Chart of the Day: The Economics of High-Priced Prostitutes

According to the complaint filed against the prostitution ring which serviced Eliot Spitzer, the owners of the Emperors Club brought in at least $1 million in revenue over roughly a 3-year period. The cost of each tryst was based on a diamond-rating system assigned to each woman:

And this is the distribution of diamonds among 79 call girls identified on emperorsclubvip.com:

In 2001, Lena Edlund, an economist at Columbia University and German economist Evelyn Korn argued that "prostitution must be better paid than a regular unskilled job to compensate for foregone marriage market income."

Let's test this out crudely: The average income for all women between 18 to 24-years-old in 2006 was about $14,000.

Let's assume that the Emperors Club and the prostitutes split the proceeds 50-50, so there is another million dollars out there that went to the roughly 80 women. That means that over the three-year period, the call girls earned about $12,500 each on average, or a little over $4,000 per-year.

So why are these women choosing careers that don't pay them as much as a legal job? It could that getting paid for sex is a part-time gig which brings in supplementary income. Or it could be that not all of the money earned by the Emperors Club is deposited into the bank account tracked by the F.B.I. This could mean that the $1 million gross revenue figure is an understatement.

(Read about street-level prostitutes here.)

UPDATED
Chief and Frederick in the comments make good points to the fact that:

- clients are probably going to pay cash to reduce traceability
- some of the girls on the site are probably fake. (I find this believable because there were so-called advertisements from legal businesses on the site, but when I checked in with the businesses they denied having any knowledge of the ads. One of them said that they don't have an Internet ad budget. So it's highly like that Emperors Club was trying to make itself more "professional" than it really was.)
- earnings per hour are orders of magnitude more than an unskilled worker could find in the legal labor market

So: a) $1 million in proceeds is likely to be much less than the actual take b) the call girls are getting better compensation prostituting than in the legal labor market

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