg. 6)

Market: Consumers and Products
In the human trafficking market, the consumers are employers of trafficked labor and the products are human beings.
(Wheaton et al., pg. 114)
• Employers demand labor for the production of goods and
services, individuals and households use a large number of
trafficked labor—the household is the employer or consumer in
this situation
• Benefits to employer employers is the low cost of discarding the
trafficked victims
• Consumers have the same goal as employers: Paying the lowest
price to receive the highest benefit
• Increasing costs to human traffickers is the main way to affect
the supply side of the market.
• Consumers can include companies that subcontract certain
types of services, end-consumers who buy cheap goods
produced by trafficking victims, or individuals who use the
services of trafficking victims
As long as people demand prostitution services
and are willing to pay for them, there will be
someone who will emerge and supply that
demand.

Market: Supply and Demand
The price the trafficker will receive is based on:
• availability of the desired product,
• characteristics of the product,
• the number of similar products available, and
• the negotiating acumen of the human trafficker.
At very low prices, human traffickers will be unwilling and unable to supply trafficked individuals because costs exceed revenue
(Wheaton et al, pg. 119).
Most economic research deals with legal goods and services, perhaps due to the difficulty of reliable data on illegal markets
(Wheaton et al, pg. 12)
Employers favor migrant domestic workers over local
domestic because of their vulnerability and lack of
choice that results from their foreign status….by
reducing opportunities for regular migration greater
opportunities are awarded to traffickers.
(Chuang, pg. 146)
In many cases of labor
trafficking, consumers provide the
demand, and thus the profit
incentive, to the traffickers.
Individuals who buy commercial sex
acts create the demand for sex
trafficking.
(Polaris, 2012)

Market: Supply and Demand
The figure below shows a decrease in the
demand for trafficked individuals by a specific
trafficker as a leftward shift in the demand curve.
This leads to a decrease in the quantity of
trafficked victims exchanged in the market
(Wheaton et al, pg. 131)
Reducing the demand for trafficked humans means
decreasing benefits to employers of employing
trafficked labor.
(Wheaton et. al, pg. 131)
Until 2007 the UK plan against human
trafficking was targeted at the supply
side of the market. They are now
tackling the demand side and, ―calling
for a more sophisticated approach and
understanding of the demand factor.‖
(Wheaton et. al, pg 131)

Market: Pricing
Today a trafficked individual can cost a few
hundred dollars vs. an estimated $100,000 (2003
dollars) for a male slave in May 1808
• Prices are largely based on market
principles, depending on the local demand, the
distances involved and the mode of transport.
• The emergence of international smuggling
organizations has helped to substantially drive up
the traffickers' fees.
• INS reports indicate that fees can range from a few
hundred dollars for Central Americans to up to
$50,000 for Chinese
(Finckenauer & Schrock, pg. 1)

Market: Locations
• 1.4 million – 56% - are in Asia and the Pacific
• 250,000 – 10% - are in Latin America and the Caribbean
• 230,000 – 9.2% - are in the Middle East and Northern Africa
• 130,000 – 5.2% - are in sub-Saharan countries
• 270,000 – 10.8% - are in industrialized countries
• 200,000 – 8% - are in countries in transition

Industry Drivers
• Fueled by an Emigration Push and Immigration Pull
• Human trafficking is an opportunistic response to the tension between the economic necessity to migrate
and the politically motivated restrictions on migration
• Trafficking is a product of the larger socioeconomic forces that feed the emigration push and immigration
pull toward risky labor migration practices in our globalized economy
(Chuang, pg. 140)
• Rising unemployment leads to greater trafficking vulnerabilities—both supply and demand
(US Department of State, 2012)
• Poverty

Globalization’s Affects
Globalization and the opening of national borders have led not only to greater international exchange of capital and
goods, but also to increasing labor migration.
The wealth disparities created by our globalized economy have fed increased intra-and transnational labor migration as
livelihood options disappear in less wealthy countries and communities (Chuang, pg. 140)
• Economic globalization as a facilitator of human trafficking: An increasingly integrated global economy enables human
trafficking to thrive
• Globalization fosters interdependence between states and countries for commerce and facilitates the transfer of
commodities
• Comparative advantage in goods and cheap labor in developing countries has played a significant role in objectifying and
exploiting humans for economic ends
• State-centered approaches to combat trafficking are proving obsolete and futile since trafficking knows no boundaries
(Brewer, pg. 46-47)
Globalization Enabling and Fostering Trafficking through:
• Information technology
• Global Media
• Internet Access
• Opening of boarders
Globalization has provided a means to
broadcast the promise of better
opportunities aboard.

Globalization’s Affects
Global economic integration
• Trade Liberalization
• Foreign Investment
• Economic Liberalization
• Tax Policy
• Weaken Role of Government
• De(re)regulation of financial sectors –
• banking, insurance, investment
Technology
• Communications – internet, cell phones, electronic banking
• Transportation
Effect – the opening of borders to the free flow of capital, goods and services
But not labor
(COC, pg. 3-4)

Economic and Industry Impacts
Within the broad socioeconomic context we can connect root causes of trafficking to violations of economic, social and cultural
rights (Chuang, pg. 160). Globalizing trends that produce an environment that is conducive to trafficking include(Chuang, pg.
142):
• Shift to export-oriented approaches: production of essential goods is targeted for external trade rather than a countries own
markets
• Entry of Multi-National Corporations (MNCs) into developing countries and their networks of subcontractors
• Structural adjustment policies mandated by the International Monetary Fund or the World Bank as a condition for loans.
This requires governments to open their markets to further financial and trade flows and to undertake austerity measures
which fall heavily on the poor and particularly women
• Shift in structure of power at the international level, or the rise in the power of international institutions focused on markets
Many MNC’s prefer female workers due to their lower cost and lesser likelihood of resisting adverse working
conditions. While they are providing a job source, MNC’s also create a pool of lower-skilled labor exposed to
standards of western consumption and representing a potential source of emigration.

• Human Trafficking affects the global economy as source countries lose part of their labor supplies
and transit and destination countries deal with the costs of illegal immigration.
• Breakdowns in international trade relations can occur when human trafficking becomes a
bargaining issue
• Historically and economically prohibition has not decreased the trade in illegal goods and services
(Wheaton et. al, pg. 132-135)

Because of human trafficking the majority of countries experience:
• Increased and deeper poverty
• Changing patterns in the labor market and forms of labor
• Social and economic dislocation
• Internal and external wars and conflicts over resources – oil, water, land
(COC, pg. 6)

Economy and Migration
Compelled to leave their homes in search of viable economic options, previously invisible, low wage-
earning, migrants (especially women) are now playing a critical role in the global economy
• Rather than confront xenophobic reactions to migration, many governments have sought political advantage by promoting
increasingly restrictive immigration policies which fosters conditions that enable and promote trafficking (Chuang, pg. 146)
• State or country centered approaches to combat trafficking are proving futile since trafficking knows no boundaries
• Globalization fosters interdependence between states/countries for commerce and facilitates the transfer of commodities—
including people!
Internal Migration
• Rural to urban areas
• Lack of housing – growth of slums
• Inadequate essential human services
• Lack of employment
Cross-Border Migration
• Seeking ways to survive
• Employment
• Opportunities for their children
(COC, pg 8)

Economy: United States
Political Response:
• Migrants viewed as defenseless victims – possible refugee or asylum status
• Migrants viewed as laborers making dual contributions to U.S. and home country – possible guest
worker program or documentation/citizenship
• Migrants viewed as security threats – national security or job security – 700 mile wall along Mexico
(COC, pg. 12)
Post 9/11: Restricted entry
• Increased number of undocumented
• Growing backlash among citizens and in Congress
• Discrimination both legal and personal
• Vigilantism
• Local policing
(COC, pg. 13)
According to an IOM report, almost all migrants attempting to gain entry into the U.S. employ the
assistance of smugglers or traffickers. A bi-national study of migration between the U.S. and Mexico
found that 70 percent of the Mexicans who entered the U.S. illegally entered with the help of traffickers.
(Finckenauer & Schrock, pg. 1-2)

Economy: United States
The largest influx of humans trafficked to the U.S. are coming from the less developed regions
of the world. The most popular transit route for Chinese, South Americans and South Asians is
through Central America and Mexico .
• And traffickers are increasingly utilizing the U.S. Canadian border as a
corridor into the U.S.
• The Southwest border continues to serve as the biggest point of illegal
entry into the U.S., largely because traffickers are able to get aliens across
without documents
• The major points of entry into the United States are located in southern and
central Texas, Southern California, Tucson, Arizona, and areas of New
Mexico.
• While the Southwest border is often used as the main portal traffickers are
increasingly moving migrants into the U.S. through New York, Chicago, and
San Francisco.
• Other newly emerging ports of entry include Atlanta, Houston, Orlando and
Washington D.C.
• The U.S. has seen a re-emergence of Chinese boat smugglers using both
the East and West coasts
(Finckenauer & Schrock, pg. 2-3)

Economy: International
Changes in the international political economy have caused a number of countries in the global south,
especially Asia to either directly or indirectly foster labor-networks. Trafficking growth strategies
include:
• Attracting direct foreign investments from MNC’s and their networks
• Investing in tourism industries widely associated with recruitment of trafficked females for entertainment of
foreign tourists
• To ease unemployment problems and accumulate foreign currency earnings indebted countries may
encourage their labor force to seek employment in wealthier countries
(Chuang, pg. 144)
Globally, the main smuggling pipelines stretch from Asia, across Europe,
through Central America and the Caribbean to the United States.
(Finckenauer & Schrock, pg. 2)

Conclusion
To combat trafficking we need a globalized law enforcement network that collaborates and works
across state boundaries
• The United Nations Convention Against Transnational Organized Crime: brings laws in line with
international standards to raise awareness of the issue, prevent trafficking, and protect victims and
prosecute traffickers
• Numerous activists have proposed a multi-tiered approach to combat globalized human trafficking
We need to understand and confront the root causes of trafficking including:
• Poverty
• Unemployment
• Discrimination
• Gender-based violence
• Education
• Lack of resources
Research calls for a system of international cooperation to decrease benefits to
employers of using trafficked labor to increase costs to traffickers and lower the net
benefits to persons for relocating illegally.
(Wheaton et. al, pg. 132)

References
Brewer, D. (2012). Globalization and Human Trafficking. Retrieved from
http://www.du.edu/korbel/hrhw/researchdigest/trafficking/Globalization.pdf
on September 21, 2012.
COC. (2007). The Economics and Social Context of Human Trafficking. Retrieved from
https://www.coc.org/files/Women%20-%20Human%20Trafficking_0.pdf on September 24, 2012.
Chuang, J. (2006). Beyond a Snapshot: Preventing human trafficking in the global economy. Indiana Journal of Global
and Legal studies: Vol. 13, Iss. 1, Article 5. Retrieved from
www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1323&content=ijals on September 22, 2012.
Finckenauer, J., & Schrock, J. (2012). Human Trafficking: A growing criminal market in the U.S. Retrieved from
https://www.ncjrs.gov/pdffiles1/nij/218462.pdf on September 22, 2012
UN.Gift. (2012). Human Trafficking: the facts. Retrieved from
http://www.unglobalcompact.org/docs/issues_doc/labour/Forced_labour/HUMAN_TRAFFICKING_-_THE_FACTS_-
_final.pdf on September 23, 2012.
UNODC. (2012). What is Human Trafficking. Retrieved from http://www.unodc.org/unodc/en/human-trafficking/what-is-
human-trafficking.html on September 22, 2012
Polaris Project. (2012). Why Trafficking Exists. Retrieved from http://www.polarisproject.org/human-
trafficking/overview/why-trafficking-exists on September 22, 2012.
US Department of State. (2009). Rising Unemployment Leads to Greater Trafficking Vulnerabilities. Retrieved from
www.state.gov/j/tip/rls/tiprpt/2009/124798.htm on September 23, 2012.
Wheaton, et. al. (2010). Economics of Human Trafficking. International Migration: 114-136. Retrieved from
http://nfsacademy.org/wp-content/uploads/2011/02/Wheaton-Economics-of-Human-Trafficking.pdf on September 21,
2012.

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