Economics of the Human Trafficking Industry

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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

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“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).

Economics of the Human Trafficking Industry

The United Nations Office of Drug and Crime define human trafficking as:

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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)

Economics of the Human Trafficking Industry

Key Elements

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Market: Defining the Market

Economics of the Human Trafficking Industry

• 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)

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Market: The Numbers

Economics of the Human Trafficking Industry

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)

7Economics of the Human Trafficking Industry

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.

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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)

Economics of the Human Trafficking Industry 9

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)

Economics of the Human Trafficking Industry 10

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)

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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

Economics of the Human Trafficking Industry 12

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

Economics of the Human Trafficking Industry 13

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.

Economics of the Human Trafficking Industry 14

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)

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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.

Economics of the Human Trafficking Industry 16

Economic and Industry Impacts

• 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)

Economics of the Human Trafficking Industry 17

Economic and Industry Impacts

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)

Economics of the Human Trafficking Industry 18

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)

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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)

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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)

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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)

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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)

Economics of the Human Trafficking Industry 23

ReferencesBrewer, 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.